Reviving Competition in Canada’s Economy: A Path to Growth and Innovation

Imagine a world where industries from banking to groceries and airlines are dominated by a few firms. Prices would rise, quality would drop, and innovation would stagnate. Unfortunately, this isn’t just a hypothetical — it’s the reality Canada is inching toward due to a steady decline in market competition. This growing monopolistic environment is stifling innovation, raising costs for consumers, and undermining economic efficiency.

Lack of Competition Plaguing Canadian Industries

Canada has been grappling with a significant decrease in competition across industries, with a 2023 report from Canada’s Competition Bureau warning that the country has become less competitive since 2000. During this time, corporate profits and consumer prices have increased, while the rate of new market entrants has slowed, benefiting large incumbent firms.

Key sectors such as telecommunications, financial services, grocery retailing, and airlines are dominated by a handful of companies. As competition dwindles, prices rise and product quality diminishes, leading to poor outcomes for consumers and weakening the economy’s overall productivity.

For example, North Economics reports that increased competition in the banking sector could save Canadians $8.5 billion annually — approximately $250 per adult. Greater market rivalry leads to lower fees, better choice, and improved financial services, as firms compete for consumer loyalty. Not only does competition benefit consumers, but it also fosters wage growth as firms seek to attract top talent.

Wider Economic Implications

The consequences of weak competition extend beyond high prices. Insufficient competition suppresses innovation and leads to lower productivity and subpar business investment. According to researchers at HEC Montréal, Canadian businesses lag in productivity due to a lack of motivation to innovate in an uncompetitive marketplace.

This challenge isn’t isolated to Canada. During the Obama administration, the United States recognized that weak market competition was a major factor contributing to stagnant wage growth and lackluster economic performance. Addressing monopolistic behavior became a key pillar of its economic agenda.

Root Causes Behind Canada’s Decline in Competition

A major driver of reduced competition in Canada stems from outdated and ineffective government policies. The Competition Act — a law intended to protect consumers by promoting competition — remained largely unchanged until critical amendments were introduced in 2024. These reforms were designed to address anti-competitive mergers, collusion, and monopolistic practices that had allowed dominant firms to consolidate power.

One of the leading causes of declining competition is the sharp increase in mergers and acquisitions. In 2021 alone, Canada witnessed over 3,850 announced deals totaling $359 billion in value. While M&A activity can improve efficiencies in some cases, it often reduces the number of independent firms in the market, leading to higher concentration and less competition.

The 2024 amendments to the Competition Act strengthened the authority of Canada’s Competition Bureau, equipping it to better scrutinize mergers and enforce competition laws. However, these changes alone won’t solve the problem. According to Matthew Boswell, Canada’s Commissioner of Competition, a broad-based, whole-of-government approach is necessary to reverse this trend and foster a more competitive environment.

Policy Reforms to Foster Competition

To address Canada’s competition problem long-term, policymakers must target the institutional and legislative barriers that limit market entry and designate unfair advantages. Here are three central avenues for reform:

1. Removing Interprovincial Trade Barriers

Interprovincial trade barriers protect businesses from out-of-province competitors, but they distort the marketplace and inflate prices. Studies estimate that these barriers add between 7% to 14.5% to consumer product prices by reducing the number of suppliers in each province. Eliminating these barriers would promote the free flow of goods and services, expand choice for consumers, and enhance national economic integration.

2. Easing Restrictions on Foreign Investment

Foreign investment laws like the Investment Canada Act (ICA) inhibit external competition, particularly in key industries such as mining, telecommunications, and energy. Though designed to protect national interests, these restrictions limit consumer options and contribute to market concentration. Revisiting and relaxing foreign ownership rules could help increase competition, drive innovation, and lower costs for Canadians.

3. Reforming Public Procurement Policies

Government procurement accounts for 15% of Canada’s GDP. However, current practices often favor large firms, placing small and medium-sized enterprises (SMEs) at a disadvantage. Simplifying procurement rules and increasing SME access to government contracts could unleash a wave of innovation and increase competitive dynamics in public sector markets.

In total, an estimated 35% of Canada’s economy is protected from normal competitive pressures. Reducing this figure through intelligent policy reform is key to unlocking the broader benefits of competition.

A Blueprint for Economic Prosperity

Revitalizing competition in Canada’s marketplace is essential not just for consumers, but for a stronger and more resilient economy. Increasing competition stimulates productivity, raises wages, spurs innovation, and leads to better goods and services at lower prices.

While changes to the Competition Act are commendable, they represent just the first step in a much-needed overhaul. Dismantling long-standing barriers such as interprovincial regulations, restrictive investment laws, and biased procurement policies will help Canada build a more open, dynamic, and fair economy.

Conclusion: Seizing Control of Canada’s Economic Future

Amid global economic uncertainty and rising costs of living, Canada has a unique opportunity to focus on what it can control — competition. Unlike global crises or cross-border conflicts, competition policy reform lies squarely within the federal government’s power.

By advancing pro-competition strategies, the Canadian government can tackle domestic challenges head-on, improve consumer welfare, and foster an environment where all businesses — large and small — have a fair shot at success. Ultimately, nurturing a competitive economy is not just an economic imperative; it’s a pathway to greater prosperity, equity, and innovation for all Canadians.