Vigorous competition pushes firms to offer better products at lower prices, and to find innovative ways to serve consumer needs. However, high levels of competition are not a given, so most countries around the world adopt competition laws and create competition authorities to protect against concentrations of market power that can harm consumers.
Last week, chief economists from the competition authorities of approximately 30 countries gathered at UBC Sauder to discuss global competition policy, common challenges and possible solutions. In light of this meeting, we turned to UBC Sauder Professor Tom Ross—an international expert in competition policy—to discuss the role of competition policy in today’s society.
What are the main areas of focus of a typical competition law?
Broadly speaking there are three core areas in a modern competition law. The first involves rules to stop collusion or price-fixing; these are agreements between firms that should be competing against one another, but instead they jointly (and secretly) set their prices to refrain from competition. The second area involves rules to control abusive behaviour of large, dominant firms; their actions go beyond competition to extend, preserve or enhance market power to the disadvantage of rival firms and consumers. Finally, most competition laws also include provisions to allow the competition authority to block or restructure mergers that may otherwise lead to a reduction in competition.
What new challenges do chief economists face when it comes to competition?
One challenge that is relatively new is the concept of vertical agreements in online markets, which may serve to harm competition. For example, there have been a few cases in which large online hotel booking platforms have insisted that hotels cannot offer rooms for a lower price than what is advertised on the platform.
Other areas of concern include predicting the effects of mergers in advance so chief economists can intervene in problematic mergers; developing new techniques to discover price-fixing agreements; and addressing anti-competitive harm from certain mergers by imposing “merger remedies,” or conditions, instead of blocking the whole merger.
When it comes to competition policy, how does Canada compare to the world?
Canada has a very modern competition law and a very professional competition authority in the Competition Bureau. We also have a very skilled competition bar in the private sector.
Canada is seen as a leader both for the sophistication of work done by our competition professionals, but also for the leadership we have demonstrated internationally through our participation in the International Competition Network and the Organization for Economic Co-operation and Development. That said, there is plenty of learning Canada can do from the approaches and experiences of our competition colleagues in other countries.