:
Good morning, ladies and gentlemen.
Bonjour à tous. Welcome to the 51st meeting of the Standing Committee on Industry, Science and Technology.
Today we're going to be examining Bill , a private member's bill.
Mr. Vincent is here. We are supposed to have two other witnesses--from the Industry department, Mr. Bilodeau and Ms. Einbinder-Miller. Please come forward. Have a seat.
I'll start with Mr. Vincent for ten minutes, then Mr. Bilodeau for up to ten minutes for opening remarks. Then we'll go into our regular question period, and members can ask questions either to the mover of the bill or to the department officials.
Without any further ado, Mr. Vincent.
[Translation]
Mr. Vincent, welcome! You have 10 minutes, sir.
Ladies and gentlemen of the committee, Bill , would give the Commissioner of the Competition Bureau the authority to make an inquiry into an entire industry sector if the commissioner believes grounds exist. Bill C-452 aims to fill an important gap in the Competition Act, giving the Competition Bureau more teeth. The objective of this bill is to give the Competition Bureau the authority to start inquiries without having to wait for complaints from citizens in order to act. Bill C-452 would give the Competition Bureau the authority it needs to take action against corporations and people who are trying to take advantage of Canadian consumers.
A brief look at past legislative reform of the Competition Act shows us that the MacQuarrie Committee review, in 1952, brought about several amendments to the Combines Investigation Act, including a provision that provided for research inquiries. At that time, the Restrictive Trade Practices Commission, the RTPC, acted as an adjudicative body that also conducted investigations and research inquiries.
After minor amendments were made in 1976, the research inquiry section provided that the director upon his own initiative may, and upon direction from the minister [...] carry out an inquiry.
Officially, the goal was to ensure that the new Competition Tribunal (the tribunal) would be a strictly adjudicative body.
A Competition Bureau of Canada publication titled Market Studies: A Contextual Overview states that "There have been no inquiries related to competition issues starting under the Inquiries Act since section 47 was repealed in 1986." The reason is simple: the Competition Bureau had lost its authority to make inquiries.
How then, can the Competition Bureau make inquiries? The commissioner cannot begin to investigate until a judge is satisfied by information on oath or solemn affirmation that an inquiry is being made under section 10 of the Competition Act, and that a person has or is likely to have information that is relevant to the inquiry.
The Competition Bureau would be much more effective and credible if it had real investigative powers. It is difficult for all of the current conditions to be met.
Mr. Konrad von Finckenstein, former commissioner of competition and current chairman of the CRTC, made the following statement: "While the Bureau's mandate includes the very important role of being an investigator and advocate for competition, the current legislation does not provide the bureau with the authority to conduct an industry study."
The Competition Bureau certainly does not hesitate to intervene when it discovers proof of price fixing. In 2008, the bureau uncovered a price-fixing agreement between gas retailers in four Quebec municipalities. In mid-April 2009, several individuals and companies pled guilty. The investigation is still ongoing.
However, the bureau needs a sworn statement before it can begin an inquiry. Furthermore, the commissioner has access only to information that is available to the public or that is provided voluntarily by the industry.
During our committee meetings, the key question that came up was how this issue was approached in other countries. Here are my findings. In the United States, these studies can be started in three ways: when Congress exercises its legislative authority and calls on the Federal Trade Commission to do a specific report; when members of Congress or Congressional Committees, without using legislative authority, ask the FTC to conduct a study; and when the FTC decides to launch an investigation on its own.
In the United Kingdom, the Office of Fair Trading carries out market studies in various sectors of the economy, including the liability insurance market, new car warranties, private dentistry, taxi services, store cards and pharmacies.
The OFT is also able to make a market investigation reference when it suspects that a feature, or combination of features, of a market prevents, restricts or distorts competition.
The European Commission may conduct its inquiry into a particular sector of the economy "where the trend of trade between member states, the rigidity of crisis or other circumstances suggest that competition may be restricted or distorted within the common market". This authority, while used in a limited extent in the past, has been used more frequently since 2005.
In January 2005, two sector inquiries were launched, one into competition in the energy sector, specifically gas and electricity markets, and another into the financial services sector.
