To Realize AI’s Potential, Canada Must Set Competition Policy on the Right Course

April 15, 2026 – Canada’s competition framework must remain flexible and innovation-focused to ensure the country captures the economic benefits of artificial intelligence while guarding against anti-competitive behaviour, according to the C.D. Howe Institute.

In “Chipping In: A Canadian Guide for Maintaining Competition in AI,” author Daniel Schwanen sets out a framework for the Competition Bureau that recognizes the rapid evolution of AI technologies and market structures and recommends applying a case-by-case, effects-based approach that promotes innovation, recognizes the efficiencies created by scale, and targets conduct that blocks new entrants.

“While still recognizing the benefits of players that bring necessary scale and scope to AI infrastructure and development, the government has an opportunity to act as a pro-competitive force and allow smaller businesses to access tools they need to grow,” says Daniel Schwanen, Senior Vice-President of the C.D. Howe Institute. “To facilitate this, the Bureau must focus squarely on removing barriers to innovation, where they exist in practice.”

The report examines competitive dynamics across the AI “stack,” from infrastructure such as computing power and data centres, to model development and the deployment of AI-enabled products and services. It finds that while a small number of global firms hold significant positions in some layers, rapid technological change, new business models, open-source alternatives and government initiatives to expand access to computing capacity are helping sustain rivalry and create opportunities for emerging firms.

Schwanen notes that Canada’s recently strengthened Competition Act gives the Bureau powerful new tools, including tougher merger review, larger penalties for abuse of dominance and expanded rights of private action. Clear, predictable guidance on how these powers will be used is essential to avoid discouraging investment and experimentation in a fast-moving sector.

The study also highlights barriers to AI adoption in Canada, including limited access to computational power, organizational readiness and regulatory frictions that protect incumbents and slow the diffusion of new technologies. Addressing these obstacles would both increase productivity across the economy and support the growth of domestic AI innovators.

The report recommends that the Bureau place greater emphasis on monitoring innovation markets and access to critical inputs, notably by working proactively with market participants to assess barriers they may face accessing potential customers or the products they need, and in general to preserve competitive choice.

“We must ensure that Canada’s competition regime is a catalyst, not a constraint, for AI-driven growth,” Schwanen concludes. “This starts with providing transparent, principles-based guidance and ensuring open access to the inputs innovators need.”

Read the Full Report

For more information, contact: Daniel Schwanen, Senior Vice-President, C.D. Howe Institute; and Raquel Schneider, Communications Officer, C.D. Howe Institute, 647-805-3918, rschneider@cdhowe.org.

The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada’s most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.

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