Canada's Monopolies and Their Economic Impact

Canada's Monopoly Malaise

Telecommunication carriers like Rogers, Telus, and Bell run the highest-priced mobile plans in the world, at three times the cost of Australia and twice that of the US and Europe. If you think you’re picking a great deal by choosing a brand like Virgin, Koodo, or Fido, think again — all are owned by the top three carriers, which means you're still paying a monopoly price.

Monopoly Economics

Economic monopolies — single companies or a small group of companies that dominate a market — are nothing new. Once controlled by government monopolies like the Canadian Broadcasting Corporation and Air Canada, Canada had the world’s first antitrust legislation in 1889. The U.S. followed with the Sherman Anti-Trust Act in 1890, which broke up monopolies and trusts. But starting in the 1980s, Canada saw an unprecedented consolidation, as laws were rewritten to encourage big players to dominate their markets, making competition concerns, prices, and consumer well-being secondary to business efficiency. But why is this a problem? Any concentration of power — any company that controls a particular product or service significantly — can determine the terms of access to that product or service for everyone else. These monopolies set the price of goods near the highest amounts consumers would pay, because there are no alternatives. And that makes for a less-than-free market. The bulk of wealth generated since the 19th century can be linked directly to free market capitalism. But monopolies disrupt that system by artificially increasing prices and decreasing competition. This harms consumers and workers, leading to lower wages, higher prices, and stifled innovation. Economists like Adam Smith have predicted and proven this over centuries.

Canadians Pay the Price

In Canada, monopolies dominate markets from banking to groceries to healthcare. For instance, six banks control 90% of all mortgages, five grocery stores (three Canadian and two American) control 87% of all grocery stores, and two non-Canadian-owned companies monopolize 85% of the beer market. Air Canada, meanwhile, was recently ranked dead last in on-time flights among North American airlines. The damage of monopolies goes beyond higher prices. In Canada, monopolies mean fewer startups, less innovation, and lower productivity. Since 2007, the number of public companies has dropped by 17%, and business investment fell 20% between 2014 and 2021. Meanwhile, the average age of the top 20 Canadian companies is 1914; in the US, it's 1944. Here’s what that means: the free market is failing to create opportunities for new businesses. With monopolies controlling the distribution and sale of alcohol, Canadians pay more for booze. For telecommunication carriers, it’s the same story — Rogers, Telus, and Bell run the highest-priced mobile plans in the world. And the dominance doesn’t stop at consumer products. Monopolies like Air Canada and WestJet control 80% of the airline market, and the only alternative for home internet is controlled by the American-owned Starlink.

What It All Means

Monopolies suppress competition. Without the dynamic pressures competitors bring to the market, established firms become entrenched and complacent, leading to lower productivity and stifled innovation. All the while, consumer choice is restricted, and prices rise. Canadians pay the price for this lack of competition. When consumers are left with no better alternative, the company in control can dictate the terms, leading to higher prices, lower wages, and more wealth inequality. This dynamic leads to a cycle where there are fewer firms to invest in, businesses invest less in themselves and in research and development, and the productivity of the overall economy suffers. This is a patent recipe for economic stagnation and inequality, driving the damage to the economy even further.

What Can Help

It is possible to mitigate the concentration of economic and political power in the hands of a small number of players. The solution, as economists and politicians have opined, is more competition. Competition means freedom of choice for consumers, freedom to start a business, and freedom to compete in a free market. This leads to better products, better service, and better prices for all. But how do we fix it? It’s time for a proactive approach. First, we must prevent monopolies from buying up their competition. The federal government must implement policies that ensure more competitors and less consolidation in the market. We need to encourage new banks, cell phone carriers, grocery stores, internet service providers, and airlines. We must support startups, encouraging more firms to grow and scale. Finally, the government must ensure that the market remains free from predatory practices by market leaders. Other than that, it’s important for Canadians to recognize the signs of monopolistic behavior in their markets and advocate for more competition and transparency. Staying informed and politically active can help bring about much-needed changes.