December 14, 2021
Practical Law Canada Competition, of which I am Lawyer Editor, published a new Legal Update, which discusses the Canadian Competition Bureau’s submission to a recent Compendium of Approaches to Improving Competition in Digital Markets published by G7 competition authorities. Below is an excerpt with a link to Practical Law’s full Legal Update.
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This Legal Update discusses the Canadian Competition Bureau’s (Bureau) submission to a recent Compendium of Approaches to Improving Competition in Digital Markets published by G7 competition authorities (Compendium). The Update discusses key aspects of the Compendium and recent Bureau enforcement, advocacy and institutional capability building efforts in relation to digital markets.
On November 29, 2021, the United Kingdom Competition & Markets Authority convened a meeting of G7 competition authorities (those of Italy, France, Germany, Canada, the United Kingdom, the United States, and Japan) and four guest authorities to discuss improving competition in digital markets. Following this meeting, a compendium comparing the different countries’ approaches to competition enforcement and advocacy in digital markets was published (Compendium) (see News Release, Competition Bureau joins international counterparts in G7 Summit on improving competition in digital markets, Competition Bureau, November 29, 2021).
The Compendium provides a high-level overview of current digital-markets-related developments in each participant competition authority’s jurisdiction, including enforcement, policy and advocacy initiatives, and legislative and regulatory reforms and proposals. The key purposes of the Compendium are to:
– Provide insights into common concerns and approaches between participants.
– Develop a consensus view on global challenges posed by competition in digital markets.
– Inform national governments, policy makers and industry participants.
International Enforcement Efforts and Challenges
According to the Compendium, most participating authorities have opened investigations, conducted studies or commenced enforcement to address concerns about the exercise of market power of platforms, including digital advertising markets, app stores and online marketplaces. These initiatives range from addressing the misuse of data and data aggregation as a barrier to entry, self-preferencing, parity obligations (that is, most favoured nation clauses), non-competes and information exchanges.
Many major competition authorities are also addressing new complex digital-markets-related issues, including the role of algorithms, to proactively address and prevent competition concerns, which include a lack of competition resulting in several large firms exercising market power over consumers and competitors. Some more specific common features in digital markets that may tend to increase market concentration, raise barriers to entry and strengthen the durability of market power include network effects, multi-sided markets and the role of data.
A few key challenges to existing competition enforcement and policy approaches posed by digital markets discussed by meeting participants included:
– Market concentration and insufficient competition in digital markets (allowing firms to engage in harmful practices the effects of which may differ from traditional price effects).
– The business models of firms operating in digital markets, including multi-sided online platforms and zero price service provisions, can be difficult for courts and agencies to define or fit within traditional frameworks, including market definition.
– Many investigations and remedial actions against the most powerful digital firms have not sufficiently restored competition.
– There is an increasing need for regulators and policy makers to collaborate across disciplines and jurisdictions given the global nature of the largest digital firms.
Recent Canadian Enforcement and Policy Efforts
The Compendium outlines a number of recent Canadian enforcement, policy, advocacy and resource initiatives by the Competition Bureau (Bureau) and federal government in relation to digital markets, including the following:
Abuse of Dominance Enforcement
– In 2018, the Bureau concluded an abuse of dominance investigation into Softvoyage Inc. in which the company agreed, under a consent agreement, not to enforce several types of exclusionary and restrictive contract terms that increased barriers to entry in the industry. For more information about abuse of dominance, see Practice Note, Abuse of Dominance (Sections 78 and 79 of the Competition Act). See also Practice Note, Consent Agreements Under the Competition Act.
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For the full Legal Update, see: Highlights of the Competition Bureau’s Submission to Recent G7 Compendium Report on Competition in Digital Markets.
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