Business
Competition Bureau recommends bureaucratic power grab over airline industry
From the Fraser Institute
By Matthew Lau
According to the Competition Bureau’s recent market study of Canada’s airline sector, “Competition delivers major benefits to Canadian travellers. Beyond lower prices, competition drives quality improvements and innovation.” This statement about economic competition is correct. Unfortunately, however, some of the Bureau’s other ideas about economic competition are fundamentally wrong and its poor proposals, which would damage the airline industry, are mixed in with beneficial proposals.
Let’s begin with what the Competition Bureau, a law enforcement agency that reports to the federal government, gets right. Three of the 10 recommendations in the Bureau’s market study relate to opening Canada’s airline sector to international competition. Allowing more international competition is an commonly proposed idea (including in a Fraser Institute study earlier this year) and a good one.
Specifically, the Bureau recommends raising the single-investor foreign ownership limit for Canadian airlines to 49 per cent, allowing 100 per cent foreign ownership for domestic-only Canadian airlines, and working with other countries to remove foreign competition restrictions. The Bureau also recommends reducing regulatory costs for northern operators to support northern and remote market access, and opening government contracts to as many bidders as possible to get better value for taxpayer dollars.
Alas, despite these good ideas for protecting or improving competition, the recommendation at the top of the Competition Bureau’s list is negative, founded on a poor understanding of economic competition, and places far too much faith in the power of government intervention to preserve or improve competition.
“We recommend adopting a system of parallel reviews,” reads the study. “Under this system, both the Commissioner of Competition and the Minister of Transport would conduct independent reviews. Either process could block a transaction, and deals could only proceed if they cleared both reviews.”
In other words, the Competition Bureau proposes the Commission of Competition (the head of the Bureau) have veto power over airline mergers and acquisitions. The stated intention is to disallow anti-competitive mergers or collaborations, but this appears to be a bureaucratic power grab that would block transactions that benefit airline passengers and likely reduce investment in the airline sector.
Speaking to a parliamentary committee last year, a deputy commissioner with the Bureau pointed out that it had opposed three airline mergers in recent years—all of which the federal government finally approved despite the Bureau’s opposition, although with onerous political conditions.
The Competition Bureau laments industry concentration (the degree to which a few large players serve a high proportion of the market), but as a Montreal Economic Institute analysis on airline competition noted, “both economic theory and empirical evidence suggest that it is barriers to entry rather than the size and number of firms in a market that matter.”
Indeed, this was a key economic insight explained by Joseph Schumpeter more than eight decades ago. Industry concentration is not inherently negative and may well result from suppliers and consumers freely making decisions with their own money. Government barriers to entry, which tend to cause industry concentration, is the real problem.
If economies of scale allow large airlines to operate more efficiently than small ones, airline passengers may well be better off when two airlines merge. Or, if an airline is financially distressed, its acquisition by another airline may allow it to continue operations and maintain services. And if airline investors realize they may not be able to eventually exit their investments by selling to other airlines, the long-run effect will be to reduce airline-sector competition and investment.
The Competition Bureau seems to grasp that barriers to entry, not concentration, are the problem by saying its goal “is not always to promote multiple carriers on every route” but rather to promote a competitive environment “where the best airline serves each route but knows it can be replaced.” Yet the Bureau’s hostility towards past airline mergers, as well as value-creating mergers in other industries, suggests it does not apply this thinking consistently and seeks to block even transactions that generate significant economic benefits.
The Bureau’s new report gets some things right, but more bureaucratic power over the airline industry will not help Canadians. The Competition Bureau simply should not have veto power over airline mergers and acquisitions.
From the Fraser Institute
By Ben Eisen and Milagros Palacios
If you use the more appropriate measure for measuring economic wellbeing and living standards—growth in per-person GDP—the happy narrative about Canada’s performance simply falls apart.
Tuesday, Nov. 4, the Carney government will table its long-awaited first budget. Don’t be surprised if it mentions Canada’s economic performance relative to peer countries in the G7.
