📖 e-books

1 issue, 3 responses

Vass Bednar

and

Robin Shaban

Apr 11, 2021

Elamin Abdelmahmoud @elamin88

I think I just never expected the dystopia to be so... incompetent

Alexander McClelland @alexmcclelland

I am Kathleen. We are all Kathleen.

James Felton @JimMFelton

Going into Coming out of lockdown lockdown

National Post @nationalpost

Opinion: Creating a more competitive country

nationalpost.comOpinion: Creating a more competitive countryOur laws have historically been ill-equipped to address competition issues across all sorts of sectors

In today’s National Post, Robin Shaban and I look at three case studies that demonstrate the Competition Bureau’s “attitude” (we’re not saying it’s a moody teen) to competition policy: ⛽ Superior Propane (it’s a precedent-setting banger), the ✈️ Vancouver Airport Authority (strong Onion article vibes) and the 🏠 Toronto Real Estate Board (total wildcard).

📚 Regs to Riches readers get a bonus case study below, on e-books.

When it comes to Big Tech, Canada’s fighting 21st-century battles with 21st century weapons and there are structural limitations in our legislation that hinder our ability to curb anti-competitive practices and put us at a disadvantage compared to other developed countries. All that said, there IS some precedent for Canada’s Competition Bureau to align with efforts to promote and protect competition from US and EU peers; even though the Bureau lacks comparable powers and is arguably under-resourced. Back in 2014, the Bureau took action to promote competition for ebooks.

Some of the substantive capacity differences between the Canadian, US and EU competition regulatory environments can be illustrated through this now-classic “ebooks” case.

At the time, e-books customers noticed that e-books weren’t priced *that* much cheaper than paperbacks, even though they cost far less to produce and distribute than physical books. Competition authorities also noticed this. After investigation, they found that the replacement of a traditional wholesale price model with an “agency” model - where the publisher sets the retail price and charges a percentage of that price as the wholesale price - is what led to inflated prices for ebooks.

With the same finding, each of Canada, the US, and Europe responded differently to the same problem: in the US, Apple was fined $450M; in the EU, they did not issue fines against firms. Instead, Apple offered to cut ebook prices to avoid fines; and in Canada, only publisher MacMillan was “fined.” It was required to give $150,000 in charitable donations.

Fines for abuse of dominance (*which MacMillian technically didn’t pay) are baked into the legislation and don’t change over time - at least, they haven’t yet. That said, e-commerce is no less voluminous in Canada. The estimated monthly traffic to Amazon.ca is about 135.5M visits.

This variability in fines is caused by the fact that in the EU, the European Commission can fine companies up to 10% of their turnover in the last financial year if they violate the law. In this case, Canada was flat-out unable to fine the companies because of the section of the Competition Act that the case was taken under (section 90.1).

Even if the Bureau won a case against the companies using a part of the Act that allows for monetary penalties, the maximum fine is only $10M (and $15M for the second offense).

Another core difference between the Canadian and EU laws in this case is the legal standard that needs to be met. In Canada, the Bureau needs to show that the agreement between Apple and the publishers created negative effects. This test can be burdensome and requires the Bureau to clearly demonstrate that the agreement altered the price of books to the detriment of consumers. In the EU, the Commission doesn’t need to show the same level of detail, making it easier to successfully stop the agreement between Apple and the publishers.

There is an extra hoop in the Canadian competition system that doesn’t exist elsewhere - that “it” (the anti-competitive behaviour) happened, and that there is a negative consequence. These differentiating factors matter as the calls on the Competition Bureau to meaningfully regulate technology companies grow.

Since the ebooks case in 2014, the EU has been the most aggressive when it comes to enforcing against monopolistic behaviour. This contrast is a useful reminder of the work that Canadian competition policy needs to do if it wants to keep pace with international peers.