Evidence of meeting #21 for Industry, Science and Technology in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was businesses.
A video is available from Parliament.
Liberal
The Chair Liberal Joël Lightbound
Your time is almost up, so we need a very brief answer, Ms. Bednar.
Executive Director, Master of Public Policy in Digital Society Program, McMaster University, As an Individual
Of course. We're keeping our eyes on the time as well.
This is why we're so excited about the potential to more comprehensively review the Competition Act. Again, there are pro-competitive policies that can take place outside of the act. Earlier this week you heard from one of our colleagues, Robin Shaban. The Vivic report puts forward a different approach to looking at data-driven behaviours and then testing them against the act, so Canada again has an opportunity to reform and refresh how we consider these behaviours independent of or concurrent with their effects on the market.
Denise, sneak in here if you have anything to round this out.
Senior Fellow and Co-Lead, Access to Markets Initiative, American Economic Liberties Project
I think this goes beyond the act. It needs to be a true all-of-government approach in which individual agencies that are sector-specific also need to take this seriously, along with having provincial remedies.
Thank you.
Liberal
The Chair Liberal Joël Lightbound
Thank you very much.
I give the floor to Mr. Généreux for five minutes.
Conservative
Bernard Généreux Conservative Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC
Thank you Mr. Chair.
Thank you to all the witnesses.
My questions are for Ms. Bednar, Ms. Hearn and Mr. Larouche. I will give them almost my entire five minutes because I find their comments very interesting.
Ms. Bednar and Ms. Hearn, I would like to know your definition of a “gatekeeper”. That word is used a lot right now by someone I know well in my political party, and I want to be sure I understand it correctly. You spoke about gatekeepers in the private sector and in the federal government. What is the difference between the two, if you see a difference?
Mr. Larouche, based on what we are hearing today, it is as though the federal government has become such a large ship that it is now unable to turn on a dime, or even a $10 bill. It takes too much time to adapt to technology that would provide adequate services to people.
I give the floor to you, Ms. Bednar and Ms. Hearn.
Senior Fellow and Co-Lead, Access to Markets Initiative, American Economic Liberties Project
When we talk about gatekeeping, what we mean is that there is a company or a set of companies that may be operating as an oligopoly and that has a dominant position in the market. They're able to exercise that dominant market power to the detriment of other stakeholders, whether that be consumers, workers or third party suppliers and small businesses.
It's not a bad thing to be big. It's not a bad thing to be a large firm. What we are saying is problematic is when you have these very large firms that then take advantage of their market position and impose terms, conditions, contract terms, tolls, etc., on markets such that, again, they're sort of acting as these de facto private regulators on markets, whether that be charging high commission fees, like the Apple and Google app stores—in the U.S. there was a big movement for the app developers to lower the commission fees—or whether that be restricting things like the right to repair at third party repair shops. All of these are different ways that terms and conditions are radically being affected because of the dominant power of the gatekeepers.
Conservative
Bernard Généreux Conservative Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC
Nobody is obligated to deal with those people or those businesses. It's a choice, no?
Senior Fellow and Co-Lead, Access to Markets Initiative, American Economic Liberties Project
I think the definition of a monopolist or someone who has market power is that you as a consumer don't have any choice. To give one example, a personal example, recently Venmo, which is a product I use as a consumer, said that they were changing their contract terms in their user agreement with consumers. They said that they were instituting mandatory arbitration clauses so that you couldn't join a class action lawsuit if you had an issue with them. The only way you could opt out of that is to mail them a written letter within 30 days. They also said that it wouldn't have any effect on future agreements they do and, if they decided to change those terms in the future, the only way you could opt out is to stop using the platform altogether.
These kinds of “choices” are not true choices. They are power asymmetries in markets. Increasingly, consumers, workers and small businesses don't have the option to go elsewhere because markets have concentrated to such a degree across different industries.
Conservative
Bernard Généreux Conservative Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC
Mr. Larouche, you have worked in the United States and the European Union. In your opinion, what is Canada's position in terms of all these gatekeepers and the difficulty for SMEs of doing business and obtaining government services more quickly?