In the past, this talking point was frequently used by prime ministers Stephen Harper and Justin Trudeau and their senior cabinet officials. And it’s apparently survived the transition to the Carney government, as the finance minister earlier this year triumphantly tweeted that Canada’s economic growth was “among the strongest in the G7.”
But here’s the problem. Canada’s rate of economic growth relative to the rest of the G7 is almost completely irrelevant as an indicator of economic strength because it’s heavily influenced by Canada’s much faster rate of population growth. In other words, Canada’s faster pace of overall economic growth (measured by GDP) compared to most other developed countries has not been due to Canadians becoming more productive and generating more income for their families, but rather primarily because there are more people in Canada working and producing things.
In reality, if you use the more appropriate measure for measuring economic wellbeing and living standards—growth in per-person GDP—the happy narrative about Canada’s performance simply falls apart.
According to a recent study published by the Fraser Institute, if you simply look at total economic growth in the G7 in recent years (2020-24) without reference to population, Canada does indeed look good. Canada’s economy has had the second-most total economic growth in the G7 behind only the United States.
However, if you make a simple adjustment for differences in population change over this same time, a completely different picture emerges. Canada’s per-person GDP actually declined by 2 per cent from 2020 to 2024. This is the worst five-year decline since the Great Depression nearly a century ago. And on this much more important measure of wellbeing, Canada goes from second in the G7 to dead last.
Due to Canada’s rapid population growth in recent years, fuelled by record-high levels of immigration, aggregate GDP growth is quite simply a misleading economic indicator for comparing our performance to other countries that aren’t experiencing similar increases in the size of their labour markets. As such, it’s long past time for politicians to retire misleading talking points about Canada’s “strong” growth performance in the G7.
After making a simple adjustment to account for Canada’s rapidly growing population, it becomes clear that the government has nothing to brag about. In fact, Canada is a growth laggard and has been for a long time, with living standards that have actually declined appreciably over the last half-decade.
Ben Eisen
Senior Fellow, Fraser Institute
Milagros Palacios
Director, Addington Centre for Measurement, Fraser Institute
Plus! Some tough lessons learned by journalists at all levels – not everyone is telling the truth and there are many people with the same name. Verify.
By now it’s established that Ontario Premier Doug Ford is either an ever so dreamy “elbows up” super hero kinda guy who’s shown US President Donald Trump who his daddy is or …. a ham fisted, narcissistic blowhard with all the finesse of a drunken linebacker crashing through the Royal Doulton.
If you follow social media, those appear to be the options. You choose.
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His $75 million ad buy attempting to show Americans how Trump is offside on tariffs with the late Republican icon President Ronald Reagan (1981-89) was either, as Ford insists, a triumph, or a disaster of epic proportions. Either way, the result is the Americans broke off trade talks until, well, whenever a very aggrieved Trump next wakes up on the right side of the bed. And the progressive bromance between Ford and Prime Minister Mark Carney looks to be on the rocks, with the latter admitting he apologized to Trump and had advised against the ads. Me? I thought Matt Gurney summarized the situation very well in the Toronto Star.
“The Americans are more than savvy enough to have figured out what we’re up to. They’ve responded to our good cop/bad cop strategy by shooting both cops and then torching the police station.”
The Rewrite, though, is about media, not tugging forelocks and authoring political thumb suckers. So what really made me curious about Ford’s ad spend was whether the premier’s media friends in Ontario were going to get their – what’s that phrase again? – oh, right: fair share.
People may have forgotten but it was only last year when Ford, succumbing to News Media Canada’s lobbying, decided that too much government advertising money was going to American tech companies like Meta and Google and not enough to people who report about him and his opponents. Consistent with the progressive belief that government subsidies can cure any problem, Ford ordered that 25 per cent of the $100 million spent on advertising annually by the Liquor Control Board of Ontario (LCBO), the Ontario Cannabis Store, Metrolinx and the Ontario Lottery and Gaming Corporation (OLG) be directed to Ontario newspapers. And he didn’t stop there. The directive news release made it clear that “the government is also making similar commitments with its own advertising spending, helping to provide even more support for Ontario jobs and promote Ontario culture.”
