Canada is becoming increasingly anti-competitive and unproductive due to overregulation, industry heads and officials told attendees at Canada’s Competition Summit this year.
Hosted by Competition Bureau Canada, the annual event brought together business leaders and regulators to discuss market competition issues in Canada. Industry minister Mélanie Joly set the tone when she told the room the government would be “hawkish” on competition. The comment lived on throughout the day’s programming and conversations as an encouraging sign that the government recognizes the importance of a competitive market. Most of the afternoon, however, focused on what the government is doing wrong.
“Incumbents benefit when the rules are stacked against challengers.”
Matthew Boswell
Bureau policy advisor Matthew Chiasson highlighted a Statistics Canada report that found federal regulatory burden increased by 37 percent between 2006 and 2021, while new businesses entering the market declined. On top of that, a Bureau study found average rank stability has increased — larger companies are becoming incumbents, and startups aren’t disrupting.
In afternoon remarks, Competition Bureau commissioner Matthew Boswell positioned startups as an important piece of the economic puzzle. He explained how they can push for innovation and efficiency in the marketplace, but said their ability to compete can be stifled by government regulation.
“Licensing hurdles, ownership limits, excessive fees: these barriers don’t just slow entrepreneurs down, they lock them out,” Boswell said. “And let’s be clear, incumbents benefit when the rules are stacked against challengers.”
Bank of Canada senior deputy governor Carolyn Rogers explained her vision of how competition incentivizes innovation, which, in turn, drives productivity. Rogers, who was one of the original voices to sound the alarm on Canada’s lacking productivity last year, said there are structural challenges in the Canadian economy that aren’t simple to fix. She pointed out that, despite Canadian Geoffrey Hinton winning a Nobel Prize for his work in artificial intelligence last year, most of the technology’s commercialization is happening in the United States.
“We should be able to leverage our ingenuity and our innovation more,” Rogers said. “Do we need more investment? Do we need changes in regulation? The answer is probably all of the above.”
On a panel discussing competition’s influence on entrepreneurship, Borrowell CEO Andrew Graham said it’s a “time of anxiety” for the Canadian tech scene. While the executive said many “may not like what’s going on in the US,” he also argued the country is a friendly environment for entrepreneurs and noted how much easier it is to experiment with stablecoins there.
RELATED: Fears of repeating Web 2.0’s mistakes permeate AI-focused Competition Summit 2024
“It doesn’t feel like the easiest time to be an entrepreneur in Canada,” Graham said. “If you’re graduating from [the University of Waterloo] in computer science and you want to start a tech business, there’s a lot of compelling reasons to do that in California or Texas or New York versus Ontario.”
Rachel Wasserman, the founder and principal of Wasserman Business Law and a fellow at the Canadian Anti-Monopoly Project, took a different tack. She raised concerns about private equity rollup firms buying up businesses from aging owners rather than other entrepreneurs, a phenomenon she referred to as the “succession tsunami.”
“We are facing, and this is not hyperbole, the potential extinction of entrepreneurship in this country if we don’t find a solution to either make entrepreneurship easier and provide opportunities for entrepreneurship through acquisition,” Wasserman claimed.
She called for government engagement, rather than deregulation, to solve this problem, proposing that the government guarantee asset-backed loans for entrepreneurs. This would give potential successors a tool that is typically only available to private equity players.
“Entrepreneurs invest more in our economy, they’re more productive, [while] asset managers are inherently extractive with overuse of debt and asset stripping,” Wasserman argued. “Pro-business policy and pro-capital policy are not the same.”
Boswell told BetaKit following the summit that awareness about Canada’s competition problems is growing, calling the event’s virtual 700-person attendance part of a “great awakening.” After hearing about government barriers to competition throughout the day, Boswell said it’s “long past the time” to fix the issues facing the Canadian economy.
“We’ve got to get out of the way,” Boswell said. “We’re not anti-regulation but do it smart; think about competition.”
Feature image courtesy Competition Bureau Canada via LinkedIn.