INDY Committee Meeting

STANDING COMMITTEE ON INDUSTRY

COMITÉ PERMANENT DE L'INDUSTRIE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, April 13, 1999

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[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): Order.

Pursuant to an order of reference of the House dated Tuesday, October 20, 1998, we will continue our consideration of Bill C-235, an act to amend the Competition Act for protection of those who purchase products from vertically integrated suppliers who compete with them at retail.

We're very pleased to have with us this afternoon three groups of witnesses. From the Canadian Chamber of Commerce we have Mr. Paul Crampton, a partner from Davies, Ward & Beck, Barristers and Solicitors; and Ms. Nancy Hughes Anthony, the president and chief executive officer. From the Association of Canadian Travel Agents we have Mr. Terry Ohman, the executive director. From the Canadian Automobile Association we have Mr. Brian Hunt, president; and Ms. Jody Ciufo, manager of public and government affairs.

It would be my proposal that we would hear the opening statements from all three witnesses first. With that, I would invite the Canadian Chamber of Commerce to be—

Mr. Jim Jones (Markham, PC): I have a point of order. I would like to move the motions to the front of the meeting instead of at the rear of the meeting, if that's possible.

The Chair: No, Mr. Jones, that's not possible, because we have witnesses invited and they have time constraints. My understanding is that the bells won't begin until 5.30, so if we're done our questions we can do this before the vote.

Mr. Dubé, do you have something else?

[Translation]

Mr. Antoine Dubé (Lévis-et-Chutes-de-la-Chaudière, BQ): I have a question regarding your decision to postpone consideration of the motion I moved until after the witnesses have testified. Will we be debating this motion in camera or in public? The last time I moved a motion and consideration was delayed, our proceedings were held in camera and consigned to oblivion. In my opinion, shipbuilding is a very important area.

[English]

The Chair: It's not going to be in camera, no. It will be in public.

[Translation]

Mr. Antoine Dubé: With cameras?

Mrs. Francine Lalonde (Mercier, BQ): Yes, that's what she just said.

[English]

The Chair: At the end...it won't be in camera.

[Translation]

Mr. Antoine Dubé: Approximately when do you think we will get around to debating this motion?

[English]

The Chair: No, it won't be televised.

[Translation]

Mrs. Francine Lalonde: At what time?

[English]

The Chair: If we're done our questions by five o'clock, we'll begin the motion at five and we'll come back after the votes if we're not finished. If we're not done, it depends on how many questions everyone has. I'm at your will.

[Translation]

Mr. Antoine Dubé: Fine.

[English]

The Chair: That being said, we'll begin with the Canadian Chamber of Commerce, Ms. Hughes Anthony.

Ms. Nancy Hughes Anthony (President and Chief Executive Officer, Canadian Chamber of Commerce): Thank you very much, Madam Chair, and good afternoon. On behalf of the members of the Canadian Chamber of Commerce, I'd like to certainly thank you for the opportunity to appear before you today to provide our views on Bill C-235.

With me is Mr. Crampton, who is a partner with the law firm of Davies, Ward & Beck. He's the chair of the chamber's task force on competition law and policy.

[Translation]

The Canadian Chamber of Commerce is Canada's largest and most representative business association. We speak for approximately 170,000 members, 80 per cent of whom are SMEs, through our network of 500 local chambers of commerce located in each province, territory and federal riding.

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[English]

I'd like to reiterate, Madam Chair, that 80% of the chamber's membership is small and medium-sized businesses across Canada. The Chamber of Commerce, which I'm sure many of you know from activities in your ridings, is engaged in promoting a favourable environment in which all businesses can grow and create jobs. And that is the context in which we are addressing this bill today.

Our position on Bill C-235 is quite simple. Although possibly well-intentioned, we believe it is a bad piece of legislation that could have a host of negative consequences for thousands of businesses and consumers across Canada. We feel it should not be passed in any form.

This bill, if enacted, would negatively affect a wide variety of industries that are key to the Canadian economy. These industries range from consumer white goods to telecommunications products, to grocery wholesale, just to name a few. It goes far beyond the petroleum industry, which we understand was the intended target of the bill.

We have outlined in detail a letter addressed to Ms. Whelan, which I hope the members of the committee have. It identified a long list of the adverse effects this bill would have on businesses and consumers.

At its most basic level, however, we must point out that if it were to become law, we feel this bill would likely lead to higher prices, to the detriment of all consumers and businesses that purchase products sold in industries in which dual distribution is practised. This is exactly the opposite effect of what was originally intended by the bill.

I would also note that in this era of globalization this bill would make it more difficult for Canadian businesses to compete in the domestic market against imported products as well as in export markets.

While the initial impetus for drafting this bill was no doubt well-intentioned, I implore members of the committee to consider the negative impacts this kind of regressive price regulation will create. I'm sure that none of us could be in favour of any legislative amendment, whether this one or anything else, that would have an adverse effect on jobs for Canadians and our country's economic well-being. That is the principal message the chamber would like to underline this afternoon, Madam Chair.

I would like to turn to Mr. Paul Crampton, who will be providing you with a more detailed commentary on the bill. We will be very happy to answer your questions later.

Thank you.

The Chair: Thank you.

Mr. Paul Crampton (Chair, Task Force on Competition Law and Policy, Canadian Chamber of Commerce): Thank you, Nancy.

As Ms. Anthony stated, our views are succinctly set out in our letter. We don't have time to go through each of them; however, we would be happy to answer any of your questions. The bottom line is that the bill is very unfair and it's going to harm a very large number of Canadians, including consumers who are going to pay higher prices for products sold in all dual distribution industries.

We've given you a list on page two of our letter of ten or fifteen industries, and that's just the tip of the iceberg. Consumers in all of these industries are going to be paying higher prices. Small and medium-sized businesses that purchase their products in these industries for resale and who use these products as inputs in their own products are going to be harmed. These same businesses are going to suffer doubly because they're going to find it increasingly difficult to find the suppliers, the products, because this bill is going to give rise to a very substantial chilling effect on the willingness of suppliers to use the dual distribution method of going to market.

In addition, workers are going to suffer to the extent that our businesses will lose their market share to U.S. and other foreign firms that aren't subject to similar legislation. That's going to impact on jobs in these businesses.

Finally, integrated suppliers are going to suffer. They're going to be forced to bear substantial monitoring and compliance costs associated with this as well as all of the risks associated with aggressive pricing, whether it's initiated by them or by others. These costs are going to be passed on in the form of prices.

