Calibrating Competition Policy for the Digital Age

Competition policy and enforcement need to be able to keep pace with business models that have emerged in the digital age. Fittingly, Canada is in the midst of a review of its Competition Act that is addressing this question. A key goal of any reform should be to deter anti-competitive practices by firms whose business models rely on gathering and leveraging large troves of data through digital technologies, when those practices threaten competition, innovation or harm Canadian consumers. Achieving this goal will require Canada’s competition authorities to have the ability to better assess whether in fact certain transactions, conducts, or strategic acquisitions, predicated on applying algorithms to very large user-derived data sets, unduly hinder competition in ways that cause harms to Canadians. One model being considered for reform would apply special “ex-ante” or preventive rules to a few so-called “Big Tech” companies, on the assumption that they are causing or likely to cause economic harms that cannot be corrected after the fact. While it is true that the business models of these, but also of other firms, resting on user-provided data and on technology, can generate substantial network economies that some competitors may find difficult to overcome, they have also been the source of real benefits for Canadian users of their services. Whether a firm’s business model, its conduct, or even its dominant position in a market harms competition or Canadians more generally, is an empirical matter that should be decided on a case by case basis, using widely applicable rules that encompass all existing or even potential competitors and competing technologies in a market. In this respect, the use of the term “digital markets” can be unhelpful, given the wide array of business practices covered by this term, including brick and mortar firms that also sell on-line and gather information on their customers. Instead of separate rules applying to Big Tech or “digital markets,” the Competition Bureau needs new techniques and tools that would allow it to gain more information about, and quickly pivot its attention toward emerging issues. This approach would include rewarding pro-competitive behaviour by instituting an objective way of identifying companies that should, from time to time, be targeted for special pro-active attention for previously causing well defined harms to competition or to consumers – whereas others would be freer to operate and innovate without such special scrutiny. It would include new tools to improve real-time monitoring of market transactions online and their impact on competition, and metrics to properly measure the state of competition and to assess whether mergers are likely to have anti-competitive impacts in non-traditional markets. It would include providing more incentives for private parties to seek redress in court for anti-competitive behaviour that they can show has hurt both their business and competition itself. And it would include approaching competition as part of a collaborative effort between many relevant authorities, for example, at the intersection of privacy and competition rules.