Reaction: The New Combines Investigation Act

Abstract

On December 17, 1985, Federal Consumer and Corporate Affairs Minister Michel Cote tabled in the House of Commons a bill to amend Canada's present competition law. Although Mr. Cote claimed that the new legislation will "protect the marketplace" and "give consumers the widest selection of goods at the lowest possible price," this is extremely unlikely. A Combines Investigation Act which interferes with our system of competitive enterprise will instead stifle business rivalry, and lead to economic inefficiency. This, in turn, will reduce the welfare of the Canadian consumer. The main drawback in Mr. Cote's initiative is that it is predicated on an untenable and outmoded economic theory. This is the view that business concentration and rivalrous competition are incompatible. It, in turn, stems from the textbook model of "perfect competition," which declares ideal a scenario in which firms are small and numerous, goods are homogeneous and unchanging, information is costless and profits are always zero. But in the real world which Canada for better or worse inhabits, these conditions are irrelevant to rivalrous business struggle. In the marketplace, large scale enterprises, even gigantic ones, are not exempt from competition. They, too, can fail if they cease to satisfy consumer demands for quality, low price, efficiency, new products, good service and reliability.