Canada's Monopoly Problem: How It Hurts Canadians

The Canadian Monopoly Conundrum

Canada's economy is dominated by powerful monopolies. These market leaders operate across almost every sector, from banking and groceries to airlines and telecommunications. Three giants, Rogers, Telus, and Bell, dominate the telecom industry, charging Canadians some of the highest fees in the world. Two airlines, Air Canada and WestJet, control over 80% of the market, and a handful of banks own the vast majority of Canadian mortgages. This consolidation isn't limited to traditional sectors: even beer, a quintessential Canadian product, is controlled by just two companies. The impact of these monopolies is profound. Canadians face higher prices and worse service, while productivity and wages stagnate. The federal government, rather than curbing this concentration, has often encouraged it, leading to an economy that lacks the competitive dynamism essential for growth and innovation. The Economist and The Globe and Mail have both criticized Canada's lackluster approach to competition, warning that the country is at risk of losing its capitalist heritage.

The Economic Fallout

Monopolies distort the market by setting prices rather than negotiating them. This price-setting power allows them to charge consumers the highest amounts they are willing to pay, leading to inflated prices and reduced economic efficiency. The price set by monopolies is typically much higher than the natural price, driving up profits and wages at the expense of consumers. Milton Friedman defined a monopoly as "any concentration of power by a firm that has sufficient control over a particular product or service to determine significantly the terms of which other individuals should have access to it." Monopolies and oligopolies have eroded the invisible hand of the market, a concept Adam Smith described in The Wealth of Nations. Smith argued that a strong capitalist economy relies on many buyers and sellers dictating prices through competition. When this competition is removed, the market becomes less dynamic and less responsive to consumer needs. This erosion has led to a system more akin to the robber baron era than to a free market.

Why is Canada's history of monopolies important?

Canada's history with monopolies stretches back to the Hudson Bay Company, founded in 1670. This original monopoly controlled the fur trade and held a near-monopoly on much of Canada's early commerce. Fast forward to the late 1800s, and single, giant companies dominated markets like oil, steel, railways, and banking. In 1889, Canada passed the world's first antitrust legislation to protect competition by breaking up these trusts and monopolies. This act, along with the Sherman Act in the US, aimed to create a more competitive market. However, monopolies began to reappear in the form of government-owned crown corporations, which dominated Canada until the 1980s. The shift towards deregulation in the 1980s led to the privatization of crown corporations, but it also resulted in a new wave of monopolies. The Competition Act, enacted in the 1990s, actually encouraged big players to dominate their markets, prioritizing corporate efficiency over competition. This led to an unprecedented consolidation across almost every industry, with the average age of Canada's top 20 companies dating back to 1914, compared to 1944 in the US.

How does this affect Canadians?

Canadians are paying the price for this monopoly problem in more ways than one. Higher prices are the most immediate impact, with 95% of mergers in monopoly markets resulting in increased costs for consumers. But the effects go beyond prices. Wages have decreased by 15% to 25% in monopoly markets, and the number of publicly listed companies in Canada has dropped by 17% since 2007. This decline in startups means fewer innovative firms to drive productivity and economic growth. Between 2014 and 2021, business investment in Canada fell by 20%, leading to stifled innovation and lower wages.

What can be done to fix this?

To address Canada's monopoly problem, several steps can be taken. First, oppose monopolies from buying up their competition. This means blocking mergers like RBC buying HSBC, WestJet buying Sunwing, and Rogers buying Shaw. Second, create a competitive economy with regulations that open the market and do not protect monopolies. This includes bringing in new policies and cutting red tape to encourage more banks, more cell phone carriers, more grocery stores, more internet service providers, and more airlines. Third, help create more competitors in the market. This means creating an environment and support system for more startups, companies growing and scaling, job growth, higher wages, more R&D, and more innovation.

Call to Action

Every Canadian should be concerned about the concentration of economic and political power in the hands of a very few. The monopoly problem is causing Canada's economic decline, and it's getting worse every day. It's time to bring home competition, lower prices, and better service. The federal government must take decisive action to ensure that the market is free from predatory practices and that Canada returns to a truly capitalist economy.