All of these categories of people who are going to suffer in aggregate outnumber by a wide margin the narrow class of people this bill was designed to benefit. In fact, it's not at all clear that this bill is going to benefit anyone, as the study by Mr. Calvani from the Competition Bureau indicated. In fact, in the U.S. this type of legislation has resulted in higher prices and has not benefited anybody, apparently.

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In our view, this bill has nothing to do with predatory pricing and everything to do with protecting the margins of a few Canadians. In fact, Mr. McTeague himself used the term “equitable margins” in his opening remarks on this bill. So let's just call a spade a spade. Stripped to its essentials, this bill is a price regulation bill, pure and simple.

You have to ask yourselves, why should these businesses have their margins protected when everyone else has to innovate and compete to earn a buck? The clear trend in Canada and elsewhere in the world is away from subsidies and toward the promotion of competition. This bill has nothing to do with promoting competition and protecting competition. As our letter explains, it's contrary to virtually every one of the purposes in the Competition Act. The whole point of competition is to take as much business away from your rivals as you can.

Predatory pricing laws around the world focus on whether one competitor is selling below its costs with the intention of disciplining or eliminating its competitor and then is increasing its prices. There's nothing in this bill about increasing prices. There's nothing in this bill about competition. It has nothing to do with it. When you're focusing on competition, if there's no ability to subsequently increase prices, there's no likely harm and you let the market take care of itself.

In any event, the bill doesn't address the relationship between a competitor's costs and his selling prices. It doesn't require any demonstration at all that competition has been lessened.

If Parliament really wants to strengthen the Competition Bureau's ability to deal with predatory pricing, there are much better options that can be considered.

We're not suggesting that Mr. McTeague's heart is not in the right place, but we genuinely believe this bill will harm the very people he's trying to benefit. We'd be pleased to work with Mr. McTeague and the bureau and this committee, if necessary, to further explore options. We can use our collective energies to develop a mutually satisfactory response to the issues motivating this bill.

It doesn't appear to us that there's any way this bill can be salvaged in a way that doesn't seriously undermine the process of competition and harm many times the number of people it was designed to protect and to benefit.

Those are our remarks for today, Madam Chair. We'd be happy to answer questions.

The Chair: Thanks very much, Mr. Crampton.

I'm now going to turn to the Association of Canadian Travel Agents. We have Mr. Terry Ohman, the executive director, before us today. Does everyone have both the English and the French versions of the brief?

Mr. Ohman.

Mr. Terry Ohman (Executive Director, Association of Canadian Travel Agents): Thank you, and good afternoon.

We've just heard some comments from the Canadian Chamber of Commerce that talk about industry in general terms. The difference between their comments and my comments is that we're going to be talking about a specific industry.

ACTA, the Association of Canadian Travel Agents, is Canada's only national travel agent association. Although approximately one-third of its 3,000 corporate members are travel suppliers, read “manufacturers”, ACTA's fundamental purpose is to provide leadership for the retail travel professional. Travel agents themselves look to serving the interests of the travelling public as their highest interest.

The position paper distributed to you outlines why ACTA supports amendments to the Competition Act. When you have an opportunity to go through the position paper you will see three references from both charter and scheduled-service air carriers. One air carrier reference declares with pride that theirs is a vertically integrated company, not unlike the vertical integration found in the oil and gas industry. ACTA is not opposed to vertical integration. A second air carrier reference states that airlines and travel agents compete for clients. ACTA is not opposed to competition.

The third reference reports on situations where a product is intentionally being withheld from travel agents. Remember that travel agents are agents of the air carrier. Yet that same product is being made available directly to the consumer via the facilities of the air carrier. It is this withholding of product that creates unfair competition in the marketplace and which amendments to the Competition Act should address.

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Similar anti-competitive actions have occurred in the past. In the 1970s and early 1980s, air carriers in the U.S. used their computer reservation systems, or CRS, as a weapon to try to put their competitors out of business. Anti-competitive practices included refusing to display a competitor's product, displaying a competitor's service in a less prominent fashion than the services of the CRS owner-carrier, or requiring the competitor to use procedures that were less timely or more cumbersome than those of the CRS owner-carrier. These practices and others were subsequently regulated by the introduction of CRS regulations through the U.S. Department of Transportation. Although in Canada no such anti-competitive practices were found to have taken place, Canadian CRS regulations were introduced. So, too, was CRS regulation in Europe.

Whereas the issues being discussed when considering amendments to the Competition Act may be considered less severe than those being addressed by CRS legislation of the past, the suggestions being put forward are important. ACTA believes the legislation being developed today can prevent serious problems from developing in the future. It is ACTA's recommendation that the legislation be further amended to address the issues of a supplier selling a product directly at a retail price for less than available at the retail office of its own agents, and a supplier prohibiting access to the product by its own agent.

ACTA takes the position that unfair competition not only hurts travel agency owners, the majority of whom are small and medium-sized businesses, but that unfair competition of this sort also impacts consumers by denying them access to a complete range of product and price, and to the impartial information travel agents are known to provide. ACTA supports the evolution of a more effective distribution system. ACTA supports the use of technology to enable such processes. ACTA cannot support processes that eliminate consumer choice. ACTA cannot support processes that are put in place to intentionally inhibit access to product to which its members are legitimately entitled to make available to consumers. ACTA cannot support business practices that, if left unchecked, could put travel agencies out of business.

Again, ACTA recommends that the legislation be further amended to address the issues of a supplier selling a product directly at a retail price less than that available at the retail office of its own travel agent, and a supplier prohibiting access to the product by its own agent.

Thank you.

The Chair: Thank you very much, Mr. Ohman.

I'm now going to turn to the Canadian Automobile Association. We have with us Mr. Brian Hunt, president.

Mr. Brian A. Hunt (President, Canadian Automobile Association): Madam Chair, thank you for inviting the Canadian Automobile Association here today to express our views on Bill C-235.

Gasoline prices are a key issue, and an important issue for the CAA's members. Whenever the price goes up, our members call. With four million members across the country, that's an awful lot of phone calls being received. Given how important the issue is to our members, we felt it was extremely important to understand the full implications of Bill C-235 and to make recommendations that are in the best interests of our members as motorists.

