Canal boats had no engines, they were pulled by horses and very slow and dependent on a lot of horse care and feeding. Some of the early static steam engines were used to pump water up the canals to re-use it in locks, and there were lock keepers to employ and dredging to do, so it's not even as if the canals were a sunk cost and had almost no running costs.

I'd not be surprised that industrialists would do such a thing as buy up the competition and shut it down, but I'd be a bit surprised if canals were much competition after railways really came in?