Professor, Law and Innovation, Faculty of Law, Université de Montréal, As an Individual
To add to what my colleagues have said, I would like to add that there are now concrete definitions of the term “gatekeeper” in Europe and the United States. Those definitions always refer to the size of a company based on its sales figures, the number of businesses and individuals it has as clients, the fact that it is the only channel of communication, and the sustainability of its position. There is therefore a convergence on the definition of this term, which would therefore apply to some ten platforms in the world, including the much-talked-about GAFAM, which everyone knows.
Where is Canada in all this? Many of my colleagues say that it is in our interest to watch the show, let the Americans and Europeans do the work and then ask for the same thing. That is one option. That said, Canada has some particularities. For example, Canada has more small businesses. In some regions of the country, small businesses are critical to the economy.
It would therefore be a good idea for us to take the situation in hand ourselves, instead of simply waiting to see what happens elsewhere. That said, we could draw considerable inspiration from that.
Conservative
Bernard Généreux Conservative Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC
In that case, what is your opinion of Bill C‑11 concerning the regulation of the Internet and such?
Professor, Law and Innovation, Faculty of Law, Université de Montréal, As an Individual
I am not aware of all the details, but I am familiar with the bill. It addresses the issue of Canadian content, which is also a particularity of Canadian broadcasting policy. The only question is whether the measures proposed in the bill will truly help increase Canadian content.
I examined the issue a long time ago in the media sector. The same thing is being done in Europe. In the context of new platforms, it is hard to force businesses to create Canadian content. Often, there is almost a need to set out subsidy mechanisms or spending obligations to ensure that content is created. As well, there is no guarantee that people will look at that content.
In my opinion, the bill includes good ideas, but it will not have the same policy effectiveness as we saw in the old world of radio and television broadcasting.
Liberal
The Chair Liberal Joël Lightbound
Thank you, Mr. Généreux and Mr. Larouche.
I will now give the floor to Mr. Erskine-Smith for five minutes.
Liberal
Nathaniel Erskine-Smith Liberal Beaches—East York, ON
Thanks, Chair.
I want to start with Ms. Bednar and Ms. Hearn.
I'm glad you referenced the “Amazon's Toll Road” report. It's not a problem unique to digital giants. Obviously, it's particularly acute in that circumstance, but you also referenced the grocery store suppliers. We obviously have an oligopoly in that sector here in Canada, so suppliers have been squeezed. We've seen SMEs continually come to the government with concerns about credit card transaction fees. Again, we have a small number of players in that system who are able to squeeze small businesses as a result.
What's the solution here? Is it about caps on fees? Is it something more systemic? What should we be looking at from the perspective of fixing the problem in front of us?
Executive Director, Master of Public Policy in Digital Society Program, McMaster University, As an Individual
A lot of this echoes, again, what you saw and heard from that Vivic report and maybe some of what Robin touched on. Looking at the behaviours themselves, when we think about the activity of self-preferencing, that can harm competition because in that ecosystem, in that marketplace, even if a product has a better price and is arguably of better quality, it will constantly be demoted in search, in favour of a platform—again, the person owning or operating that—in favour of their products.
When the consumer doesn't even know that this is happening, we can start to think about how to interpret that behaviour. Is it deceptive marketing? Do we have to label when self-preferencing is occurring? Do consumers deserve the ability to opt out? Then, what does it mean? Again, what are the implications for those third party sellers? Because you're absolutely right. It's not just giants like Amazon. The behaviour itself is becoming ubiquitous. We see it at The Bay. It's an online marketplace open to third party sellers that also has private label products that are consistently self-preferenced over others there, and not just—
Liberal
Nathaniel Erskine-Smith Liberal Beaches—East York, ON
Self-preferencing is a problem. The ability to impose and increase fees is a separate problem.
Executive Director, Master of Public Policy in Digital Society Program, McMaster University, As an Individual
Right.
Liberal
Nathaniel Erskine-Smith Liberal Beaches—East York, ON
It strikes me that there might two different answers to those two different problems.
On the ability for Amazon to increase fees, my colleague, Mr. Généreux, would say, as he just said, can sellers not go elsewhere? It's not so easy given the concentration of the market and where the consumers happen to be.
