Competitiveness on a ‘clear decline’ in Canada as profits rise: report

Canada's competition watchdog says in a new report that industries have faced a 'clear decline' in competitive intensity since the turn of the millennium.

Competitive forces have been on the decline in Canada at the same time as profits and price markups are on the rise, a new report from the Competition Bureau finds.

Canada’s competition watchdog on Thursday released a comprehensive look at the country’s competitive landscape between 2000 and 2020.

It found that “competitive intensity” — a metric for how hard businesses feel they need to compete against rivals in their industry — faced “a consistent and clear decline” over the period.

“When firms have to compete aggressively against their rivals, they face pressure to keep their prices low. So we don’t expect them to earn substantially higher profits,” the report read.

But the bureau found that profits rose widely in Canada over those two decades, as did price markups — the measure of how much more a business is charging for a product compared with how much it costs to produce it.

Profits rose the most in industries that already saw higher profits, and the case was the same for markups, according to the report, which relied on Statistics Canada data.

The Competition Bureau’s report came with a number of caveats and other reasons that could inflate prices aside from a lack of fierce competition, but said an increase in markups “could indicate a decline in the intensity of competition firms face.”

Canada’s most concentrated sectors became more concentrated over those 20 years, according to the analysis. The bureau also found that top firms in these sectors were less likely to be challenged by upstarts or existing smaller players in the industry.