Yahoo Finance Is Canada putting cartels before customers?
Regulations that restrict Canadian competition for certain products such as beer, dairy, poultry and a few professional services may be costing consumers and dragging down the nation's economy, says a new report commissioned by the CD Howe Institute.
It calls for a review of the Competition Act and a limit to the number of sectors that are immune from competition laws, where practical. It also points out a few places to start, including some agricultural products, private alcohol sales and legal services.
"In a number of regulated sectors, Canadian governments have sanctioned restrictions on competition in the pursuit of alternative policy goals. This market intervention involves a trade-off because anti-competitive regulations can drive up prices, limit product choices and restrict economic growth and opportunity,” says the provocatively titled, yet matter-of-fact report, Beer, Butter and Barristers: How Canadian Governments Put Cartels Before Consumers. "We argue that certain regulatory regimes advance private interests at an unreasonable cost to consumers."
Regulated industries account for more than 20 per cent of Canada’s GDP, according to the report. It argues that, “lacklustre competition in these sectors inhibits productivity and the overall performance of the Canadian economy.”
To really drive home its point, and tug at the heart strings of the general public, the report points to a product that is dear to many Canadians – beer. It cites privately held Ontario company Brewers Retail Inc., which operates “The Beer Store” chain. The Beer Store sells 78 per cent of beer in the province and Brewers Retail is owned by three foreign multinationals that supply nine of The Beer Store’s 10 leading brands,.
The report, written by an associate and a law student at Stikeman Elliott LLP, notes these brands receive heavy in-store promotion, including a display in a refrigerator termed the “Ice Cold Express.”
“This set-up may confer a competitive advantage on The Beer Store’s three international owners,” the report states. “Moreover, the lack of customer-accessible shelf space at many Beer Store locations assists the owners because their famous brands and large advertising budgets make their sales strategy less reliant on customers’ ability to browse.”
It’s also a form of private taxation, the report argues. “Consumers are inconvenienced, and grocery and convenience stores are deprived of the opportunity to compete for retail beer sales. Absent state-organized monopoly, these businesses would profit directly from beer sales and indirectly from incidental purchases made by beer consumers.”
While the authors recognize competition law is complicated and the issues is unlikely to stir protests among Canadians – even if it could mean cheaper beer - they holds out hope that consumers will at least recognize the problem and maybe speak up.
“Our optimism flows from the non-ideological nature of our argument, which we think can attract broad, if dispassionate, political consensus among consumers," the report says. "We think that focusing on everyday product markets where regulations impose costs on Canadians – including staple foods, alcohol and legal services – is a promising step towards a more competitive Canada.”
