Canadian COMPETITION LAW

The OECD published a new working paper earlier today (November 6^th) on Canada entitled “Unleashing Business Innovation in Canada”.

Abstract:

“This paper discusses how to improve Canada’s business innovation in order to boost labor productivity and output growth. Many general framework conditions are highly favorable to business risk-taking and innovation, including macro stability, openness, strong human capital, low corporate tax rates, low barriers to firm entry and flexible labor markets. However, they can be improved further by reduced external and interprovincial barriers in network and professional service sectors, more efficient capital markets, fewer capital tax distortions and improved patent protection. A second focus should be on ensuring that incentives arising from government subsidies are targeted on actual market failures. The very high level of support to business R&D via the federal Scientific Research and Experimental Development (SR&ED) tax credit and provincial top-ups may affect the incentives of small firms to grow and should be redesigned. A plethora of small, fragmented granting programs, mainly geared to SMEs, should be streamlined for better government-business collaboration. The large public share in venture capital should be wound down, as it may crowd out more productive private finance. A final focus should be on boosting manager and worker skills that are intrinsic to all forms of innovation, by filling gaps in training, mentoring and education. This Working Paper relates to the 2012 OECD Economic Review of Canada (www.oecd.org/eco/surveys/Canada).”

The OECD’s new working paper on Canada includes several recommendations for changes to Canada’s Investment Canada Act regime:

“To take full advantage of FDI, Bergevin and Schwanen (2011) and CPRP (2008) have recommended that the Investment Canada Act’s (ICA) net benefit test for foreign investments should be either removed or the onus shifted to government to prove that a proposed investment is not in Canada’s interests, with the reasons publicly stated. As announced in the 2012 budget, the federal government is in the process of making targeted improvements to the Investment Canada Act to enhance transparency while preserving investor confidentiality. The Ministries of Industry and Canadian Heritage would do well also to create procedures to provide foreign investors with timely and binding opinions concerning ICA compliance of prospective transactions (CPRP, 2008). At the same time, ownership restrictions in sheltered sectors, notably telecommunications and broadcasting, need to be lifted in order to get much needed capital, contestability and management talent. This process has already begun: in 2010, foreign ownership restrictions were removed for Canadian satellites and changed to permit greater foreign investment in the air transport sector; and in 2012, the federal government lifted foreign investment restrictions for telecommunications companies that hold less than a 10% share of the total Canadian telecommunications market.”

For a copy of the OECD’s new working paper see: Unleashing Business Innovation in Canada.

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