Law Times

Page 10 September 19, 2016 • Law timeS www.lawtimesnews.com Digital economy poses competition challenges BY JIM MIDDLEMISS For Law Times W hen the Com- petition Bureau weighed in to the municipal debate last November over ride-book- ing regulation and services such as Lyft and Uber, it highlighted the challenge Canada's chief regulator faces in trying to over- see competition in an economy driven more by innovation and data than the traditional nuts and bolts of manufacturing and resource extraction. A digital economy presents interesting new challenges for global competition regulators, says John Pecman, commis- sioner of Canada's Competition Bureau. For example, take data. "If data is the new oil of the economy, how are we as compe- tition authorities going to deal with market power?" he asks. "How do we apply our tradition- al antitrust approach to the digi- tal economy and monitor prices? There are a number of agencies wrestling with these issues." Last November, the Bureau issued a white paper, "Moderniz- ing Regulation in The Canadian Taxi Industry," to help city coun- cils come to grips with the rise of what the Bureau calls Transpor- tation Network Companies. The Bureau said that "com- petition should be an essential guiding principle in the design and implementation of regula- tions" and urged politicians to "take a less intrusive and more balanced approach when design- ing and implementing regula- tions for transportation services." Stated the paper, "Consum- ers stand to benefit from lower prices, reduced waiting times and higher quality services if regulators allow the forces of innovation and competition to shape the industry." However, it's not just inno- vative ride-booking services on the Bureau's radar screen. It is also undertaking a market study of the rapidly emerging FinTech space, which covers technology that consumers use to carry out financial transactions. "FinTech has the potential to disrupt the financial services sector, spur innovation and gen- erate benefits for individuals and companies across Canada," the Bureau noted. Technological advancement has been disrupting economies since the Mesopotamians invent- ed metalworking, but the chal- lenge now is the pace of change and the fact that the disruptor is intangible and comes in the forms of bits, bytes and processes, rather than something tangible, such as a better mousetrap. A digital economy means competition regulators have to develop different approaches and analyses for mergers and anti- trust enforcement, notes George Addy, a former Bureau commis- sioner who heads the competi- tion & foreign investment review practice at Davies Ward Phillips & Vineberg LLP in Toronto. He says that, in a typical merger re- view, the Bureau has a "very sort of linear analysis." He adds, "They have their pro- cess down pat for that, and they rarely deviate from that process." "I think the challenge for competition authorities . . . is going to be reconciling or ad- justing the historical approach to antitrust markets and how you evolve from a culture that is very linear in its thinking to trying to understand market dynamics and potential impact of activities by participants in markets that are not linear, that are not f lat." The digital sector, he says, is "innovation intensive and very, very dynamic. "How do you factor in the very short, very aggressive life cycle of some of these products . . . and the ease of disruption by new in- novations that nobody thought of yet, which could come out in a year or two? How do you adjust your traditional antitrust think- ing to things that aren't static for very long?" he asks. Subrata Bhattacharjee, na- tional vice-chair of the compe- tition and foreign investment review group at Borden Ladner Gervais LLP in Toronto, says that any time an innovator emerges in a market there is a "temptation on the part of an incumbent to slow or prevent entry. "The most common way for them to do that is to try to in- crease or institute regulation," he says. Canada is seeing incumbents circle the wagons when it comes to the sharing economy in terms of ride-booking service Uber and rental agency Airbnb. Bhattacharjee points to a couple of recent high-profile workshops the Bureau held on innovation and competition, and cited the FinTech and ride- booking studies as examples of the Bureau's outreach efforts on the innovation front. He says these initiatives show the Bureau is "alive in this [in- novation] debate" and that "it wants to get ahead of some of this stuff before it's too late." The one area that competi- tion lawyers are watching close- ly is the rise of Big Data and how companies use information to develop a competitive edge in their industry. "Big Data and antitrust is a very important emerging issue around the world," says Bha- ttacharjee. The problem, he says, is that "today's innovator becomes to- morrow's incumbent." Addy says the biggest chal- lenge for competition regulators moving forward is that Canada must avoid adopting what he called a "European industrial engineering model, as opposed to the competition law and en- forcement model." "We must avoid slipping down the slope of being more concerned about protecting competitors than competition," he says. LT FOCUS George Addy says in a typical merger review, the Competition Bureau has a 'very sort of linear analysis.' IT'S TIME TO RANK… THE TOP 10 INSURANCE DEFENCE, TAX, WILLS, TRUSTS & ESTATES BOUTIQUES Complete the survey online at canadianlawyermag.com/surveys and make your picks. 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