Despite the claims of its supporters, we do not believe Bill C-235 will benefit our members, or consumers in general. We have prepared a full brief on our position and have tabled it with the clerk of this committee.

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Looking at the retail gasoline market as it exists today, we have concluded that it is a very competitive marketplace. In our opinion, the proof of the competition is the quick reaction from any gasoline outlet that sees a competitor lower or raise its price. Gasoline is a commodity that exhibits little brand loyalty among consumers. Remember, this is probably the only product that you can comparison shop for at a distance of 100 feet, while travelling at more than 60 kilometres per hour.

Even more important is the fact that any attempt to increase price on the part of the retailers has not been sustainable. Even if the price spikes one week, it is not long before prices fall back to lower levels in retailers' attempts to gain market share. Second, the gasoline retail market has come under the most intensive public scrutiny, with no evidence uncovered of price fixing or abuse of dominant position. The Competition Bureau has conducted numerous inquiries that have consistently found no evidence of either allegation.

In looking at the retail consumer gasoline price, what strikes me most is that, in relative terms, consumers are paying about the same price for gasoline now as they did in the 1950s if you factor out inflation. The evidence doesn't reveal a problem for the consumer. We have also found that there has been no exodus of independent retailers from the market. In all but three of twelve cities studied in one report, independent retailers have increased their market share at the expense of vertically integrated companies. In our view, the real issue with gas prices is the level of taxation. The only component of gasoline prices that has increased over the years is the tax component. In most jurisdictions today, it now exceeds 50% of the pump price.

The biggest issue with Bill C-235 is that it is fundamentally designed to regulate prices through below-cost-selling legislation. Any form of price regulation usually results in higher prices for consumers. Studies of below-cost sales regulation in the United States show that the laws directed specifically at the retail gasoline market have resulted in higher margins for retailers and higher prices for consumers. One study shows a 2¢-per-gallon higher price for regulated states. In Canada, at least three provinces have studied and rejected government regulation. They concluded that regulating prices or minimum margins creates a risk of causing higher prices, to the detriment of consumers.

CAA interprets Bill C-235 as an effort to protect the independent sector of the gasoline retail industry. The American experience shows that regulatory legislation has not helped the independents. It hasn't stopped the decrease in retail outlets, nor has it affected the composition of the retail establishment. Even if the bill could provide support to the independent retailers, CAA opposes placing the financial burden upon motorists. If there is a need to protect small business in the gasoline industry, the cost should be borne by all taxpayers, not simply motorists. Motorists already pay a premium through excessive taxation that supports governments' general revenues. It is through these general revenues that the government should attempt to support small business.

CAA proposes four recommendations to the industry committee. First, CAA recommends that the Standing Committee on Industry reject Bill C-235 because of paragraph 50(1)(a) and section 79 of the current Competition Act are sufficient to prosecute predatory pricing and abuse of dominance transgressions.

Second, we call for the continued vigilance on gas prices, and investigations of all allegations. Public hearings such as these are critical to the process of ensuring fair competition. Although this places the oil companies in a position of having to face intense scrutiny, CAA believes this is a healthy process.

Third, the petroleum producers themselves have to do a better job of managing their businesses. Frankly, this business needs to overhaul its marketing and public affairs activities, given the level of mistrust that exists among consumers and the public at large. At a minimum, oil companies should attempt to smooth price fluctuations and improve their public education activities in order to help consumers understand price volatility.

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Finally, in terms of gasoline prices, the direct role that government can and should appropriately play is to reduce the taxation levels on gasoline. Gasoline is a necessity, not a luxury for most Canadians. Mobility is the cornerstone of our modern society, and the private automobile is the principal means of mobility for most Canadians. Individuals have made critical decisions as to where they work, where they live, and where they worship, based on the mobility provided by the automobile. At a minimum, the federal government should stop the tax on tax grab of charging the GST on the substantial excise tax on gasoline. Further, the excise tax—which most recently was increased by 1.5¢ per litre in 1995 to battle the deficit—has to be reduced. With the deficit eliminated, there is no justification for maintaining such a surcharge.

Once again, I would like to thank the committee for its attention, and I welcome any questions about our position.

The Chair: Thank you very much, Mr. Hunt.

I'm now going to turn to questions. If the question is not directed to you but you have a comment, just notify me or indicate it to me, and I'll call on you to respond.

Mr. Chatters.

Mr. David Chatters (Athabasca, Ref.): Thank you, Madam Chair.

My first question is for the first witnesses. I certainly didn't disagree with what you were saying, but I would ask if you would find the concept of this bill more palatable if it didn't discriminate against fully integrated suppliers and if it in fact applied to all wholesalers everywhere in Canada, as the Quebec provincial legislation does.

Mr. Paul Crampton: Marginally, it would address the discriminatory aspect of it, but we have many other much more fundamental difficulties with this. It's price regulation. To the extent that it's price regulation, it forces businesses to compete with one arm tied behind their backs. They then go up against competitors from other jurisdictions that aren't forced to compete with one arm tied behind their backs, and we all know what the result is going to be. Our businesses lose market share.

Mr. David Chatters: That's good to know.

You said in your presentation that if there's a perceived problem with competition and with the Competition Bureau, there are other ways to improve performance. What are the other ways that we could address? Clearly, I think all of us on the committee had to agree that the witnesses this morning had a strong, strong case for the Competition Bureau, yet the Competition Bureau failed to prosecute. I think there are some problems, and we need to address these problems, but I really don't think this is the way. How do we do it?

The Chair: Just before they answer that, could you clarify who that witness was this morning, Mr. Chatters?

Mr. David Chatters: It was the grocery retailer from Nova Scotia.

The Chair: Mr. Wade. Okay, thank you.

Mr. Paul Crampton: Sorry, what was your question again?

Mr. David Chatters: You said there are better ways.

Mr. Paul Crampton: Yes, there are better ways. We haven't explored these other ways in our competition law and policy committee at the chamber, but based on my own experience in this area, I would have thought one of the ways would be to give the bureau more resources. I know it is working under an incredibly difficult burden. A lot of its employees are working evenings, and sometimes weekends. They might get an isolated case like that and it's highly local, but meanwhile they have many more cases on their lists that have national impact. I can understand that it might only be natural that the local one might then go to a lower priority on a list of things to do. So giving the bureau more resources might be one answer, and I think we have to explore that.

Mr. David Chatters: I don't know if that's palatable.

