A renewed scrutiny of corporate governance was inevitable in light of the current political climate and the backdrop of the recent recession and notable market failures.
This revisionist approach towards competition law expands the scrutiny beyond notions of consumer welfare standards into non-traditional economic considerations like fairness, underemployment, income inequality, wealth concentration and broader social contexts. Derisively referred to as “Hipster Antitrust,” it finds its modern roots in America in the 1978 text The Antitrust Paradox by Robert Bork, which has already influenced American competition law. Hipster Axntitrust would go further and reconsider historical assumptions in a new information economy.
Because consumers in the modern economy inform their purchasing decisions based on the available information, the manner in which information is made available to consumers through the Internet and its intermediaries such as Google are not effectively addressed by traditional antitrust law. Distortion of the truth occurs by sellers, and intermediaries have little incentive to scrutinize these distortions given their need for advertising revenues. Because this is not necessarily considered false or misleading information there is no violation of regulation, even if consumers are confused or misled in their purchasing choices.
Supporters of Hipster Antitrust liken it a revival of modern neo-Brandeism, even while the Federal Trade Commission has recently and loudly rejected it. What is clear is that Hipster Antitrust is a buzzword that has attracted the interest of many across North America, and may provide the basis for a renewed interest in competition law
An example of this in Canada would be a panel this week in Ottawa, at a conference hosted by the CBA’s Competition Law Section’s Young Lawyers Committee. Paul-Erik Veel of Lenczner Slaght & University of Toronto Law and Economics emphasized there was no clear consensus as to what Hipster Antitrust actually means, but there are 4 themes that can be found in the literature:
- Maintaining the standard economic analysis of total/consumer welfare standard, but changing the test used to analyze competition
- Using a standard economic analysis combined with a greater emphasis on the distributional consequences
- Supplementing the standard economic analysis with broader public interest considerations
- A more interventionist approach that would respond to new economy type problems.
An example of the first type would be A Better Deal proposed by House Democrats to amend the Clayton Act. The last type would focus on technology and large information problems, as described above. The other two would be somewhere in between these other options.
Although the renewed emphasis on competition law as a solution to contemporary economic challenges, Margaret Sanderson of Charles River Associates indicated that Canada provided a pertinent counter-example to the Hipster Antitrust rhetoric. We have more lenient antitrust standards through an efficiency defence in mergers, and also have more highly concentrated industries, but still have better performance on most of the macroeconomic effects that are cited in need for reform.
Elisa Kearney of Davies Ward Phillips & Vineberg noted that the regulatory universe touched on by competition law was incredibly complex, and involved areas such as privacy law, consumer protection law, intellectual property, telecommunications regulation, libel and slander defamation, and the Charter. Canada’s differentiation from the U.S. may be explained by any one of these other legal aspects of corporate governance, or perhaps due to subtle and unknown combinations of them all.
One example of this might be in the regulation of tied selling by banks, with the prohibited activity of making the purchase of one product conditional on another, as differentiated by bundling and relationship pricing used to create incentives to purchase multiple products. Although the Competition Act itself provides some restrictions to tied selling as anti-competitive, other unharmonized regulations provide additional limits on its use. Section 77 of the Competition Act only prohibits tied selling when it is engaged by a major supplier or is widespread in the market, and therefore likely to have an anti-competition effect.
Consumer protections come through more with other statutes, such as s. 459.1 of the Bank Act, which prohibits coercive selling in all circumstances. Further protection can be found under the Securities Act through National Instrument 33-102, which prevents abusive sale practices, including if a customer is coerced or forced into purchasing two products together.
That doesn’t mean that Canada is not exploring these issues in a new economy at all. The Competition Bureau released a paper in November 2017 looking at the implications for competition policy due to big data and innovation. Although the potential abuse of big data is recognized here, prohibitions would have an adverse effect on innovation. Data collection may even improve competition by providing incentives to innovate when companies identify their competitors entering into new commercial areas. The Bureau appears to prefer applying the regulatory scheme in a flexible manner to adapt and change to emerging market conditions, but also concludes that competition enforcement should pay an important role in a new economy.
Understanding competition law within the broader regulatory context may also help lawyers entering the area to understand and address market inefficiencies and consumer dissatisfaction with services provided. Complaints last year from the big 5 Canadian banks that employees appear pressured to oversell products to consumers, including tricking or lying to them. The Financial Consumer Agency of Canada (FCAC) released a report last month concluding they were unable to find evidence of widespread “upselling,” but acknowledge that governance frameworks do not adequately address the risks of any market conduct obligations. The reason for this problem emerging in a traditional industry like banking is that technological advances have changed consumer behaviours in finance, with the majority of transactions occurring online and at ATMs, but the majority of sales growth occurs through branches and call centres. Continued consumer dissatisfaction may give greater momentum to Hipster Antitrust sentiments in Canada as well.
Few of the young lawyers in Ottawa for the conference had any exposure to competition law while in law school, and it is only in practice that they were introduced to it. Connecting competition law to broader policy issues and discussions of economic concern around innovation, even if to continue to maintain the standard economic analysis, may provide the context that would expand interest in this area for the future generation of competition lawyers.