Vass Bednar is a contributing columnist for The Globe and Mail. She is the founder of Regs to Riches and the executive director of McMaster University’s master of public policy in digital society program.
Denise Hearn is an author, adviser and resident senior fellow at the Columbia Center on Sustainable Investment at Columbia University and co-author of The Myth of Capitalism, named a Financial Times best book of 2018.
The following is an excerpt from The Big Fix: How Companies Capture Markets and Harm Canadians, which will be published by Sutherland House on Oct. 15.
“My real name is Joe, and I’ve been living with leukemia for 11 years . . . and unfortunately it’s back.”
Roman Reigns, an imposing pro wrestler, stood in the middle of the ring in front of thousands of fans and a packed arena. The crowd fell to a hush as he spoke.
Roman Reigns’s real name is Leati Joseph (Joe) Anoaʻi, and at the time he was the reigning World Wrestling Entertainment (WWE) Universal Champion. His run of 1,316 days was the fourth-longest world title reign in WWE history. “And because the leukemia is back, I cannot fulfill my role, I can’t be that fighting champion, and I’m going to have to relinquish the Universal championship,” Joe announced.
Moments of authenticity like this, which break the fourth wall, are so rare in championship wrestling that there is a special term for it: breaking “kayfabe.” Kayfabe is the illusion of rivalry. It is what all of pro wrestling is built on: invented characters and storylines, fake rivals engaged in fabricated feuds and staged events that are portrayed as real. Everything down to the last detail of a match and a wrestling season is highly scripted. All wrestling fans know this. It is part of the suspension of reality that we all indulge in when we go to movies or any form of escapist storytelling.
It’s a perfect metaphor for markets today. Many companies have become experts in the illusion of rivalry. They pretend to compete, but it’s all an act. Monopolists and oligopolists are kayfabe geniuses.
The illusion of competition can happen in multiple ways. The biggest way firms pretend to compete is by engaging in aggressive mergers and acquisition campaigns, acquiring as many companies as they can. This is a form of lazy growth. Instead of investing in research and development, employee training, or more natural expansion methods, firms simply buy growth instead of building it.
Aswath Damodoran, a professor at New York University’s Stern School of Business, put it this way: “I firmly believe that acquisitions are an addiction, that once companies start to grow through acquisitions, they cannot stop. Everything about the [mergers and acquisition] process has all the hallmarks of an addiction.”
Companies will often retain the brands of companies they acquire to maintain the illusion that multiple companies are competing for your dollars, but they’re all owned by the same parent company.
Take the global eyewear monopolist, EssilorLuxottica. When you walk into a Sunglass Hut at the mall and see dozens of brands for sale, you may think that by choosing Ray-Ban over Gucci, you’re supporting one company over another. But in reality, every pair of sunglasses in the store is owned by one company: EssilorLuxottica. Over the last 20 years, the company has gone on an acquisition spree, buying up more than 250 companies, earning it the moniker Big Lens. Last year, EssilorLuxottica added Moncler and Jimmy Choo to its collection of over 150 brands worldwide. And it also owns the Canadian eyewear retailer Clearly, despite the website boasting that it is “Proudly Canadian for twenty-plus years.”
But what has made EssilorLuxottica a true eyewear behemoth is that it doesn’t only own nearly all glasses brands, but it also owns the retail stores that sell them, including Sunglass Hut. The firm has aggressively acquired retail stores to distribute their eyewear and now owns more than 18,000 stores.
The company is a product of a 2018 merger between Essilor (the world’s largest lens manufacturer) and Luxottica (the top frame manufacturer globally). In 2018, Essilor controlled more than half of the world’s prescription lens market. It is astounding that antitrust regulators approved the merger, as it gave the firm unparalleled monopoly power over lens manufacturing and distribution worldwide.
Controlling the entire process from manufacturing to distribution is known as vertical integration, and EssilorLuxottica has perfected it, profiting massively. Their 2024 company report brags that since the 2018 merger was approved, the firm has increased its revenue by 57 per cent to 25.4 billion euros. Its net income, the amount it earns after accounting for all expenses, rose by even more: 66 per cent.