Mr. Paul Crampton: Another option might be.... The criminal burden here is a very difficult one, and the criminal process is very cumbersome. If it ever satisfies itself that it could establish something beyond a reasonable doubt, which is a very difficult, very high evidentiary threshold, by the time it gets itself up and running and over that hump, it might be too late to do something. What it would do wouldn't necessarily help the person, in any event. Maybe one option that could be explored is decriminalizing the predatory pricing provision. It hasn't really been very effective.

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Having worked for several years within the bureau, and many times that on the other side of the fence while representing a broad range of clients, I genuinely believe that part of the reason is that true predatory pricing really is rare. And you'll see the enforcement authorities in other jurisdictions agreeing with the Competition Bureau on that point. But to the extent that you might get the odd instance where it is happening, I would have thought that if you had an ability for the Competition Bureau to run off and get an injunction on relatively short notice, to stop it, this would be more effective than the criminal process, which takes years for somebody to see themselves through to the end of the process.

Those are two options. There might be others, and we're happy to work with this committee to try to identify better ways of addressing the issue to the extent that there might be one.

Again, I think where a supplier is going to sell to its own customer at a price at which the customer can't stay in business, it makes common sense that those instances would have to be rare; otherwise a supplier wouldn't be able to stay in business with its customers. So if a supplier wants its customers to thrive and pay its bills, a supplier is obviously going to have to leave its customer a margin. Instances where a supplier doesn't do that would have to be rare situations where maybe the price is fluctuating around and the customer gets whipsawed for a brief period, or you're selling perishable goods off before they go bad or clearing inventory out at the end of a season—these types of situations. But it doesn't make sense for a supplier to be trying to sell through its customers and not giving its customers a margin. Otherwise, it would make much more sense for the supplier to decide not to sell. In Canada and in most countries it's our right to decide who we're going to sell to. It would make much more sense for the supplier to do that, and then it wouldn't be facing a customer who owes it a lot of money because the customer went bankrupt.

I think the problem here is isolated instances. To the extent that there really is an issue, let's put our heads together and think how best to deal with it. But this bill certainly isn't the best way.

The Chair: Last question, please, Mr. Chatters.

Mr. David Chatters: I think there is an issue, but I agree this isn't the way. I don't see that the same problem exists in the travel agents' business that we're addressing in some of these other.... It doesn't seem to be the same business. And I would certainly reinforce the Canadian Automobile Association's concerns over the way oil companies are marketing their product. If they in fact advertised tax-exempt prices on their billboards and took a more active role in educating the public on how gasoline is priced, I think we could go a long way toward educating the public, as you said.

I think with that I'll let it go.

The Chair: Thank you, Mr. Chatters.

Mr. Lastewka.

Mr. Walt Lastewka (St. Catharines, Lib.): Thank you, Madam Chair. And I want to thank the witnesses for their excellent presentations.

First to the Chamber of Commerce, you mentioned in your report very clearly that this would lead to higher prices. Could you be a little bit more specific about how you think this would lead to higher prices?

Mr. Paul Crampton: Obviously, as you are aware, the Competition Bureau commissioned a study by somebody who looked at the various U.S. laws, at the states where these laws have been implemented, and found as a factual matter that the prices in fact did go up. I think we were speaking more conceptually. Any time you have regulation, and this is regulation, prices go up, because you impede the ability of businesses to respond rapidly to price changes.

In this particular case what you will do is chill the desire of vertically integrated suppliers to follow price reductions by their unintegrated customers, because by following those price reductions it will imply that this law will require them to also lower their wholesale price, which they won't want to do. So they'll simply not follow the price reduction. They'll lose market share and the consumer will be the big loser.

Mr. Walt Lastewka: I also read that you've looked at the amendments and you maintain your same conclusion.

Mr. Paul Crampton: Yes. The amendments certainly help a couple of our points toward the end of the letter, the ninth and tenth points, I believe, but they don't really address the fundamental point that this is price regulation and this is going to harm a large number of people.

This bill is about protecting margins, as opposed to having anything to do with the process of competition. This provision doesn't belong in an act that is designed to protect the process of competition so that our Canadian businesses, small, medium, and large, can compete with full vigour and without the government coming in maternally or paternally and setting artificial limits their competitors don't have to deal with.

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Mr. Walt Lastewka: Mr. Hunt, you mentioned in your report similar items to those of the Chamber of Commerce and then you made a remark concerning one of the items the travel group brought up, and that was the declining commissions from airlines and so forth. You mentioned that you would explore other ways to deal with the difficulties of declining commissions. Could you explain a little bit more on that and what your thought process is?

Mr. Brian Hunt: A major portion of our business is in travel, and we advocate for the travelling public and our members. We do not support this bill in terms of regulating in the travel industry. What we intend to explore is areas in leisure travel, the development of a unique travel product that our members will pay a fee for, as opposed to the commissions. We feel very strongly that commissions are the issue here, and we think that many industries, whether it be the cruise lines, whether it be airlines, are all moving to a net commission structure.

So we think we can compete very effectively in that environment. That will take a different approach to business through strategic alliances and things of that nature, but that marketplace is being dramatically restructured, and I think it needs a fresh approach to the industry.

Mr. Walt Lastewka: Mr. Ohman, would you agree with Mr. Hunt on that item on the travel business side? I know that's been changing drastically.

Mr. Terry Ohman: It certainly is changing. I would agree with respect to the type of product Mr. Hunt is referring to in terms of creating a packaged product and creating a net price for which the consumer may pay an additional fee. That may very well be part of the future.

What we're talking about now is not price maintenance. Quite frankly, from a travel agency perspective the price can be whatever the price is. We talked earlier about products that are perishable. Certainly air travel is very perishable. As a result, the price can plummet or be significantly higher, depending on the demand for the product.

The area of the bill as it stands today does talk in terms of wholesale price versus retail price. That's the area that quite frankly we're suggesting has to be amended. We're talking about how the price can be what the market demands it to be. But what we can't have is a situation where the supplier of that product withholds a portion of that product for themselves, and only for themselves, and denies their affiliated agents, their affiliated sales force, that same product. That is anti-competitive and it doesn't serve the interest of the consumer.

One way of doing that, and it's not a way we're opposed to necessarily, is through the Internet. We're not opposed to the Internet, but what we are opposed to is saying you can only get this product if you have the Internet, because this means you're restricting a large portion of the population and the consumers who don't have access to that particular technology.

