If Danielle Smith Was A Private Business, Would She Be Investigated for Abuse of Dominance?
Now that she shows an understanding of *something* from an Economics textbook, she is using it for evil!
Yesterday, I read the latest on Substack from University of Calgary Political Science professor Lisa Young, in which she wrote about Alberta Premier Danielle Smith’s announcement of the “Alberta Next” panel, of which members include Adam Legge of the Business Council of Alberta and Trevor Tombe of the University of Calgary.
The following quote particularly stood out to me as enlightening:
I do, however, have to give Premier Smith credit on one front. By convincing Adam Legge of the Business Council of Alberta and Trevor Tombe of the University of Calgary to join the panel, she has effectively neutralized two highly credible voices that have sometimes been critical. Legge has spoken out about how businesses in the province don’t want separation. Tombe has run the numbers on the Alberta Pension Plan and has pointed out the flaws in the government’s math.
Now, in the months leading up to a probable referendum on separation, Smith has sidelined two of the most credible voices best positioned to offer analysis of the potential economic costs of secession.
This is a great observation, and one which made me think Smith has something in common with businesses like Safeway Canada Limited, which was busted over 50 years ago for violating Canada’s competition laws.
Let me explain.
Church and Ware (2000, 410-411) write about a legal case back in 1973 when the Director of Investigation and Research of the Bureau of Competition Policy (now known as the Commissioner of Competition for the Competition Bureau), obtained prohibition orders against Safeway Canada Limited. He did so due to concerns Safeway was monopolizing the retail grocery markets in Calgary and Edmonton, and the prohibitions included the following:
For 3.5 years, the company was significantly restricted from expanding the total square footage of its retail outlets in the two cities.
During these same 3.5 years, Safeway was prohibited from opening more than one new store in each city. It was also not allowed to (directly or indirectly) acquire any new sites for grocery stores during the first 2.5 years of this prohibition.
For the first year following these 3.5 years, Safeway was still not allowed to open more than two new stores in each city.
For five years, Safeway was prohibited from merging with, or otherwise acquiring the retail grocery assets of competitors.
As noted by Church and Ware (2000), these constraints were imposed when both cities were growing rapidly due to a booming oil-and-gas sector.
So what exactly did Safeway do wrong? According to the Director:
The intent of this prohibition is to allow for the development of competition in the retail grocery trade in Edmonton and Calgary. Further, it is intended to prevent Canada Safeway from preempting prime sites for retail outlets in each of the two markets as these sites become available.
In short, the Director alleged that between 1965-72, Safeway engaged in preemption strategies to gain market power in the retail grocery trade.
More specifically, based on the reasonable assumption that people tend to buy their groceries at the store nearest to them — rather than shop around for deals — Safeway was able to significantly increase its market shares in these cities by rapidly expanding its number of locations, not so much because they would be profitable in their own rights, but because they would keep (potential) competitors from taking control of these locations instead.
Since there is limited real estate for grocery stores to operate competitively with major grocers like Safeway, Safeway was allegedly reducing its overall profitability on purpose just so it could increase its monopoly power, thus keeping its profits higher than they would otherwise be if it had to compete with new entrants.
Such preemption strategies are similar to the anticompetitive act of predation, which involves purposely losing money to run competitors out of business, after which the predator can act like more like a monopolist. I have written with my wife and partner in everything,
about predation in the context of the 2001 case against Air Canada here.So going back to Danielle Smith, she seems to be basically following a preemption strategy in the debate over Alberta separation: take control of two of the most valuable and scarce “resources” in the fight against separation (Legge and Tombe) so they cannot publicly argue against her nonsense, thus tilting the debate more to her liking — whether it be in favour of Alberta separating from Canada (which Smith denies supporting) or as Young argues, “by keeping Albertans angry at Ottawa instead of confronting the challenges the province will face in the future.”
Despite Danielle Smith having an Economics degree from the University of Calgary, I have always been astonished by how little she seems to understand even the basic principles of the discipline. Well, she has finally shown she understands something from an Economics textbook, and she is apparently using it for evil!
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