Canada's economy has less competition than it used to, new report says

The federal agency in charge of ensuring there's healthy competition between companiesin Canada says there's less of it than there used to be.

That's the main takeaway from a new report by Canada's Competition Bureau, published Thursday, which tracked competition in various parts of Canada's economy and how it changed between the years 2000 and 2020.

By looking at granular data on profits, business creation and other metricsfrom Statistics Canada and various other government departments, the report found that overall Canada's "competitive intensity" the level to which firms compete with each other to win consumer dollars has fallen over the years.

That means that instead of getting more competition, industries that were highly concentrated in 2000 were even more concentrated, in fewer hands, by 2020, the report found. And the number of industries deemed to be highly concentratedwent up, too.

Rich getting richer

The biggest companies are being even less challenged by smaller new entrants than they used to be, and even the number of new entrants into industries overall has declined.

The rich are getting richer, too, as the report found that profits and markups have both risen over the past 20 years especially at companies that were already highly profitable in the first place.

"The result of this decline in competitive intensity is that both consumers and businesses have seen fewer of the benefits that a more competitive economy has to offer, such as lower prices, greater choice and more innovation," the bureau said in a statement.

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While the report was short on concrete details as to how to fix the problem and reverse the trend, in broad terms the bureau said that what's needed most is a "whole-of-government approach" to foster competition. And an overhaul of competition laws that would allow the bureau to do more to help.

That's something the bureau has asked for before, most recently in a report on Canada's grocery industry, which found that overall the sector is not as competitive as it could be, and consumers pay higher prices as a result.

Among the legislative changes the bureau has asked for previously is the ability to compel companies to provide inside information when requested. Currently the system is mostly voluntary.

The bureau has also asked that Canada's Competition Act be overhauled in a way that would focus more on what's good for consumers, as opposed to having loopholes that allow the vast majority of merger proposals to be approved.

"Merger review for the bureau is the first line of defence against concentration," an official for the bureau said Thursday. "We need a strong Competition Act that lets us gather the informationwe need go after and theconductwe want to go after and really get remedies."

Keldon Bester, the executive director of the Canadian Anti-Monopoly Project says the report "paints a picture that will be familiar to Canadians."

While the report didn't single out any particular industries as being any worse or better,overall,"the top firms stay the top firms fora greater duration. There's less jostling and fewer new entrants to challenge them," Bestersaid in an interview Thursday.

"That leads to stagnation and a loss of dynamism."

New outlook needed

Bester says one interesting takeaway was that the report examined to what extent larger companies really are more efficientand found little evidence that was the case.

"That raises questions as to whether we should let companiesacquire each other because of these efficiency benefits that we might not be seeing," he said.

Ultimately, Bester says, an overhaul of Canada's Competition Act is definitely justified, but he warns that isn'ta panacea that will magically make everything better and cheaper for consumers.

"How do we get more Canadians to startbusinesses?" he said."How do we get businesses to scale up to go against new competitors? How do we change our mindsetas Canadians that says as long as things are stable, they're fine becausein reality, they might be in slow decline."