Why Canada’s economy needs more competition 

This Policy Brief is published under the umbrella of Mission Canada, PPF’s response to the increasingly tumultuous geopolitical environment that threatens Canada’s economic growth and sovereignty. Under this initiative, PPF outlines the critical steps Canada should take to leverage its comparative advantages, including abundant natural resources and a talented workforce, in order to drive inclusive economic growth.

Canada is at a crossroads. U.S. tariff attacks, rising global competition and declining productivity all threaten our prosperity and place in the world.  

If Canada wants to compete and win, it needs to do more than kick start major projects and ramp up energy exports, it needs to finally get serious about competition within its borders.  

Competition policy is a foundational part of any strategy to strengthen our economy. By ensuring our markets are open, fair and dynamic, better competition policy could foster more innovation, productivity and entrepreneurship.  

Recent reforms to Canada’s Competition Act have brought long-overdue changes. But more change is needed that matches the scale of our current global disruption. The most fundamental of these changes is legislation that restructures markets that face chronic deficits in competition and dynamism by forcing divestitures (like banking, telecoms and digital services).    

There will be pushback. U.S. President Donald Trump has threatened to retaliate against countries that enforce laws that reign in American companies. In June he said he would be “terminating ALL discussions on Trade with Canada, effective immediately,” in response to Canada’s plan to tax big tech firms. Canada backed off.  

It may be tempting for Canada to roll back its progress on competition policy too, to appease America and its tech monopolies. But it cannot abandon this key pillar of economic policy and the prosperity it can sustain.  

Why competition matters 

Competition policy is the set of laws and institutions designed to keep markets fair, open and innovative. By encouraging competition — rivalry among firms — it pushes businesses to improve productivity, lower prices and offer real choice to consumers. In doing so, competition policy fosters genuine entrepreneurship and helps ensure that economic prosperity is broadly shared. 

Competition policy is not industrial policy. It does not cultivate champions directly. Instead, it sets fair rules of play, creating the conditions for firms to rise and compete globally.  

It is also distinct from consumer protection, though related. Competition between businesses gives consumers choices, and the option to switch if they are treated poorly or are asked to pay unfair prices. Workers benefit from competition too, giving them the freedom to walk away from unscrupulous employers and command greater compensation when their employers are making higher profits. 

In this sense, competition policy is economic infrastructure — like roads or electricity — for a functioning economy. Markets are a fundamental building block of our economy. Regulating how businesses compete, and how much they should compete, has a profound impact on how well our economy functions. In these turbulent times, competition policy gives entrepreneurs, consumers and workers the market foundations to thrive. 

A strong competition regime also enhances Canada’s global credibility, aligning us with peers like the EU and giving us a seat at the table as digital-era rules are written. It supports sovereignty by reducing the dominance of foreign monopolies, particularly in the digital realm. All of these elements matter if Canada is to grow stronger and more self-reliant in the decades ahead. 

How competition policy works 

At the heart of Canada’s framework is the Competition Act, first enacted in 1986 but with roots stretching back to 1889. The Act is enforced by the Competition Bureau, an independent agency within Innovation, Science and Economic Development Canada. The Bureau investigates cartels, mergers, deceptive marketing and abuse of dominance. Cases are heard by the Competition Tribunal, a specialized quasi-court. 

Historically, Canada has tolerated weak competition in key sectors — notably in banking, telecoms and airlines — on the assumption that openness to trade would discipline firms. The consequence of this approach has been weak competition today.  

A landmark study by the Competition Bureau found that from 2000 to 2020, across several different measures of competition, competitive intensity has fallen. The top firms across industries are less likely to be challenged by existing or new competitors and there are fewer new firms entering Canadian industries. Industries with a small number of large competitors have become increasingly concentrated compared to industries with more competition. Along with all these trends, profits and margins have increased.      

An example of a sector with low levels of competition is telecom. With only three major firms — Bell, Rogers, and TELUS — making up the vast majority of the sector, Canadians pay some of the highest prices for telecom services.  

Fortunately, the philosophy that guided competition policy decades before has shifted in recent years. Today, policy makers and enforcers at the Competition Bureau recognize that foreign competition alone is not enough to combat a lack of competition at home, and that action is needed to fix Canada’s uncompetitive markets. 