So we're saying if you're going to make it available at whatever price, make it available to the full range of the distribution channel.

The Chair: Thank you very much, Mr. Lastewka.

[Translation]

Go ahead, Mrs. Lalonde.

Mrs. Francine Lalonde: Good afternoon. I want to thank all of you for your presentations.

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Mr. Ohman, I'm trying to understand the difficulties you're having. While your response to the last question enlightened me somewhat, I would still like you to further clarify your position. You say that you support the bill and that you have problems with competition.

[English]

Mr. Terry Ohman: We have been dealing with the consumers and with the suppliers as travel agents for many years. What we have seen in the past is that suppliers in a totally unregulated situation will use whatever device they have at their disposal to put their competitors out of business. I've provided an example of this that in fact started in the United States but became global in scope. What ACTA is trying to say is that the suppliers using new technology, using the changing market environment, are introducing new ways of competing. The part that is perhaps difficult for everyone to understand is that if I, as a travel agent, am the agent of the supplier, clearly there should be no competition issues because I am the agent of that company.

What I'm saying is that competition between affiliated retailers and suppliers does exist and is increasing. The regulation that we are suggesting is simply to put a speed limit sign on the highway to say that as we are going forward and as we are innovating and as we are making change, do it in a manner that is fair to all concerned. That's the nature of much of the bill we support. We have worked with the Competition Bureau and the Competition Act in the past. We support the work and the efforts they are trying to accomplish, but we believe, as it relates to this issue, they need help. The help is in the form of legislation.

[Translation]

Mrs. Francine Lalonde: Thank you. We note the following in your submission “It is ACTA's recommendation that the legislation be further amended to address the issues of”. Are you referring here to Bill C-235 or to the Competition Act?

[English]

Mr. Terry Ohman: Bill C-235.

[Translation]

Mrs. Francine Lalonde: You mention suppliers who sell a product direct at a lower retail price. Would these be integrated suppliers who sell through affiliates?

[English]

Mr. Terry Ohman: That is correct.

[Translation]

Mrs. Francine Lalonde: You state the following in (b): “a supplier prohibiting access to the product by its own agent”. What exactly do you mean by this?

[English]

Mr. Terry Ohman: We have a situation where the supplier operated its own offices, operated with its own staff, operated with its own facilities. It may be staffed with the employees of that company or it may be through technology that they can control the particular product. And whereas we are not saying they should not be able to do that, we do say that any product they put available through that channel also needs to be available through their affiliated retailer, which is the travel agent, because only the travel agent has access to the full range of product—not only that company, but other companies as well—and it's only by having full access to the product that the travel agent can provide the service to the consumer.

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When the consumer comes to a travel agent, they expect to see the full range of product. Those travel agents are accredited by the suppliers, so they are very much affiliated. If this legislation is not supported with amendments, then the consumer in an airline situation who wants to find out the best price from airline A or airline B or airline C or airline D may be forced to go to each of those airlines individually, and it destroys the impartiality the travel agent would otherwise offer to the consumer.

[Translation]

The Vice-Chairman (Mr. Eugène Bellemare (Carleton—Gloucester, Lib.)): Thank you, Mrs. Lalonde.

[English]

Mr. Peric.

Mr. Janko Peric (Cambridge, Lib.): Thank you, Mr. Chairman.

Mr. Crampton, we hear from you that you did not study the Competition Act, but at the same time, you believe Bill C-235 is not a good bill for competition in Canada.

This morning we heard from Wade's, and according to them, for no-name bleach, for instance, their wholesale cost is $1.33, and the superstore retails it at $0.69. It varies from 7% to 48%. In the end, the Wades went out of business or they sold the business.

I'm not a lawyer, Mr. Crampton; you are. Could you tell me and this committee, what in your opinion is healthy competition?

Mr. Hunt, we members of the Liberal caucus spend a lot of time on gas prices. We travel through the province and the country and we hear from suppliers, from refiners, and from independent gas station owners. I'm really surprised and shocked that you could state that your membership—and I'm a member of CAA—would agree with your statement that competition in Canada is healthy.

We hear from independent gas station owners and those who went down, those who were squeezed out of business by the four major companies. The four majors control 85% of the market in Canada. In the United States they control only 10% of the market, and the rest of it is controlled by independents. That's what I call healthy competition.

According to your statement, there is nothing wrong, and this bill is wrong for healthy competition in Canada. The independents are squeezed out.

The Chair: Bring your question, please.

Mr. Janko Peric: So the majors have control, and you're telling your membership that there's nothing wrong.

Do you have any comments, both of you?

Mr. Paul Crampton: In terms of what I would consider to be healthy competition, I think healthy competition is when suppliers are free to innovate, to price, to differentiate their products, to set their own price, to decide for themselves if they want to offer bells and whistles or if they want to offer superior service or compete on superior location or compete on price.

So competition would exist when you don't have any particular supplier or group of suppliers able to, unilaterally or in concert, dictate prices or dictate service, variety, innovation, or other important dimensions of competition.

• 1620

So when you have legislation that gets in their way and impedes their ability and their flexibility to respond dynamically to changes in the market, you are impeding the very process that you're hoping to promote through framework legislation like the Competition Act.

It may be helpful for some of the members to put this in a very broad perspective. I happen to be a member of what we call a core competition principles working group within the Asia-Pacific region, and we have spent an awful of time during the last two or three years, since the Canada-APEC here and at a conference that launched it in Montreal, trying to persuade developing countries to reduce the degree of regulation in their markets to the benefit of their own consumers, their own businesses, and the international trading system. They're finally coming around and saying to themselves, yes, we will get rid of these inordinately cumbersome and limiting regulations in our economy, and we'll free our businesses up to compete in the world system.

Here we are at the vanguard of that process, coming up with legislation like this, and I have to tell you that it is really embarrassing.

Mr. Janko Peric: I feel that it's embarrassing when I hear from witnesses like you that this bill is embarrassing to the nation.

The Chair: Mr. Peric.

Mr. Janko Peric: Please, I'm losing my time—

The Chair: Mr. Peric, your time is up. That's what I was trying to tell you.

I'm going to have to remind everyone that we have only five minutes for questions and answers, and we're starting to get into long preambles to both questions and answers. I now have eight or nine more speakers on my list.

Mr. Janko Peric: I would still like an answer from Mr. Hunt.