In Australia, the Australian Competition and Consumer Commission can conduct general inquiries in all sectors of the economy. The inquiry can be opened by the commissioner.
Some people would tell me that Bill C-10 gives the Commissioner of the Competition Bureau more authority. I would have to disagree.
These are the key elements of Bill C-10: increasing applicable sanctions; redacting certain criminal provisions on price-fixing practices; creating a more effective mechanism for criminal cases; introducing a mechanism to investigate mergers; giving the Competition Tribunal the ability to impose administrative fines on companies that abuse their dominant market position.
Based on the history of the Competition Bureau, particularly as regards the repeal of section 47 in 1986, and the minimal efforts made by the current government to improve the legislation, and based on what goes on in other countries, I believe that we must pass Bill and reinstate the Competition Bureau's authority to make an inquiry into an entire industry sector. To close, I still question how gas stations can all have similar prices without consulting each other. I'm now ready to answer questions.
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Good morning, my name is Richard Bilodeau, and I am the Acting Assistant Deputy Commissioner of Competition for the Competition Bureau's Civil Matters Branch. With me today is Rhona Einbinder-Miller, Acting Executive Director and Senior General Counsel with Competition Bureau Legal Services.
I would like to begin by thanking the committee for the invitation to appear on Bill . I would like to focus on two aspects that have an important bearing on the bill that you are considering today. To begin, I will briefly explain the importance of some of the specific amendments to the Competition Act that were made in 2009 as they relate to the issues before the committee today. Second, I will provide you with a short assessment of some of the implications of this bill, should it be enacted.
[English]
The Competition Act and Canada's competition regime changed significantly as a result of the amendments passed by Parliament in March 2009. These amendments, which represent the most significant changes to the act in over 20 years, were aimed at modernizing the legislation and bringing it more closely in line with the competition laws of Canada's major trading partners.
With respect to the issue before the committee today, probably the most important amendments were those that affected the criminal conspiracy provision, more generally referred to as the anti-cartel provision. Those amendments created a significantly more effective criminal enforcement regime for the most harmful form of cartel agreements. These changes now make it illegal to engage in agreements to fix prices, allocate markets between competitors, or to restrict output, regardless of factors such as the impact of the agreement on competition in that market.
Penalties for criminal cartel behaviour were also increased. The maximum term of imprisonment for individuals was increased to 14 years, while the maximum fine per violation was increased to $25 million.
The changes to the anti-cartel provision came into force on March 12, 2010, a year after the other amendments, thereby allowing businesses time to adjust their practices to ensure that they were in compliance with the new law. At the same time, the amendments created a new provision that allows other forms of potentially anti-competitive competitor collaborations to be reviewed by the Competition Tribunal under a companion civil provision.
[Translation]
With all of the amendments to the act now in force, a top priority for the bureau is to ensure their efficient and effective implementation. Equally important for the bureau is to bring cases forward in a responsible manner to fulfil the enforcement mandate given to us by Parliament.
As well, in this new legal environment, it is important to clarify the bounds of lawful and unlawful conduct, while ensuring Canadian business and consumers are confident the law will be enforced with vigour. This brings me to the bill under consideration today.
I would like to take this opportunity to set out some of the issues we see arising from this bill regarding both the workings of our legislation and the nature and extent of the powers that will be conferred on the bureau, should the bill be adopted. As we understand the intent of this bill, a primary concern underlying its introduction is that the commissioner does not have the proper tools to successfully investigate and prosecute price-fixing in the petroleum sector.
However, the bill before you today was introduced before the new anti-cartel provisions of the act came into force. These amendments now make it clear and unequivocal that it is illegal to agree with your competitor on price, market allocation or restrictions on output. The previous provision did not provide this clarity. The new law establishes easily understood boundaries for all businesses regarding what is lawful behaviour. The commissioner no longer has to prove that these arrangements have a negative effect on competition, which will improve our ability to hold accountable those individuals and businesses who engage in these harmful practices.
In effect, the commissioner now has access, through the legislation, to new and powerful provisions that clearly strike at the issue at the heart of this legislative initiative. Moreover, it is premature for the bureau to measure the success of these new and clear provisions, having only had them in place for eight months. We are confident that the true effectiveness of this new and clear provision will become apparent in the years to come.
