The Platform Economy and Competition Policy: Options for Canada
This report reviews the competitive effects of the digital transformation in platform ecosystems for Canadian SMEs as purchasers of services. The digital transformation in markets enables greater efficiencies in the provision of services to businesses, but also generates competitive inefficiencies arising from the reliance on platform firms as suppliers, given their disproportionate share of the market. The economic impact of platform firms derives from the nature of network effects and increasing returns that have been identified as key aspects of the platform economy. The status of these firms also derives from increased investment in intangible assets, in contrast to investments in physical assets, as a dynamic factor in the expansion of the platform economy, as well as the specific characteristics of the economics of information. The report explores the potential of this transformation to create and reinforce monopoly positions in key platforms in the digital economy. It examines why conventional perspectives that inform competition policy have been slow to identify this threat and may not provide an adequate basis to respond to the challenge.
The report examines some of the new policy perspectives that have emerged from the academic and policy-oriented literature to deal with this challenge, with a particular focus on the limitations of existing competition policy authorities to deal with the full dimensions of the current challenge. It considers a set of alternative recommendations currently being advanced and the need for a ‘whole of government’ approach to deal with the issue. Policy approaches recently adopted or currently under consideration in other jurisdictions, especially the EU, UK and US are examined, and the implications of this trend for policy development in Canada are considered. The report concludes with a preliminary set of recommendations for the most effective policy approach for Canada, considering its position as a small, open trading country in the global economy and its traditional role as a technology taker, not technology setter.
Access the full paper: The Platform Economy and Competition Policy: Options for Canada
A French language version of this report is available upon request. Email david.wolfe@utoronto.ca