The Chair: Yes, I'm going to allow Mr. Hunt to answer your question. Thank you.

Mr. Hunt.

Mr. Brian Hunt: First, I'm delighted that you're a member of the association.

Mr. Janko Peric: [Inaudible—Editor].

Mr. Brian Hunt: Well, we'll be down to three million....

The best example I might give you is one from the travel industry, because we're involved in that. We do survey our members, and our members are solidly against regulation in pricing and things of that nature. Whatever you think of surveys, that's how we do it.

As an example, on an average tour package, today our members are paying commissions of anywhere from 10% to 20%. What we're talking about here is building that in on a regulated basis, in competition with the Internet.

The issue on the Internet is that the suppliers are going directly to consumers, and they're reducing that cost dramatically. If you want to fight that with legislation.... You can't control the Internet, ladies and gentlemen, and I would suggest to you that this theme applies in the gasoline industry. So I am as shocked as you are that we are supporting a structure that is going to deliver higher prices to our members, and we are solidly against higher prices for fuel and higher prices in the travel industry.

The Chair: Thank you very much, Mr. Hunt.

Mr. Jones, please.

Mr. Jim Jones: Thank you very much.

My first question is to the Canadian Chamber of Commerce. You had said that if this bill becomes law, there could be an impact on imported products, on the cost of exporting products from a competition standpoint, and that we could lose business to foreign competition. Can you elaborate a little bit on that?

Ms. Nancy Hughes Anthony: Yes, Mr. Jones.

I think I was referring to the fact that Canadian businesses need to be competitive at home, and they also need to be competitive internationally. They buy products; they buy furniture and tables and things like that. They buy them in order to conduct their business and then be as competitive as the next company, or hopefully be competitive internationally. Should there be artificial restraints on the price at which they can get their equipment, furnishings and things, they are going to suffer.

I think that was the point I was trying to underline. I don't know if Mr. Crampton has anything to add to that.

Mr. Paul Crampton: If you look at the list on page two—and I emphasize that this is just a sampling—let's take the average business. They would have to purchase office equipment, computer products, and telecommunication products for their business, and obviously they would have to price their products at a level that enables them to recover their costs and make a margin. So if you have a situation where a number of the products they have to buy to run their business have increased in price, then they have to set higher prices to recover those costs, and then they've got to go out and do battle in the marketplace against U.S. titans and other global giants. I'm telling you, it's going to impede our ability to compete. We don't need to have one arm tied behind our backs. We need your support, we don't need your hindrance, please.

• 1625

Mr. Jim Jones: What is a little confusing still is the argument the travel industry is proposing here. I don't understand a lot of the things they're saying. Let me give you an example. If an airline can provide an improved cost model to businesses, to their customers, why can't they do it? For example, if you can do direct marketing over the Internet, and I don't have to pay out any commissions, and it might save the company 10%, 15%, what I hear you saying is no, we've got to protect the commissions to the travel agencies. I think there are models out there, business models, that are changing every day, and especially now as we move into this electronic model of the Internet. So can you just elaborate? Are you really out to protect just the commissions of your travel agencies?

Mr. Terry Ohman: Thank you for your question.

We are not out to protect commissions at all, quite frankly. That's not the issue. I would like to refer back to the comments from the Canadian Chamber of Commerce where he was talking about office equipment and businesses being put at a disadvantage or prices being higher in this range of goods. What the bill talks about is the relationship between the supplier and the agent in a vertically integrated relationship. That doesn't apply when you're dealing with office equipment. It does apply when you're dealing in the oil and gas industry. It does apply when you're dealing in the travel industry.

So I tried to make it very clear in my presentation and in the report that the use of technology or any other device to become more efficient that results in a lower price for the consumer is perfectly acceptable and to be applauded. We do that, and we do it every day. But what we don't apply is a situation in a vertically integrated relationship, where a portion of the product is taken away and not made available to the public through the normal channels of distribution, in such a manner that the retailer in this case is at a disadvantage with the entity that is actually providing the product.

It is a confusing situation and a baffling situation to me. It's baffling that we have to put up with it, but it exists. So the vertical integration that we're seeing in the travel industry and the restriction and the limitation of product does in fact have a similarity with the oil and gas industry.

The confusion to me when I was reading Bill C-235 was the reference to the wholesale price versus retail price. I would even suggest that maybe for some of the opponents to the bill, in that writing, in the way it was set down, it does smack of some form of price maintenance, but I don't think that is intended, and it's certainly not intended in anything we put forward.

The Chair: Last question, Mr. Jones, please.

Mr. Jim Jones: Okay, then I'll switch to the CAA.

The author of the bill is here, and in his presentation he seemed to think it was bad that the number of gas stations in this country is reduced from 23,000 down to 14,000. Is there competition out there, and is the model changed? Are the big gas companies still getting competition? The new competition is companies like Costco and Home Depot and Canadian Tire. Just like in the airline industry and any of these other industries, the model is changing. What the author wants here would just be imposing a lot of restrictions on the competition out there.

• 1630

Mr. Brian Hunt: I think you've got to look at the model as changing dramatically. The retail margins on gasoline are about 8%, and not even the fully integrated companies can make money on that. What they've all done is introduced convenience stores, cash stop machines, etc.—doughnut shops you see in proliferation. I don't think we've seen the full impact. The gentleman over here was referring to the U.S., that Costco and Home Depots in the U.S. are selling and pumping gas at a very low price. Our understanding is that will come to Canada very shortly.

We're very comfortable that there are enough stations for people to fill up, that there is a variety of choice and there is enough competition. I mean, as I see prices go up by five cents a litre, it's not too long when they come back down again. So we think it's a very healthy market. We think there are enough outlets. And there's more to come, because Costco and these others are coming into this country and they will be here very shortly.

The Chair: Thank you.

Mrs. Barnes, please.

Mrs. Sue Barnes: Thank you, Madam Chair, and thank you to all the witnesses before us today.

I'm just going to try to paraphrase what I thought I heard the chamber say. I just want to see whether or not you would agree with this: that with respect to Bill C-235, good intentions don't necessarily translate into good legislation. Is that sort of a concise view of your position?

Mr. Paul Crampton: That's a fair comment.

Mrs. Sue Barnes: Okay, because I can tell you that I know my colleagues work very hard, but at the end of the day we're looking, as legislators, at something that could impact across many, many industries, and I think we have to be very careful and we have to be evidence-based.

