Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Disruptive business models raise concerns, Canada Competition Bureau finds, (Mar 9, 2016)

By Greg Hammond, J.D.

The Canada Competition Bureau today released a summary report of highlights from its “Workshop on Emerging Competition Issues,” which was held on January 19, 2016. The workshop focused on two main concepts: (1) disruptive business models and the implications for competition policy; and (2) incorporating non-price effects in competition analysis.

Disruptive new business models—such as those used by Netflix, Uber, and Airbnb—are reshaping Canadian industries, according to the summary. However, as these business models gain traction—thereby increasing competition—existing market participants may be responding by engaging in anticompetitive conduct or by asking regulators to enact rules that raise barriers to entry in these markets, which could effectively stifle competition and innovation. The workshop therefore focused on these issues.

While disruptive new business models offer benefits to consumers, such as providing services in more efficient ways, presenters suggested that such models may have negative impacts on some stakeholders as well. For example, there has been a sharp decrease in the value of taxi licenses in some municipalities due to the growth of transportation network companies Uber and Lyft, the summary stated.

Participants at the workshop therefore agreed that regulators must strike a balance between allowing disruptive business models and achieving legitimate policy goals. They also agreed that competition authorities can help regulators design regulatory frameworks in a way that promotes competition and innovation.

Other considerations from the workshop included: (1) both traditional firms and disruptive innovators, once established, may potentially engage in anticompetitive conduct; (2) intellectual property rights may have an impact on disruptive business models; (3) disruptive business models may have network effects that can impact competition; and (4) data collected by disruptive business models may potentially raise competition concerns.

Participants also generally agreed that firms may compete on a number of non-price dimensions, such as quality, innovation, consumer choice, diversity of business models, convenience, and a number of other factors valued by individual consumers. There was general agreement that analysis of retail price maintenance may benefit from consideration of non-price effects and merger reviews may include analysis of non-price effects. However, participants disagreed about whether a case should be brought forward purely based on non-price effects.

Noting that the workshop allowed the Competition Bureau to gain valuable insights on emerging competition issues with regard to disruptive business models and non-price effects, the Competition Bureau has identified three “next steps,” including: (1) consideration of the digital economy, disruptive business models, and the sharing economy as priority areas for the Competition Bureau’s advocacy efforts and effective advocacy for regulations that are no broader than reasonably necessary to achieve legitimate policy goals; (2) monitoring of developments concerning disruptive business models in Canada and abroad; and (3) consulting with international competition agencies and domestic stakeholders, and provide guidance to stakeholders through position statements, bulletins, and additional workshops.

News: Antitrust