The merger has clearly been great for shareholders, but not so much for consumers who are paying more and more for glasses every year. Glasses can have a 1,000-per-cent markup, meaning that while it costs just a few dollars to manufacture glasses, they are often sold for hundreds of dollars. E. Dean Butler, the founder of LensCrafters, which was acquired by EssilorLuxottica in 1995, called this “a complete rip-off.”
Consolidation is well known in often-discussed sectors such as airlines, banking, grocery and telecommunications in Canada. However, many other markets have transformed into oligopolies in recent decades. Like microplastics that infect our bodies without us even seeing it, Canada’s anti-competitive markets are just a background feature that infects every aspect of our lives, including the food we consume and the entire value chain of how food gets from a farm to our table.
Many of the key agricultural inputs needed to start a farm are now controlled by megacorporations. Take fertilizers, for example. Nutrien (a Canadian company), CF Industries (U.S.), Koch Fertilizer (U.S.), and Yara (Norwegian) together control 95 per cent of the ammonia fertilizers market, and 100 percent of the urea fertilizers market. Both urea and ammonia fertilizers provide essential nitrogen to plants, enhancing photosynthesis and helping to generate higher crop yields. They are critical inputs for farmers.
Nutrien, headquartered in Saskatoon, is the world’s largest provider of crop inputs and services. Nutrien dominates in both fertilizers and potash exports. Canada is the world’s largest exporter of potash and has the greatest global reserves of the mineral. Potash refers to potassium-based minerals and chemicals that are primarily used to make fertilizers but can also be found in fireworks and everyday products like soap, toothpaste and detergents.
The company is a product of the 2018 megamerger between PotashCorp and Agrium which, at the time, were the world’s largest fertilizer manufacturer and direct-to-farmer retail network, respectively. PotashCorp was once publicly owned by the Province of Saskatchewan and began as the iconic Saskatchewan Wheat Pool, a farmers’ co-operative. Its history of transitioning from publicly owned corporation to privatization is a familiar feature in today’s economy.
Nutrien represents a paradox of competition. It not only sells and distributes in Canada, but also exports Canadian potash globally through Canpotex (a transportation logistics company). Nutrien generates high profits from exploiting its market power for both domestic and foreign consumers. This potentially harms Canadian farmers with higher input costs, but high profit margins may benefit Canadian pension funds and other Canadian institutional and retail investors. The majority of shareholders of Nutrien are institutional; Royal Bank of Canada and Vanguard are the top two holders of shares as of July, 2024. Large firms like Nutrien also bring tax revenue to Canada. These trade-offs between jurisdictions and stakeholders, and capital and labour, are inherent in many industries that are globally traded. However, most stocks and financial assets are held by the wealthy, and this imbalance only worsens inequality.
Similarly, meat processing is highly concentrated with four companies controlling 71 per cent of pork processing in Canada, with Maple Leaf controlling approximately 40 per cent and Olymel, approximately 10 per cent nationally. Beef processing has just two U.S. corporations, Cargill and JBS with 99 per cent of the federally inspected beef slaughter capacity in the Canadian market. JBS and Cargill, along with others, were recently sued by the U.S. Department of Justice for allegedly using the data broker Agri Stats to fix the prices of numerous meat and poultry products. An Open Markets Report showed that, for example, turkey processing margins increased 300 per cent in three years because of the conspiracy.
These higher prices make their way to the grocery store, where they hit consumers directly in their pocketbooks. It is well known that Canada’s grocery sector is also highly concentrated, worsening the power imbalance against consumers. In the food and consumer staples retail sector, Loblaws Co. Ltd., Sobeys Inc., Metro Inc., Walmart Inc., and Costco Wholesale Corp. comprise 80 per cent of the market and maintain a portfolio of brands across industries.
The rise of private-label retail products, coupled with decades of mergers and acquisitions that have consolidated industries while retaining distinct brand names, are two ways in which companies create an illusion of rivalry.
Like a choreographed match, corporate wrestlers know they get paid to pretend to compete. Welcome to the Age of Kayfabe Capitalism.