To the CAA, I thought your brief was very well done and there were so many interesting things. I want to say just for the sake of many around the table, there have been interventions by three provinces in Canada on trying to regulate pricing, specifically in the industry that we talked about originally. Would you just go into that and what happened and why there was a back-off? I think it's Newfoundland, British Columbia, and Nova Scotia.

Ms. Jody Ciufo (Manager, Public and Government Affairs, Canadian Automobile Association): The three provinces that examined whether or not to implement price regulations in very broad terms determined that it would be detrimental in the end to the consumer because it could well lead to higher prices. These were the public advocate of Newfoundland, in New Brunswick.... Although they had some problems with competition, they did conclude in their brief that it would lead to higher prices. These are references that are cited in our brief and make reference to the excerpts from the reports we were dealing with. In this case they found that it would end up being overall higher prices.

Mrs. Sue Barnes (London West, Lib.): I thought it was interesting that in your brief you cite back to 1957, I think, and talk about the relative cost of gasoline. Maybe just bring that out in your evidence today.

Mr. Brian Hunt: If you go to Statistics Canada and you look at the retail price of fuel, excluding taxes, and you take inflation—you have to do it in constant dollars—Canadians are paying the same price for fuel today as they did in 1957. So we can't see that prices have gone up staggeringly other than in the area of taxation.

Mrs. Sue Barnes: At the same period, has there been a difference in choice in the product?

Mr. Brian Hunt: I think there definitely has been an increase in the choice of product. You are aware that the number of stations has decreased, but a lot of those stations were duplicates. A lot of consolidation took place in the industry. You may look down a street today, and where you used to have eight or nine stations, you now have five or six. We don't think that's restricting competition.

Mrs. Sue Barnes: Mr. Ohman, I'm trying to understand your problem here, and just correct me if I'm not getting the scenario. On the one hand, I think it would be very easy to say they're just protecting their commissions. I think really what you're trying to tell us is the situation or the scenario where perhaps a supplier of air services allows one price on the Internet, so I could buy it directly off the Internet, is not available to your agents. Your agents would have, as any business would have, attendant costs, so that creates a problem for your travel agents. Is that the scenario we're talking about, or is it a different scenario?

• 1635

The only comparable thing I can think of is if I were trying to buy stocks tomorrow, I could have a discount broker, I could buy directly, or I might want a full-service broker who will give me good advice, and I'd be prepared to pay a premium for that. Are they comparable situations, or did I have it right the first time?

Mr. Terry Ohman: There is an element of correctness in what you've said, but I want to really emphasize that it's not protecting commissions because of the difference we are talking about. If a travel agent earns in the order of 8% in terms of a commission, which is in that ballpark—sometimes 8%, sometimes 10%—if you have a product that is available normally in the order of $600 to $800, we're not trying to protect the 6% or 8% commission. But when that same product that is normally available to the majority of the public at a range of $600 to $800 is all of a sudden made available, just to use your example, through the Internet at $300, you are now seeing a huge discrepancy of price to the consumer via a specific distribution channel. We're saying if the supplier deems the price should be $300, let the price be $300. That's fine. But make that product available to the broad spectrum of Canadian consumers at $300. Even if you limit the number of sales at that price, put that product out at that price to the full distribution channel.

Mrs. Sue Barnes: And right now those travel agents wouldn't have access to that price. It's not the fact that there's limited access and there's only.... For instance, on a seat sale we know there's only a certain percentage at one price. What you're saying is even at that price, you have no access to that.

Mr. Terry Ohman: That's what we're saying is unfair and anti-competitive.

The Chair: Thank you very much.

I'm going to remind everyone once again to try to have shorter questions and shorter answers. We still have seven people wishing to ask questions on our list.

You have no more questions, Mr. Jones? Okay.

[Translation]

Have you any further questions, Ms. Lalonde?

Mrs. Francine Lalonde: Yes, I have. Thank you.

If I've understood Mr. Ohman correctly, he believes travel agents are worse off because of new technology and the computerized reservations service. For these reasons, he is calling for legislation to regulate the pace of change.

Mr. McTeague is seeking assurances that retailers won't encounter any problems and won't be unduly controlled by integrated suppliers who can defer product and refining costs and so forth. No doubt this creates problems, but I'm surprised to hear the CAA representative say: “I do not believe Bill C-235 will benefit consumers”.

All retailers are not small businesses facing major problems. The Canadian Federation of Independent Business told our committee this morning that instead of passing Bill C-235, we should be focussing our attention on the rules according to which the Competition Bureau operates.

• 1640

The CFIB supported Bill C-235 at second reading and observed that the conditions governing competition for SMEs should be scrutinized. The entire focus shouldn't be on the consumer. Businesses need to make money and in the process preserve jobs, but not at any price. Consumers mustn't be overcharged either. Shouldn't we be concentrating on striking some kind of balance?

Ms. Nancy Hughes Anthony: You are considering a very important question. In our view, the Competition Act already contains adequate provisions to address some of the problems that may arise. Some stakeholders may have expressed some concern about the procedures, speed of action or ability of the Competition Bureau.

The issue here for us is not one of regulating profit margins or prices, as the proposed legislation is suggesting, but rather, as Mr. Crampton observed, one of working together to find other ways of emphasizing that Canada does have a Competition Act which provides for concrete, effective measures. Perhaps this is a common objective. Regulating prices or profit margins is not the answer.

The Chair: One last question, Ms. Lalonde.

Mrs. Francine Lalonde: I'm wondering if the other two groups would care to respond to my question?

[English]

The Chair: Okay. Then that's it.

Mr. Ohman.

Mr. Terry Ohman: The amendments to Bill C-235 are in fact the balance that you are seeking to provide. I'm looking for a speed limit, but it's not a speed limit against change. It's to put a sign post on the road that says to the vertically integrated suppliers: be vertically integrated, have competition, but do it in a fair manner. That's the sign post we need, and that's why we support Bill C-235.

The Chair: Mr. Hunt, did you have anything to add?

Mr. Brian Hunt: I think, just very quickly, both the travel industry and the fuel distribution industry are being restructured dramatically. If you try to put legislation in that guarantees a profit to members of that industry who are inefficient, that's a regressive move. It's not a progressive move. In both those industries there are globalization issues that you can't stop.

The Chair: Thank you.

Madam Jennings, please.

