Discover more from regs to riches
🥛 controlling supply
🐣 the power of poultry
While the world watches the FTC’s historic cases against Google (accusing the firm of using illegal agreements to maintain a monopoly) and Amazon (accusing the firm of abusing its monopoly and harming competition for independent sellers and consumers) unfold, our primary competition issues remain decidedly provincial in both senses of the word.
At Canada’s recent annual Competition Summit, the corporate law establishment spent a significant portion of the day ruminating on the country’s competition bugaboos: supply management and inter-provincial trade restrictions that limit our ability to buy, sell, and transport goods and services (like the ones restricting cross-border purchasing of alcohol or meat, or redundant employment certifications). And don’t worry, participants raised concerns about the lack of foreign competition in certain regulated sectors as well.
There was a tacit implication that if we can’t resolve these local and long-standing BINGO-card barriers within our borders, we won’t be able to look outside of them and properly acknowledge new digital business behaviours that control online marketplaces.
Harmonising interprovincial trade restrictions is a dusty idea that is finally getting more momentum. What can I say? We’re swiffering. A book on interprovincial free trade recently won the Donner Prize, and is a finalist for the Writers’ Trust of Canada’s Balsillie Prize for Public Policy - which is a sign that it’s caught the attention of wonks who may hope that it helps to Trojan horse a thorny topic back in the public consciousness.
The endurance of these barriers is difficult to rationalise and dorky to defend. Maybe we will finally be able to reduce some of those arbitrary hurdles as part of an all-of-government approach to competition. Which is to say that there is a role for the state to make these markets more free and fair. It’s a misapprehension that more competitive markets are necessarily the result of ‘less’ or ‘no’ regulation.
Which brings me to supply management. It’s challenging to appreciate how unleashing the power of poultry to an un-managed marketplace will make a meaningful dent in Canada’s productivity. But that doesn’t mean that the system isn’t worth revisiting and refreshing, especially with the government’s new focus on the grocery sector, which means that decision-makers are looking under regulatory cushions for cost savings at the check out.
At worst, Canada’s competition establishment pointing to these twin perennial problems is a convenient way to distract from other client interests they could be protecting, namely those of the largest technology companies.
Amazon uses a series of well-documented tactics to constrain access to their digital marketplace, extracting steep tolls from businesses selling online. The mistake would be thinking that Canada needs to end supply management before it can address systemic barriers in e-commerce. The Canadian Federation of Independent Business (CFIB) included some feedback from members about their experiences with Amazon in their competition submission:
Almost half of the members surveyed agreed they were finding it harder to compete with the rise of digital competitors like Amazon;
Almost 90 per cent of members survey agreed that the dominance of big businesses selling online (such as Amazon) threatens Canadian small businesses;
55% of CFIB members surveyed were dissatisfied with the eCommerce platform due to unfair and questionable practices imposed on them by Amazon;
Key issues raised: Amazon encourages consumers to purchase their own products over those offered by small businesses, Amazon gets suppliers to prohibit small businesses from selling certain products, Amazon places small business listings lower in the search results, Amazon restricts the ability of small businesses to communicate with their customers, Amazon imposes various arbitrary fees that sellers must pay to continue accessing the platform.
Our attention is evolving and we may be more willing to confront these inherited pricing systems instead of defending them. It all comes down to a question of courage. Maybe we have mismanaged legacy marketplaces with interventions that no longer serve Canadians well and unduly constrain competition. Internal trade barriers can be unhelpful in a global economy, and it’s weird how we regulate whether alcohol can be sold in a different province, when certain trucks can drive, and the types of toilet seats that can be used on construction sites. But we are wrong to insist that these interventions must be sequenced. If you don’t like supply management frameworks, you are going to hate arbitrary algorithmic manipulation.
Of course the two systems have important distinctions. One has publicly-determined and clearly communicated rules (in the case of supply management, each commodity is governed by its own elected provincial marketing board according to provincial legislation and regulations) and the other is a product of an unaccountable de facto private regulator. But it seems to me that the core behaviours that people are revolting against are pretty similar. The motivating idea seems to be that markets should have less friction, whether that’s imposed by the state or a firm. I’m on board with that.
A firm like Amazon ‘supply manages’ information, pricing, and labour, harming independent businesses in the process. The platform also penalises sellers that offer lower prices on other sites. The company computationally throttles the search results and pricing on Marketplace in its favour, but their rules aren’t transparent or democratic and they are only accountable to shareholders. Better competition legislation and enforcement can help to level that playing field and actually open up Canada.
We’re calling for more ‘free’ trade but maybe a better frame is ‘transparent’ trade. Many marketplaces are still too murky. When it comes to inter-provincial trade barriers, we can identify them but can’t always appreciate their historic rationale - many feel like barnacles. Digital marketplaces tread the line between efficient and exploitative. Think of Amazon and Walmart using AI to extract concessions from suppliers. I guess I am trying to say that there are so many parallels here. Like, my man - you don’t like that certain goods can’t be easily ported across some provinces? Then let’s get going on open banking so consumers can move their financial data and kickstart innovations, you know?
The real reason I started tapping this bad boy out is because I think we should stop pretending that we can’t face digital competition realities head on until we revolutionise how we sell milk and cheese. Competition modernization can’t be a game of chicken. 🐔