Why competition matters
Discover how competition drives our economy, helps Canada realize its full economic potential, and benefits consumers through lower prices, greater choice and increased levels of quality and innovation.
How healthy competition drives productivity in Canada
Productivity is important to our economy. It determines how effectively Canadian companies compete domestically and internationally, and over time, it leads to a better standard of living.
Productivity is the measure of the output we get for our inputs. It can be thought of as the result of the work Canadian businesses do to produce the goods and services that we buy, sell and trade.
In Canada, productivity growth has been a long-standing concern for our policymakers. For decades, we have been less productive than many other countries such as the United States, Germany, and the United Kingdom.
Canada is rich in resources and skilled labour, and we must consider competition to help us realize our full productive potential. Competition has the power to drive our productivity forward and benefit Canadian businesses and consumers alike. Competition can improve productivity in three ways:
- Efficient use of resources: firms facing intense competitive pressure are likely to use their labour and resources more efficiently than those facing slack competition;
- Innovation: competition encourages firms to innovate and invest in new products and processes to gain a competitive edge on their rivals; and
- Keep markets productive: healthy competition squeezes out lower-productivity firms and allows higher-productivity firms to thrive.
Competition pushes individuals, firms and markets to make the best use of their resources, and to think outside the box to develop new ways of doing business and winning customers. This not only drives productivity up, it also improves our own standard of living.
When Canadian workers and firms are more productive, their goods and services are more attractive to Canadian consumers and foreign buyers. This increases the competitiveness of Canadian exports, expands our output and increases the economic benefits for Canadian workers, businesses and investors.
While it is the Competition Bureau’s responsibility to protect and promote competition, we must do this by working in concert with Canada’s policy-makers. Now, more than ever, productivity growth has to be our collective priority to ensure the future well-being of our economy.
How competition is good for consumers
Competition in the marketplace is good for Canadians. Competition benefits Canadians by keeping prices low and keeping the quality and choice of products and services high.
With fair and vigorous competition, businesses must produce and sell the products consumers want, and offer them at prices they are willing to pay. This means that in a competitive market, the consumer holds the power.
When there is limited competition and consumer choice, businesses can dictate their terms. This can lead to businesses offering products and services that are too expensive, of low quality, or lacking features that consumers want. Without competition, consumers must accept these inferior products and services, or go without.
However, when businesses operate in a healthy competitive market, consumers get to choose the best option available to meet their needs and price point. Fair competition means that businesses must make a strong case to each consumer, and convince them that their products or services are the superior choice. This translates to more and better products and services that meet the diverse range of consumer tastes. In short, more variety, more features, higher quality and more value for consumers.
As consumer preferences invariably shift, a competitive market will reflect these changes in the products and services it delivers. This will push businesses that excelled at meeting yesterday’s needs to either adapt or fall behind because of pressures from existing competitors or new entrants in the marketplace.
When markets only have one or very few sellers, consumers may not even realize what they are missing. In a competitive market, new entrants or existing businesses continuously innovate and improve productivity to offer consumers better products and services at lower prices.
Together with Canada’s policy-makers, it is the Competition Bureau’s responsibility to protect competitive markets and help ensure that we all experience the full benefits of healthy competition.
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