[English]
One question that came up during debate on this bill was whether the commissioner has the authority to commence an inquiry on her own initiative, or whether she must receive a complaint before she can begin a formal investigation.
Let me be clear that the commissioner does not have to wait for the filing of a complaint with her office before starting an inquiry. Whenever the commissioner has information that indicates that one of the enforcement provisions of the act has been or is about to be violated, regardless of the source of that information, section 10 of the act provides the commissioner with the authority to commence an inquiry into any matters she considers necessary. Of the formal inquiries that are currently being conducted by the bureau, approximately 30% were initiated without complaints.
To conclude, I would like to emphasize that when Parliament amended the Competition Act 21 months ago it provided the bureau with effective means to enforce Canada's criminal conspiracy laws against those serious offenders who agree to fix prices, allocate markets, and restrict output. These amendments, which came into effect in March 2010, combined with our existing powers to collect evidence and protect those who come forward to disclose anti-competitive activity, allow the bureau to act more effectively in the best interests of Canadian businesses and consumers.
[Translation]
Without question, the debate around Bill , and the bills that preceded it, highlight issues in certain industry sectors that are important to many consumers, and to the bureau. We have, particularly since the March 2009 amendments, effectively legal means, and corresponding evidence-gathering tools, to respond vigorously when issues are raised under the Competition Act.
The Competition Bureau is pleased to have the opportunity to contribute to the committee's deliberations. We remain confident that under the new rules passed by Parliament, we can continue to ensure that Canadian businesses and consumers prosper in a competitive and innovative marketplace.
I will now turn to any questions that you might have. Thank you.
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We do have the power to investigate. We had it before the Bill C-10 amendments came into effect in March 2010.
Whenever the commissioner has reasons to believe that an offence under the act has been committed or that there are grounds for a court order, she has the power to cause an inquiry to be made under section 10.
The amendments that came into effect in March 2010 simplified the circumstances in which we can investigate cartels. Before, when there were allegations of price-fixing by a cartel, for example, we had to prove not only that there was a price-fixing agreement, but also that the agreement had a significant effect on competition.
Parliament, with Bill C-10, has made us responsible for establishing that there was a price- fixing agreement among competitors, but without having to show that there was any effect on competition. It is sufficient to prove that the agreement among competitors fixes prices, allocates markets or lessens production.
We no longer have to prove any effect on competition.
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Well, precisely, it's the power to investigate.
As I said earlier, if each refinery in Quebec and Canada were to decide each month on a price for refining oil and there were no disparity... You've got to understand these people are not talking to each other. They say there is no consultation between refineries to set prices each month. This price is set within refineries on a monthly basis. If these people are not discussing the matter, why is it that the price of gas at the pump, each month, is the same for everyone and equal everywhere, all the time?
If the Competition Bureau has all powers, as they say, if I were them, I would be asking myself this: why is it that with no consultation we see identical prices each month for all refineries, regardless of which oil company it is? It seems to me that this is a sign. And if I had investigative powers, I would immediately look into it. With the investigative powers these people say they have, I would launch an investigation to see why oil companies are price-fixing.
I want to thank our guests for being here today.
I really don't have many questions, but I do have some comments I'd like to make.
First of all, I was part of the Texaco-Esso merger. And it wasn't a merger. They sold off their Texaco unit because of a lawsuit south of the border. I was working for Texaco and ended up working for Imperial Oil for a number of years--loved Texaco and no comment on Imperial Oil.
Let me start with Mr. Vincent. Mr. Vincent, I've sat on committee with you before. I appreciate your commitment to things. My issue is this. This is my third private member's bill in the last number of weeks, which is down to one or two clauses. One had seven clauses and eight amendments. Another one is down to one clause. This is a one-clause bill. I'm not a big fan of private members' bills. I think it highlights the issue. But this is a one-clause piece, and we're calling it legislation.
I want to know who you consulted with. Other than sending it over to the Library of Parliament to send you the legal wording, who did you meet with? Did you talk to the Competition Bureau about what you're proposing? Did you meet with individuals in the field? What I don't like about them is normally there's zero consultation. Normal bills, bills that are presented by whoever is in government, are usually a binder full of stuff, have full consultation with the public. Can you name me anyone you talked to about this before you brought it forward?
