Why is the Competition Bureau of Canada Giving Uber a Free Ride?

Ostensibly, the Competition Bureau is a law enforcement agency that administers and enforces several federal statutes, including the Competition Act.

It investigates and litigates behaviour designed to restrict competition, such as collusion between competitors, price-fixing, bid-rigging, tied selling and other forms of anti-competitive behaviour. It also investigates certain forms of illicit competitive behaviour that involve dishonest and unlawful business means, such as deceptive telemarketing and misleading marketing practices.

On November 26th, the Commissioner of Competition (the chief officer of the Bureau) published an op-ed in the Globe and Mail entitled, “Don’t Ban Ride-Sharing. Rethink Regulation.”

 

The op-ed accompanied the release of a set of the Bureau’s recommendations for regulating the taxi and ride-sharing industries in Canada.

The Competition Bureau’s interventions coincided with public consultations forming part of the City of Ottawa’s taxicab and limousine regulatory review. Like regulatory reviews underway in other Canadian municipalities, Ottawa’s review has been assessing how to respond to the entry of ride-sharing companies such as Uber and Lyft.

In the Competition Bureau’s opinion, the alternatives presented by Uber’s arrival can be likened to the benefits of embracing innovation, versus the futility of clinging on to obsolete technology. The Commissioner of Competition writes:

“When was the last time you watched a movie on VHS? In the early 2000s, nobody was talking about banning DVDs to protect those who manufactured VCRs and video tapes. Instead, we embraced innovation, and benefitted from the superior quality of DVDs. Why then are some regulators taking steps to ban ride‑sharing applications?”

The straightforward answer to this question is that according to courts and city officials, ride-sharing companies like Uber are breaking the law. In the early 2000s, nobody talked about banning DVDs because producing DVDs wasn’t an illegal competitive practice. But operating a taxi-cab outside of municipal bylaws is an unlawful practice, and enforcement officers are charging drivers and impounding vehicles for violating the law. City officials and occasionally courts in Toronto, Calgary, Ottawa, and other municipalities have charged Uber with operating an unlicensed taxi brokerage and its drivers with failing to meet industry safety, insurance and regulatory requirements.

Oddly, the fact that Uber’s business model is unlawful doesn’t seem to faze the Competition Bureau. Presumably the Bureau wouldn’t condone illegally dumped or subsidized imports in Canada. But why does it look the other way at the illicit behaviour of Uber? It’s hard to believe that it’s motivated by the promise of ground-breaking technology, when according to studies completed for the Ottawa review, most of the innovative features offered by ride-sharing companies can be offered by traditional taxi companies offering parallel apps.

The answer may lie in the Bureau’s apparent conviction that competition is always a blessing, and intensified competition is preferable to ordinary competition. However, bylaws containing cut-throat taxi competition have been imposed over time in a wide range of jurisdictions, because of the threat to public safety, as a background study for the Ottawa review sagely points out. Taxi drivers themselves historically fought for restrictions on entry to the industry, just as workers formed unions to limit race-to-the-bottom competition in wages, hours and working conditions.

Restrictions on taxi industry competition are a good example of government regulation designed to protect public health and safety and promote the social and economic well-being of Canadians. Not just anyone can practice medicine or architecture, and entry into regulated professions is carefully restricted. Private militias cannot form to compete with police departments to provide neighbourhood safety. Long-haul truckers cannot compete by driving longer hours than are safe to do so. And so on. Legislated restrictions on competition intended to meet public-interest objectives are protected by the ‘regulated conduct defense’ in the Competition Act. And unsurprisingly, “combinations or activities of workmen [sic] or employees for their own reasonable protection” are also protected under the Act.

In his book “Raw Deal,” author Steven Hill documents how Uber’s business model of operating outside licensing rules and regulatory requirements unleashes cut-throat competitive pressures, to the detriment of passengers, pedestrians, and drivers (taxi and ride-sharing drivers alike). Just the sort of destructive forces that “regulated conduct” is designed to prevent.

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