The Price Canadians Pay for Limited Competition

Introduction

Open and competitive markets are the backbone of a thriving economy. They challenge businesses to innovate, improve efficiency, and deliver high-quality goods and services at fair prices. For consumers, this translates into better options, lower costs, and enhanced service quality. For businesses, competition fosters resilience and productivity, creating an environment where enterprises, big and small, can thrive. For Canada, embracing open markets means fostering innovation, attracting investment, and building a more resilient economy.

Yet, Canada faces unique challenges. Its small population and vast geography have contributed to high market concentration in key industries such as telecommunications, grocery retail, and air travel. This concentration often restricts consumer choice and inflates costs, straining household budgets and dampening economic dynamism. Take the telecom sector, for instance: Canadians contend with some of the highest mobile and internet prices globally, with average monthly mobile bills exceeding $65, compared to $25 in France and $30 in Australia (Rewheel, 2021). Similarly, grocery prices consistently outpace those in comparable markets, with Canadians spending nearly 10% more on food than their American counterparts (Statistics Canada), while air travel remains both expensive and inaccessible for many, with domestic ticket prices averaging $430 compared to $300 in the United States (International Air Transport Association).

Addressing these challenges is critical to creating a market landscape that benefits all Canadians. Drawing on lessons from successful international reforms, this editorial explores how Canada can break down barriers, foster competition, and build a fairer economy. By examining the telecom, grocery, and air travel sectors, we can identify actionable solutions to enhance consumer choice and lower costs while setting a bold vision for Canada’s economic future.

Canadians are feeling the pinch at the checkout counter and on their monthly bills. Whether it’s the rising cost of groceries or some of the highest telecom prices in the world, consumers are struggling in a market that seems designed to benefit entrenched corporate interests over public welfare. These challenges stem not just from inflation or geography but from deeper structural issues in market competition that demand bold, practical reforms.

The Grocery Squeeze: Profiting from Inflation

Canada’s grocery market exemplifies the consequences of limited competition. During the COVID-19 pandemic, supply chain disruptions and inflation pushed prices higher, but major grocery chains—Loblaw Companies, Sobeys, and Metro—capitalized on the crisis to turn record profits. Loblaw Companies alone reported a 30% increase in operating income in 2022, driven largely by price hikes (Food Secure Canada). Many price increases went beyond covering rising costs, serving instead to boost profit margins. For instance, while transportation and input costs rose during the pandemic, grocery price increases often exceeded these additional expenses, disproportionately impacting low- and middle-income households.

In rural and remote communities, the problem is compounded. The dominance of major chains, combined with high transportation costs, leaves consumers with few options and inflated prices. Unlike Germany, where discount grocers like Aldi and Lidl hold a combined 50% market share and drive down prices (Aldi), Canada’s grocery market remains inaccessible to such competition. Introducing these players could force incumbents to innovate and lower prices, benefiting all Canadians.

The Telecom Trap: High Prices and Limited Access

The telecom sector tells a similar story. The “Big Three” providers—Rogers, Bell, and Telus—control over 90% of the wireless market, charging some of the highest prices globally for mobile and internet services (CRTC). On average, Canadians pay $70 per month for 10GB of mobile data, compared to $26 in Italy or $33 in the United Kingdom (Rewheel Research). Smaller providers, which rely on leasing infrastructure from these giants, struggle to offer competitive prices, leaving consumers with few alternatives.

High telecom costs are more than an inconvenience; they limit economic opportunity. Affordable internet and mobile access are essential for education, employment, and healthcare, yet many low-income families and rural communities remain digitally excluded. The digital divide deepens inequities and limits participation in modern life. By contrast, countries like Singapore have introduced policies mandating infrastructure sharing and supporting Mobile Virtual Network Operators (MVNOs), creating more competitive markets with lower costs and better service (IMDA Singapore).

The Air Travel Burden: Limited Routes, High Costs

Air travel in Canada is another sector plagued by limited competition. With Air Canada and WestJet dominating the market, ticket prices are among the highest globally, with domestic flights costing an average of $430 per round trip (Transport Canada). Regional travel, in particular, suffers from high costs and limited route availability, creating barriers for mobility and economic growth in smaller communities.

Unlike Europe’s Open Skies policy, which has fostered competition and lower prices across member states (EU Open Skies), Canada restricts foreign carriers from operating domestic routes. This protectionist approach has stifled innovation and left consumers with few affordable options. Deregulation, as seen in Australia’s airline industry, has shown that introducing low-cost carriers can significantly lower prices and improve service quality. For instance, Australia’s average domestic airfare dropped by 20% after deregulation in the 1990s (Virgin Australia).

What Canada Can Do: Solutions for Fairer Markets

Addressing these challenges requires systemic reforms that prioritize consumers over corporate profits. Here’s how Canada can take action:

Expose and Prevent Price Gouging

Transparency is key to holding corporations accountable. Regulators should mandate regular audits and public reporting of profit margins during periods of economic stress, deterring companies from exploiting crises to raise prices unnecessarily.

Attract Discount Retailers

Incentivizing international discount grocers like Aldi and Lidl to enter the Canadian market could inject much-needed competition into the grocery sector. Their presence would drive prices down and expand consumer choice.

Mandate Telecom Competition

Requiring infrastructure sharing for the “Big Three” would level the playing field for smaller providers, lowering costs and fostering innovation. Policies to support MVNOs and introduce transparent pricing regulations could further enhance competition.

Strengthen Antitrust Regulations

Empowering Canada’s competition authorities to block mergers and acquisitions that concentrate market power is essential. Scrutinizing anti-competitive practices, such as exclusive supplier agreements, would help prevent further market consolidation.

Support Local Solutions

Tax breaks and grants for independent grocers and smaller telecom providers could expand affordable options in underserved communities. Investing in local and regional businesses would promote competition and reduce reliance on dominant players.

Building a Fairer Marketplace

The COVID-19 pandemic exposed the vulnerabilities in Canada’s markets. From grocers profiting off inflation to telecom giants maintaining sky-high prices, the need for reform is clearer than ever. Competition is the key to fair pricing, better service, and innovation. By fostering a more open market, Canada can ensure that all consumers—not just those in urban centers or higher-income brackets—have access to affordable groceries, telecom services, and air travel.

These changes aren’t just about economics; they’re about fairness and opportunity. It’s time to put people first and create a market that works for all Canadians.