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Monsieur Vincent, I'm happy to answer that question.
Here's how it actually worked when I worked at Texaco Canada 25 years ago. Depending on my territory, I had 28 to 30 gas stations that were my responsibility. Every retailer had binoculars. We would see what was happening on each corner with our competition. We would decide if we would match their price.
Do you know who made that call? I did, for my gas stations. They would call me—and I was with Texaco at the time—and say Imperial Oil, Esso, is at this; Shell is at this; Sunoco is at this--what do you want to do?
At 23 years of age, I made the decision on what the price was. The system was a little bit different when I went to Esso, but it was still a call-in. It was based on what others were doing.
At the opposite end, I would call my retailers and say what we're doing today is we're going to restore, what we called a restoration. We were going up 5¢ based on what the barrel had been and what the refining costs were. We would sit on it and were hopeful that our competitors would match it.
Do you know who else does that? Bread companies, tire companies, everybody does price shopping to see what the price is. Do you know what the difference is, Monsieur Vincent? The price is on the street, not on the shelf in the grocery store. It happens in every single industry. People know what people are spending on the retail side.
I applaud Mr. McTeague for being able to determine the price. It is a formula. You get the New York barrel price and you apply a formula, and it tells you approximately what the gas price is going to be the next day. It's not real rocket science.
I want to give Monsieur Vincent a chance to answer some indirect criticism of his bill, in terms of his strategy, because I don't think it's fair.
Bringing forth bills, the government members often decry that if they're so complicated, basically, they'll destroy all kinds of things and the earth will be swallowed whole. Here we have a bill that is very much scoped and can improve legislation, as opposed to attempting to revise the entire Competition Bureau.
Was it your intent to make this as simple as possible, so that the Competition Bureau could then prescribe the remedies and the regulatory ways to go about this new power?
Again, thank you both for being here today.
Thank you, Mr. Vincent, for bringing forward this legislation.
As I understand it, Bill would empower the Commissioner of Competition to initiate investigations. I think that's the key wording here—“initiate investigations”—and to be able to take action.
My first question is to Monsieur Vincent. Are you concerned, or can you think of any safeguards we may want to bring forward to ensure that there are not any, as I'm going to call them, frivolous complaints brought forward? We're strengthening the powers of the commissioner and allowing that commissioner to have those powers to act as well. Are you at all concerned that we may need safeguards to make sure that the complaints are actually founded?
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Thank you very much for that.
Mr. Bilodeau, I'm concerned about resources available. I have two questions for you actually. One is around the resources. Are you concerned that, having these additional powers, you would not have the resources to be able to carry out the tasks that have been mandated?
My second question is that, as I understand it, I'm sort of hearing from you that you already have these powers to carry out investigations, in the broader respect, for an entire industry. First of all, clarify whether you can do it for an entire industry. Second of all, you already feel you have the powers this particular piece of legislation is giving to you, and if that's your point, then why are you concerned about this particular piece of legislation if it just clarifies that you have that power?
Mr. Bilodeau, you said that you did have investigative powers. I even thought I heard you say earlier, after the last question, that you did not need a judge to begin an inquiry.
I would like you tell me what needs to be done in order to file a complaint. If I have a complaint to file with the Competition Bureau, what do I need to do? Is a telephone call sufficient? Do I have to provide my telephone number? Do I have to submit anything in writing, do I need witnesses, does everything have to be done under oath? Do I have to submit evidence, do research?
Finally, what do I have to do, at a minimum, in order to get the Competition Bureau to initiate an inquiry?
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There is no need to call upon a judge. The formal investigation is the second step.
The first step involves calling in and saying what the problem is. That is what we call a preliminary investigation. You will be asked some questions for clarification. As I said earlier, the call may be enough. It depends on the circumstances, which industry we are talking about, and what information you provide. There may be other industries. Considerable information on the gas industry is publicly available. As you know, the price of crude oil is public as is the rack price. There is a great deal of information.
