Why Does Ottawa Keep Funding Fake Canadian Companies?

The Canadian Food Inspection Agency has been issuing fines for grocery stores that label imported products as being “Canadian” when the claim misleads shoppers.

“Maplewashing” may sound like a funny crime, but regulators understand something significant: people care about whether something is really Canadian, and firms have incentives to blur that line. We have strict rules for food labelling because a “Product of Canada” is different from something merely “Made in Canada.”

In several important parts of the economy, Canada already recognizes that ownership and control really matter. Telecommunications has long had Canadian ownership and control rules. Airlines face restrictions too. The Canadian Radio-television and Telecommunications Commission has its own frameworks for determining whether an undertaking is meaningfully Canadian. In other words, we already accept that, in certain strategic sectors, counting as “Canadian” cannot just mean having an office here or a local mailing address.

But when it comes to public procurement and industrial policy, Canada still makes it far too easy for foreign-controlled firms to dress themselves up as domestic champions. Over the past several weeks, the Canadian Shield Institute has been testing the different dimensions that might make a company meaningfully Canadian. The obvious candidates are familiar enough: where a company is incorporated, where they’re headquartered, where strategic decisions are made, who owns the company, where their intellectual property sits, whether the company’s revenues and taxes ultimately land in Canada, and whether they actually build productive capacity here.

Each of those dimensions captures something observable, and each one makes a certain amount of intuitive sense. But when you really dig in, you start to appreciate the complexity.

Incorporation is easy to verify but far too thin: a firm can be incorporated in Canada and still be controlled elsewhere. Headquarters matter, but “HQ” can be performative too—little more than an address and a brass plaque. Control is crucial but hard to observe consistently from the outside unless a firm is public (we used the Statistics Canada Inter-Corporate database). IP ownership tells us where long-term value will accrue, but it gets messy in firms that are scaling quickly and raising capital. Ownership is probably the most revealing signal, but it can also feel too blunt in an economy where many Canadian firms do need outside investment to grow.

That is the trade-off at the centre of this exercise. A perfect definition of a domestic firm is not obvious. A long checklist becomes difficult to administer, easy for companies to exploit loopholes, and vulnerable to endless edge cases. But a definition that is too loose (like the one we have now) defeats the whole purpose. If “Canadian” can include a wholly owned foreign subsidiary with a local office, then the category has collapsed.

The absurdity of the situation comes into sharp focus when we look at the government’s publicly disclosed data on procurement contracts and contract amendments (updates to the contract due to continued negotiations, changes to the original requirements, or unforeseen complications).

At the Department of National Defence, fifty-two of the 100 largest contracts and amendments notionally went to Canadian companies, but when you actually take a close look at those fifty-two companies, only nineteen of them are genuinely Canadian controlled. At Public Services and Procurement Canada, ninety-eight of the top contracts and amendments went to “Canadian” companies, but only fifty-five of them were legitimately Canadian controlled or primarily owned by Canadians.

By way of an example, let’s look at this $92 million contract for “fire control systems” sole sourced to Lockheed Martin Canada, with a business address in Kanata, just outside of Ottawa. On paper, this is a “Canadian” company. But of course, that’s not the whole truth. And indeed, if we look at the Inter-Corporate Ownership Database maintained by Statistics Canada, we see that Lockheed Martin Canada is 100 percent owned by Lockheed Martin Corporation, and that the country of control is the United States of America. Profits accrued by Lockheed Martin “Canada” flow back to the US. The intellectual property developed through research and development flows back to head office and is commercialized by Lockheed Martin, headquartered in beautiful Bethesda, Maryland.

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That is why it may be easier (and better) to tackle the problem in reverse.

Instead of trying to build a flawless definition of a Canadian company, Canada should flip it around: a Canadian company is not a firm that is majority controlled by a foreign parent or foreign government. At a minimum, foreign subsidiaries should not be able to pass themselves off as “Canadian” companies for the purposes of public funding, procurement, or strategic industrial policy.

This approach will not settle every borderline case. It does not tell us everything worth knowing about value capture, governance, or economic contribution. But it is straightforward to administer and way harder to fake. Most importantly, it targets the core problem we are actually trying to solve: ensuring that public money strengthens firms whose strategic decisions, economic gains, and long-term value remain anchored in Canada. In 2024–25, the federal government awarded $66.9 billion in contracts for goods, services, and construction. That’s the state making important decisions about who gets to scale, who gets repeat customers, and what companies get the credibility that comes with being a government supplier.

Canada’s new Buy Canadian policy and Defence Industrial Strategy show that Ottawa is already trying to use procurement as industrial policy, but both still rely on definitions that are too generous to firms that are only superficially Canadian. Under the Buy Canadian framework, a “Canadian supplier” can qualify largely by having an address, employees, registration, and tax presence in Canada, while still being foreign controlled.

The Defence Industrial Strategy is more ambitious in spirit, with a goal of directing 70 percent of defence acquisitions to Canadian firms over ten years, but it still does not clearly say how “Canadian” will be defined in practice. In both cases, the policy intent is stronger than the test. Ottawa wants to back domestic capacity, but without sharper rules around ownership and control, it risks rewarding firms that can look Canadian on paper while long-term value, decision making, and gains still flow elsewhere.

As it stands, companies that operate here—like Lockheed Martin “Canada,” or IBM “Canada,” or Raytheon “Canada”—are treated as being “Canadian” for the purposes of the Buy Canadian policy. Does this pass the smell test?

We already know how to police misleading “Canadian” claims in the grocery aisle. The harder and more important task is bringing that same seriousness to the firms seeking public dollars.

Adapted from “The National Interest” newsletter, with permission of The Canadian SHIELD Institute.