News

Decline in Competitive Pressure

4.6

Andrew R. Michaud

October 19, 2023

In a recent report issued by the Canadian Competition Bureau, it was revealed that the competitive landscape in Canada has significantly changed over the past two decades. The report highlights a decline in the extent to which Canadian companies exert pressure on their rivals to gain market share. Consequently, this has led to a greater dominance of larger companies in highly concentrated sectors.

The Competition Bureau emphasized the importance of implementing pro-competitive public policies that foster healthy competition among industries. These policies should avoid sheltering industries from the challenges of fair competition.

To address concerns over rising inflation, particularly in the food sector, Canadian grocery chains have made commitments to stabilize price increases. Canadian industry minister François-Philippe Champagne has warned that failure to live up to these commitments could result in consequences for the grocery chains.

While the Competition Bureau's report does not identify specific industries where competitive intensity has weakened, it does reveal a significant decline in the entry rate of new companies across the economy. Over the period from 2000 to 2020, this rate decreased by a quarter, indicating a less dynamic business environment in Canada.

Furthermore, the report suggests that profits price markups are increasing, particularly in sectors where markups were already elevated. The estimated increase in these markups is approximately 12%.

Overall, the report sheds light on the changing competitive dynamics in Canada and emphasizes the need for policies that promote fair competition and prevent industry dominance.