Considerable expertise has been built up over the years. We know a little more about the gas industry than other industries, which we know less about or where we have never before conducted an investigation. However, a call is sufficient, even though it is better to have proof.
However, that does not mean—
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I think that citizens expect the Competition Bureau to be able to do an adequate job. An adequate job means two things to me. Moreover, he clearly mentioned that several times during his appearance.
First of all, a complaint must be launched, but the person calling in must be asked more questions. Does the complainant have the information required to undertake the investigation, in other words, does he have something concrete? Let's look at the example of the price of gas. Imagine a retailer calling you to say that someone has asked him to change his price at the pump. That would be concrete. The Competition Bureau would therefore have something serious enough to take to a judge and to investigate on this issue, but at present, he cannot initiate an investigation himself.
What powers are set out in Bill ? As Mr. Bilodeau said earlier, there is a shortage of funding and resources. Why don't they want additional investigation powers when that's what is lacking? How will they be able to do the job without money and resources? That's where the problem lies.
I think he did a good job of explaining it earlier. The culminating point when we examine bills, the question that is always asked at committee meetings is if that is done elsewhere. Is that done in other countries. It was in place before but no longer is. What more can we do? With these powers, we could save even more money because investigations could be undertaken immediately without there having to be an in-depth analysis and a judge involved.
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I wouldn't ask you to pursue that for those reasons, because it would be a matter
sub judice. But it's my understanding that in that case, an individual mistakenly gave information to the bureau thinking that because they were not part of the deal there was somehow some infraction of the Competition Act. The bureau was unable to take the information, get it on record, and then proceed with the charges, which are ongoing. There was a lot of chest thumping when that happened. The overall assumption or impression left, in the absence of my explanation, was that the Competition Act works. In fact, you stumbled on it.
I'll leave that. I want to ask a question with respect to what Mr. Wallace quite readily pointed out. In 1989 you had several players who had their own wholesale price. I'm not talking about retail here, because I think it's pretty clear. We can debate until the cows come home what price inversions look like. If Costco in Mississauga or wherever they are in Ontario doesn't want to charge a retail margin and they want to invite people to come in, that's up to them.
What I think Mr. Vincent is most concerned about is what's happened at the wholesale level, which is the picture we don't exactly see. That's of course where you see identical regionally based prices. Is that a reflection of a lack of competition, or is it just super-competition? One makes the price, and the others simply follow. Or is it because, as has been quite rightly pointed out, they share a product, region by region, for matters of efficiency? I won't conclude why that is but will simply underline that all of your investigations have been predictably useless and irrelevant, because they're following only certain assumptions about the market. Quite apart from who provides you with information and how you acquire information, there has been no global study in this industry, or for that matter in others.
I recall one many years ago that I tried to initiate on the issue of the grocery industry. Justice Kelen, who is on the Federal Court now, was co-author. I did that because we felt that the bureau and the Competition Act that was written in 1986 failed to appreciate the rather distinct and dramatic changes taking place that were impacting consumers and the competitive process throughout the country.
My question to you is about the power of inquiry, which you may see as redundant to the powers you currently have. There's been no change to subsection 10(1) of the “inquiry by commissioner” section in the Competition Act. Is that correct?
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If you're giving an example, now that the Montreal refinery has shut down, what's your relevant market? I'm not asking these things to bait you, sir. What I'm trying to do is demonstrate why now, more than ever, there probably is great need for what Mr. Vincent has suggested.
No one has done an updated analysis of this industry as it currently exists, given the number of refineries that have quit or left, many of which have done so, as I pointed out, for governmental and environmental reasons. When we make these things onerous, they don't necessarily make economic sense. The impact is that we have lock-step, uniform wholesale prices in Canada, which do not exist in Europe, Australia, New Zealand, Asia, or the United States. So Canadians are right to ask how, if we are dealing with what appear to be monopoly prices or similar prices, we can conclude anything other than that there is a monopoly here. Obviously they need to worry about collusion or conspiracy, because the same several players get together in the dark of night to fix prices.
If they don't exist at the wholesale level, and there's only one player calling the shots, aren't we talking about an outmoded piece of legislation? Wouldn't his investigative powers actually allow the bureau, once and for all, to understand the industry as it exists today?