Competing Fairly
As President and CEO of Well Made Here, I was recently invited to the closing panel of a symposium organized by the University of Ottawa on the topic of: “Competition Policy in the 21st Century: Charting a Path Forward for Canada”.
«The current law and its revised version place significant emphasis on preventing monopolies, notably with stronger sanctions. They also balance more equitably the savings promised by a merger with its impact on society. And when we say “society,” it can mean employees, customers, suppliers, or the state.
The efforts of the legislator and its enforcement arm, the Competition Bureau, also focus on price fixing or market sharing between two or more competitors. Rightly so, because by acting in this way, these companies, although distinct legal entities, are depriving other players of the main attraction of capitalism, access to market shares.
From Consolidation to Monopolization
I argued that statistics tend to show that Canadian law and policies are not having the desired effects and that the improvements made will fall short of their intentions. As Kafka wrote: “Believing in progress does not mean that progress has already taken place.”
Indeed, the numbers are coldly irrefutable: there are fewer and fewer manufacturers in Canada, while the country’s population is growing and a middle class is expanding globally.
If there are fewer companies while the market is growing, it means that a few increasingly large companies are capturing more market shares and leaving less for the majority, namely our SMEs.
In 2002, the Canadian manufacturing sector provided two million jobs and generated over $165 billion, representing 15.7% of GDP. Today, it employs 1.7 million people and represents only 10% of GDP.
Multinationals make up less than 1% of all companies in Canada but control about 70% of all our assets. The phenomenon of centralization is easily observed in our industry: I could list the names of at least 25 Quebec or Canadian manufacturers who lost contracts with well-known banners because they did not have the production capacity or liquidity to meet a demand that has become more consolidated than before.
Through mergers, acquisitions, or bankruptcies, we are passively witnessing a natural skimming of suppliers. Consequently, there is a standardization of brands, inevitably leading to a reduction in the diversity of products for renovators and construction contractors.
Selling Price and Purchase Price
My plea at the symposium also aimed to show that it is no longer enough to ensure the legal independence of players and to ensure that they do not dictate consumer selling prices. It is also necessary to ensure that there is no fixing of PURCHASE prices upstream.
Indeed, it should be considered that if half of the hardware stores are affiliated and not corporately owned, only a hundred points of sale out of 3000 in the country are 100% free of their supplies. Why? Because groups have improved their service offerings to merchants, and their loyalty strategies have refined since their creation in the early ’80s.
All of this deceives the Competition Bureau, which perceives only the outlines, that is, distinct legal entities. It should learn that incorporation does not guarantee independence.
“Our laws lack teeth and our politicians lack backbone.” Those were exactly my words. The audience of intellectuals was surprised by my plain-speaking.
A Collaborative Mode to Institute
I naturally addressed the issue of collaboration between merchants, which is prohibited by law.
We remember – well, my wife remembers! – that I received, two years ago, a warning from the Competition Bureau’s Cartels Directorate inviting me to stop encouraging our members to agree on opening hours, failing which I risked a $25M fine and 14 years in prison.
I scored several points at the symposium by pointing out that the Bureau makes assumptions and condemns without evidence, which the spirit of our Criminal Code discourages.
I gave examples of legislation in Europe where, unlike here, competitors are encouraged to coordinate if their exchanges do not penalize consumers but benefit them. For example, many airports in Europe experience periods of infrastructure saturation. In response to this issue, the European Union has recently adopted a regulation establishing mechanisms for coordinating schedules to optimally use all necessary airport platforms to provide the best possible air service between competitors.
In the old countries, it is also understood that artisanal trades practiced by many merchants must be protected, notably by allowing them to offer the most possible access hours to their establishments together rather than separately. Our stores can compete with Amazon and others thanks to two trump cards: 1) qualified and available staff, and 2) physical inventory. Indeed, nothing replaces the personalized advice of an in-person expert, and even Prime service takes 24 hours for delivery, while any consumer is located only 30 minutes from a hardware store. However, these two characteristics cost money that can be paid for by opening less to open better. It would be healthier to implement an official framework for dialogue between competitors than to let them speak in secret.
Inequity Between Local and Foreign Companies
On a completely different note, the legislator does not address the inequality with which our SMEs are treated compared to the large foreign companies that arrive. Although redacted, documents revealed to the public show that these companies have access to tax treatments, energy advantages, loans, and subsidies that our companies cannot even dream of. Two weights, two measures that distort the notion of fair competition.
About Low Prices
We also talked about predatory pricing at the symposium. Fans of the invisible hand that supposedly manages the market so well advocated that the lowest price should win. I agree with the principle. But it still needs to compare apples to apples. Let me explain.
If the authorities allow an old-generation product to enter the market…
If we require Canadian manufacturers to be whiter than white in terms of child labor, environmental standards, health prevention, or safety…
If we do not protect patents enough and counterfeiting flourishes…
If we only consider the purchase price without considering the product’s durability…
If we never calculate the fiscal impacts on government finances generated by income taxes from manufacturer workers and the taxes and duties paid by these manufacturers…
Our laws should be guided by a sense of fair play, and the lowest price should be just one of the criteria.
Protecting Ourselves Like Others
Even though we cannot ignore our geographical position in the shadow of a giant, this fear of angering Americans should not prevent us from applying some positive discrimination towards our wealth creators, our manufacturers, including foreign companies that operate factories on our territory.
If nothing in free trade agreements allows positive discrimination in a domestic market, nothing prevents it either.
In other words, if it is forbidden to favor our products in a foreign market with which we have a pact, we can, however, do a lot, legally, to encourage Canadian consumers and businesses to prefer purchasing locally made goods.
And in this equation, the central state, provinces, and their municipal governments have, in my opinion, the duty to lead by example when it comes to their own supplies.
My Conclusion
In the end, I stated at the symposium that to understand the role of competition laws, we must probably return to the origins of the word “economy.” In ancient Greek, oikonomia was seen in a societal management perspective; it was a moral and philosophical science.
The free market has its advantages, but if it sometimes does not align with society’s interest, our laws and rules must then correct these failures. If Louis XIV could say, “I am the state,” today we must be able to demonstrate that “The state is all of us!” »