Word on the street is that this cashapalooza – announced mere months before an election- has been warmly received by Ontario media, so I was already trying to find out who was getting how much when the US ads launched.
Turns out what should have been a simple task is not so easy. The specifics are not to be found within Ontario’s public accounts. So I wrote to Grace Lee, the director of communications in the Premier’s office and then Hannah Jensen, who also works there. No response. Then I tried again. Still nothing. When I asked if the directive “also applies to the Government of Ontario’s recent advertising buy in the United States so that additional government advertising – as is indicated in the directive – worth 25 per cent of the US spend will benefit qualified Ontario media” I got the same cold shoulder.
So, while there was a bit of publicity regarding Ford’s initial decision to subsidize Ontario publishers to the tune of $25 million-plus, no one is providing the details. The publishers must know and the government must know, but they seem to be keeping it a secret. It doesn’t seem likely, but if Ford is faithful to the words and spirit of his 2024 directive, there should be some additional cash flowing to approved Ontario publishers as a result of his Trump tantrum-inducing investment.
Alas, it appears unlikely the public will ever know if that’s the case or which media outlets are benefiting from the premier’s benefaction. That makes these arrangements look all too grubby. Keeping them in the dark, where they’ll stay because that’s the way the politicians and the publishers like it, is only going to further diminish public trust in media. But it’s unclear most of them care anymore.
A phrase in a Juno News report caught my eye last week and it should serve as a cautionary tale. In its report on a large Alberta Independence rally in Edmonton, separatism-friendly lawyer Jeffrey Rath was, understandably, a key source. But he was loosely quoted when referring to a competing Pro-Canada petition on the question of separation. Juno reported that “Rath said Saturday that he heard (organizer Thomas) Lukaszuk was 50,000 signatures short, with a Tuesday deadline.”
The issue isn’t whether Rath said that or not – it’s whether what “he heard” was based on anything other than wishful thinking and rumour-planting. Reporters should not pass along that form of information without verifying because, as it turned out, Rath wasn’t even close. Needing 294,000 signatures, the Pro-Canada petition collected 456,000 or at least 200,000 more than what Juno’s source, Rath, “heard.”
Fine if Rath wants to make a fool of himself. Reporters should be careful not to share the distinction.
A more established title than Juno was in a shambles last week when the venerable Times of London had to quickly pull a story in which former New York Mayor Bill de Blasio was quoted criticizing Democrat mayoralty candidate Zohran Mamdani.
What went wrong? The Times reporter believed he had reached out to de Blasio via email and got a response that questioned Mamdani’s economic plan. The New York Post, also owned by Rupert Murdoch, jumped all over it but when the real former mayor de Blasio responded on X that the report was bogus, The Times stepped back quickly, issuing a statement that it had “apologised to Bill de Blasio and removed the article immediately after discovering that our reporter had been misled by an individual falsely claiming to be the former New York mayor.”
In an interesting twist, the international publication Semafor reported that it had “reached out to a Gmail address our sources believed to be the one used by The Times.”
And:
“You are correct. It was me. The real Bill DeBlasio,” the person who controls the email address responded.
As it turns out, just as there’s more than one Peter Menzies in this world, there’s not just one Bill de Blasio and The Times’ assertion that someone was impersonating the former mayor quickly proved contentious.
The guy who responded to the email turned out to be a 59-year-old Long Island wine importer named Bill DeBlasio.
“I’m Bill DeBlasio. I’ve always been Bill DeBlasio,” DeBlasio (not de Blasio) told Semafor after it knocked on his door. “I never once said I was the mayor. He never addressed me as the mayor.
“So I just gave him my opinion.”
The moral of this story for journos? As the old Chicago City desk saying goes, always “check it out – if your mother says she loves you, check it out.”
In the meantime, we await The Times’ apology to DeBlasio – the one with the wine.
(Peter Menzies is a commentator and consultant on media, Macdonald-Laurier Institute Senior Fellow, a past publisher of the Calgary Herald, a former vice chair of the CRTC and a National Newspaper Award winner.)
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