Recent Reforms 

The past two years have brought some of the most significant reforms to the Competition Act in a generation, packaged across three bills from 2022 to 2024: 

• Elimination of the efficiencies defense, which had allowed harmful mergers to proceed on the grounds of cost savings, often through layoffs;

• Stronger penalties for abuse of dominance and a more expansive definition of abuse of dominance that covers more types of business strategies that harm competition;  

• Criminalization of wage-fixing and no-poach agreements, closing a loophole that left workers vulnerable to collusion between employers; 

• Market study powers, which let the Competition Bureau compel information from businesses so it can conduct studies into the state of competition in specific markets. To-date, the Bureau has carried out studies of retail grocery and airlines and is undertaking one on financing for small- and medium-sized enterprises; 

• Expanded private rights of access to the Tribunal, which allows parties other than the Commissioner of the Bureau to take cases and expanding who can challenge anti-competitive behaviour; and

• Higher standards for mergers by shifting the burden of proof on companies when a merger deal is expected to increase their market share by over 30 percent. 

These changes modernize Canada’s competition law and move Canada closer to international norms. They also signal a fundamental shift in how policy makers think of competition and its importance.  

Still, there is an open question of whether these laws are sufficient to address new, emerging issues, particularly when it comes to digital technology.  

Current Issues and Challenges 

Algorithmic pricing is one of the more novel challenges facing competition law enforcers in Canada and beyond. Today, algorithms set prices in many markets, which can lead to tacit coordination.  

Competition agencies have yet to figure out how to deal with this type of tech-facilitated anticompetitive behaviour under competition law because, unlike traditional collusion, there is no explicit agreement between competitors to fix prices.  

Despite these challenges, the Bureau has undertaken an investigation into a pricing algorithm software company used by landlords to set rents. The outcome of this case will test whether the Act is fit-for-purpose, and whether more changes are needed.  

The dominance of digital platforms continues to be another topical issue, particularly in light of the U.S. trade war. Google, Meta, Amazon and Apple continue to dominate global markets through their digital networks. Their reach raises not only economic concerns but also sovereignty issues, especially with respect to control and use of data from Canada.  

Canada lacks a dedicated digital competition regime like the EU’s Digital Markets Act, reducing our ability to tackle these issues and leaving us vulnerable. 

Research from the Competition Bureau is very clear that for at least the last two decades, policy makers and competition law enforcers have allowed Canadian markets to become less competitive, leading to our current lack of business dynamism and sluggish productivity growth.  

How do we buck this trend? In its market studies on retail grocery and airlines, the Bureau put forward policy recommendations like creating a “grocery innovation strategy”, providing grants and incentive programs to encourage new independent grocers and removing some foreign ownership restrictions for airlines.  

But these recommendations only pick at the edges of the problem, and do not offer direct, guaranteed pathway to more competition. Bolder steps are needed to enhance competition in Canada’s least competitive and most critical markets.           

Changes to the Competition Act in recent years give the Competition Bureau more tools to challenge businesses’ anticompetitive behaviour. However, stronger laws are no good unless the Competition Tribunal, which hears cases based on these new laws, is also updated.  

The Tribunal’s decision to permit Rogers’ acquisition of Shaw is a perfect example of the outdated economic thinking and ideology held by judges that currently sit on the Tribunal, which has underpinned competition policy over two decades and led Canada to the sad state of competition we have today.  

For recent legislative reforms to be effective, policy makers also need to consider how those reforms will be interpreted by the Tribunal and whether the Tribunal is up to the task of protecting competition in Canada.          

Conclusion 

At a time when global shocks, technological disruption and political uncertainty test our resilience, we must leverage Canada’s unique advantages to build a stronger, more inclusive and more resilient economy in an increasingly volatile world. This is the core tenet of PPF’s Mission Canada project.  Recommitting to competition as both an economic and a national imperative is central to that mission.

Recent reforms to the Competition Act bring Canada closer to a system that rewards dynamism and protects fairness — principles that sit at the heart of a strong Canadian economy.  These reforms show that progress is possible, but ambition must keep pace with disruption. Stronger competition laws are only meaningful if they translate into open markets where entrepreneurs can rise on merit, workers can negotiate fair wages and consumers can choose freely. The mission is not simply technical enforcement: it is building the foundations of a fair, dynamic and globally credible economy.