Monopolies in Canada
Table of Contents :
Introduction
What is a Monopoly.
Our Monopolies.
Are they encouraged.
Driving Prices.
Driving Prices.
New Rule.
My Perspective.
Disclaimer.
We all know Canadian monopolies are a problem yet we saw merger of two telecom giants recently.
Effect of monopolies on consumer choices and competition are well documented, but still we end up having a few players in many sectors of our economy.
What is a Monopoly
In a Monopoly, a single company or group of companies dominate a particular market or industry resulting in limited competition.
Consequently innovation and competition is stifled, as there is little incentive for companies to invest in R&D.
When any one player enjoys significant domination, usually it leads to higher prices or lack of competition that ends up badly for consumers.
Ideally they are not desirable in a healthy capitalistic economy, but if we look around they do exist that too in many critical sectors of our economy.
Often regulators are in place which remain vigilant to ensure consumers interests are not being harmed, and competition is not being stifled.
Our Monopolies
We all recognize that Canadian monopolies are a problem yet we all feel helpless at times.
Ask yourself, Is the recent merger of Rogers and Shaw a good deal for consumers.
I believe we have a sort of illusion of choice, but in reality we don’t have much.
Five banks control 90% of banking, three telecom companies have over 85% market share, two airlines control over 85% of aviation, two companies control 63% of the beer market, last but not the least five big box grocery chains control over 60% of where we buy.
And then we wonder, how come we have to pay more for a cell phone plan, banking, travel and even groceries.
Are they encouraged
Canada has always been fearful that our homegrown companies if not protected and allowed to grow big enough, will get overwhelmed by American competitors.
Often our political masters look pro-competition but the law incentivizes consolidation.
Unlike other developed nations, many legal loopholes often allow mergers to go through, if that favours shareholders.
At least that is the impression general public gets, otherwise why should we even allow monopolies to grow and become even bigger.
Can you ever imagine Telus or Rogers competing with Verizon or AT&T, I don’t think so because they have flourished in a sort of protected market.
In my opinion, when you give overprotection to companies they inherently become inefficient and don't innovate.
Driving Prices
Consumers pay the price when too few control too much in Canada.
Inflation is evident from our skyrocketed grocery, cell phone or even housing costs, as lack of competition hurts especially low-income Canadians.
According to open media survey done recently which concluded :
Over 90% of Canadians think monopolies across sectors drive up prices, whereas 70% believe big companies are favoured over consumers.
The recent merger of Rogers and Shaw reinforce consumers' belief, that high telecom bills will significantly affect mid-income Canadians.
And worst of all, over 70% pooled believe that govt needs to do more to make goods and services affordable for Canadians, as they are struggling with the cost of living.
New Rule
Five big retailers control a significant market share, so the government is introducing a new rule called the “Grocery Code of Conduct.”
The idea is to ensure fair transparent and predictable pricing, while ensuring secure and stable food supply chains.
Some analysts believe this could reduce if not break the domination of these big companies, so that prices of our everyday needs become more affordable.
Food processors and big grocers are making record profits lately, when the public is facing a cost of living crisis.
The details and timing are still being worked out, but the government is signalling consumers that they are ready to act, may be because elections are less than 2 yrs away.
My Perspective
Whether you like it or not, monopoly under any circumstances is neither good for consumers nor for the economy in long term.
When we don't have options or competition, innovation and growth in economy is stifled while resources are distributed to a few .
This widening disparity could lead to reduced purchasing power of a common man, thus economic growth of the country suffers.
It is clearly evident as most Canadians go south of the border to buy stuff because it is cheap.
You know the reason, immense competition there resulting in wider options and lower prices for consumers.
That is exactly the reason, why govts around the world are worried now about monopoly of social media giants like, Facebook google or even amazon.
But that is me I might be wrong.
Disclaimer :
As a disclaimer, I’m not a financial advisor please consult one before investing based on your personal financial situation.