The intuitive response.... I think the “Amazon's Toll Road” report suggests one solution would be to cap fees. The other solution is a more systemic one, which is breaking up Amazon, which doesn't strike me as something a Canadian regulator can put on the table.
Is there anything useful for us to look at as far as solutions go with respect to the imposition of fees on suppliers in the case of a monopoly or oligopoly?
Executive Director, Master of Public Policy in Digital Society Program, McMaster University, As an Individual
Again, until—and Denise, feel free to jump in—we bring a case forward in Canada, we can't refer to Canadian case law in competition. Currently, Canadian competition law may view this as an abuse of dominance. We might be able to enforce the act as it exists, but we haven't seen a case brought forward on this. That's where the limitation ends up falling.
Liberal
Nathaniel Erskine-Smith Liberal Beaches—East York, ON
That's helpful. To look at the copycatting issue, which has been referenced as well, we had, many years ago now, at the international committee that had been looking at big data and privacy, Amazon before us. This came up, and they indicated they don't look at the sellers' data per se, but they can obviously get at the same data from the consumers' perspective. Is there not a concern when you have the large monopolistic player that has access to all of the data that is then able to compete?
There are different competing considerations. On the one hand, it does drive the price down, presumably, but on the other hand, it almost unquestionably hampers innovation. How do we square those two objectives?
Executive Director, Master of Public Policy in Digital Society Program, McMaster University, As an Individual
I think that's where we start getting at the intersections between competition law and privacy and data management. We see this happening in an analog context. I'm sorry to give an American example, but Target also essentially rips off successful brands, copycats them, puts them under their private label and forces those firms out of their ecosystem and ends their contracts with them. That is copycatting in an analog space.
We can look at sector-specific regulations. We can take that consumer protection approach, which again demands us to be more holistic or integrated when we're thinking about how we modernize our approach to competition in Canada, with the act, of course, at the foundation of that, but also moving beyond it. Also, what are the tools that we have at our disposal? At the core of copycatting is also an intellectual property consideration.
I'll round out that too-long answer by saying that the bargain that third party merchants are forced to kind of tick off in those terms and conditions may not even be explicit. The price of their competing in that marketplace is making them vulnerable to being ripped off and kicked out of that marketplace, because it's not just being replicated. Knock-offs have been part of history and commerce for all time. It's that additional discipline of being price disciplined and priced out or actually just saying, “You can't participate in this market.”
We bring this up in particular because it's been a small-p policy in government. We've encouraged firms to go digital. That's been fantastic for e-commerce—and the pandemic has accelerated that—but if we don't look very carefully at these terms of competition for what it means to compete online, we do all of our small and medium-sized enterprises in Canada a huge disservice and maybe sort of make it deceptive, too, in the long run.
Liberal
The Chair Liberal Joël Lightbound
Thank you very much, Ms. Bednar.
We'll move to Mr. Williams for five minutes.
Conservative
Ryan Williams Conservative Bay of Quinte, ON
Thank you very much.
Thank you to all the witnesses. So far, this has been an incredible discussion.
I'm going to start, if I may, with Ms. van den Berg. When we look at restaurants right now in this industry—and we had a lot of emergency benefits during the pandemic—we're not seeing workers returning to the industry. I'm in the hotel business, so I see the exact same thing. Are these workers leaving the workforce or are they finding new careers outside the food service industry?
Executive Vice-President, Government Relations, Restaurants Canada
Thank you for the question. It's a great one. It's one that we've been grappling with for the last six months, frankly.
I think, to be perfectly candid, that a great majority of them have been lost to other sectors that can offer the job security that we can't. It has been proven over the course of this pandemic that we can't. The provisions that stood us in good standing prepandemic are no longer as steadfast as they once were. That's concerning when you have rent to pay and groceries and hydro due.
In addition to that, I think there are the demographic challenges of Canada as a country. That's why so many of our members have no choice but to rely on the TFW program for both short-term and long-term survival.
Conservative
Ryan Williams Conservative Bay of Quinte, ON
There are some companies like Freshii, which this week is the one that added computer screens and has employed people in I think Guatemala to actually run their front counter. Do we see that being the result of this labour shortage in this industry in the long term?