[Translation]

Ms. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): Mr. Crampton, you say you speak for 170,000 SMEs in all sectors of the Canadian economy. Could you break that membership down for us?

Ms. Nancy Hughes Anthony: I couldn't tell you how our membership breaks down, as far as the different sectors of the economy are concerned, but I can tell you that our 170,000 members are collectively represented through 532 chambers of commerce.

Ms. Marlene Jennings: Can you give us some idea of who your members are? Are any travel agents members of your association?

• 1645

Ms. Nancy Hughes Anthony: Yes, more than likely.

Ms. Marlene Jennings: Mr. Ohman seemed to be saying that not all of your members support Bill C-235.

Ms. Nancy Hughes Anthony: Mr. Ohman represents an association of travel agents and obviously, we don't share the same view.

Ms. Marlene Jennings: I'm merely trying to underscore the fact that it's quite possible some of the travel agents who belong to the association represented by Mr. Ohman are also members of the Canadian Chamber of Commerce. Therefore, it's possible the views you're presenting here today are not shared by all of your members.

Ms. Nancy Hughes Anthony: Yes, that's possible.

Ms. Marlene Jennings: Some of your members may also be affiliates, franchises or integrated suppliers. Take, for example, an oil company that has its own affiliates or where franchise owners belong to the local chamber of commerce, which in turn is a member of the Canadian Chamber of Commerce. It's possible that some of your members may be affiliates of integrated suppliers.

Ms. Nancy Hughes Anthony: Given the number of members we have, that's quite possible. As I explained earlier, approximately 80 per cent of our members are SMEs.

Ms. Marlene Jennings: Thank you for your comments.

Mr. Hunt, you refer in your brief to a recent study showing that in nine of ten cities surveyed, there was no exodus of independent retailers. In fact, the independents' share of the market had increased. What study were you referring to? How were independents defined, when was this study conducted and by whom and which 12 cities were targeted? Thank you.

[English]

Ms. Jody Ciufo: The studies we were referring to in the brief were both commissioned by Industry Canada. The first was conducted by Loretta Mahoney and the title is Retail Gasoline Market Shares: An Analysis of the Experience of Integrated Companies and Independents over the Decade in Selected Canadian Cities. That was published in March 1999. The second study we refer to was a separate report that dealt with market shares of firms, the vertically integrated versus independents. It was completed by Dr. Sen and the Law and Economics Consulting Group, and was entitled Wholesale and Retail Competition in the Canadian Petroleum Industry: An Econometric Analysis. It was also published in March 1999.

[Translation]

Ms. Marlene Jennings: For the purposes of these two studies, how were independent retailers defined?

Ms. Jody Ciufo: I'm sorry, but I don't have that information.

Ms. Marlene Jennings: Thank you.

[English]

The Chair: Thank you, Madam Jennings.

Mr. Jones, do you have any more questions?

Mr. Jim Jones: Not really, but I do have a comment. If I look at the technology now, even at gas stations, I get the feeling that the author of this bill should be coming out with a bill to protect the people who won't be able to pump gas, because today I can go in and just put my credit card in there. So there are going to be all sorts of jobs lost that way. If we start protecting independents because—

• 1650

Mr. Dan McTeague (Pickering—Ajax—Uxbridge, Lib.): Madam Chair, on a point of order, that's a debate. If he wants to discuss that, he can actually get into the question of ancillaries. When you use a credit card, in terms of the machines and technology he's talking about, it takes away from the revenue of the oil companies, so it's a moot point. The member doesn't know what he's talking about.

Mr. Jim Jones: I do know what I'm talking about.

The Chair: Mr. McTeague, Mr. Jones is entitled to his time to give his commentary when he asks a question or doesn't ask a question.

Mr. Jones.

Mr. Jim Jones: All I'm saying is that I think the times are changing. I can think of many industries that wouldn't be able to make the market changes they would have to make if this bill were put in, and I find it very difficult to support a bill like this.

The Chair: Thank you, Mr. Jones.

Mr. McTeague.

Mr. Dan McTeague: Thank you, Madam Chair.

I don't know where to begin with this, because it's a question of trying to fight the revisionism that's been stated here.

Mr. Crampton, I will begin with you. The firm you're working for is of course the same firm that Mr. Katz, who provided the documentation this morning on behalf of the Canadian Council of Grocery Distributors, works for. I take it you work for the same firm. Mr. Crampton, do you have any expertise in the U.S., or do you have U.S. clients? Can you talk to me a bit about your expertise in the United States, in the context of these studies you've cited with Calvani and Johnson, and the fact that one of them—in this brand-new document, which most of us did not see until two weeks ago—states that they have no expertise in the U.S. Are you somewhat more apprised of the Canadian experience, as conversant to what...? Are you familiar with the U.S. version of the Competition Act in the way that Mr. Johnson has suggested he is not familiar, as a U.S. person with an opinion, with the Canadian context?

Mr. Paul Crampton: I'm not licensed to practise law in the United States. As somebody who spends 110% of his time in the competition law and antitrust areas, I'm fairly familiar with their predatory pricing laws. I'm not familiar with the state divorcement and similar laws. But the U.S. predatory pricing laws are quite clear, and the U.S. Supreme Court has made it quite clear that predatory pricing is very rare. You have to be able to show not only an elimination of a competitor and an intention to eliminate the competitor, but an ability after the competitor is gone to recoup and increase prices. And that's what we don't have.

Mr. Dan McTeague: Mr. Crampton, are you familiar with the May 2 edition of The Economist, which suggests that the Chicago school, which you are referring to and by which previous decisions have been made, is now being seen as somewhat antiquated, and that a good predator, after they've been successful in removing those pesky little independents, now puts itself in the position of making sure the prices actually don't go too much higher afterward, but keeps it so that it forms an entry barrier for anyone coming in?

What I wanted to point out to you is something that is analogous to your situation. If, for instance, tomorrow the Law Society decided to up your fees to somewhere in the order of $2 million a year, and you could only bill $500,000, Mr. Crampton, how long do you think you'd be in business?

Mr. Paul Crampton: If the Law Society upped my fees to $2 million—-

Mr. Dan McTeague: The Law Society or the governing society. I'm not a lawyer, but I think you can appreciate what the gist of my concern is. If you have to compete against price.... You have made the suggestion, as have, falsely, the CAA, that somehow this is price regulation. If you are in a situation where you must price to the point of peril, because your supplier or a person who is your wholesaler is beating you at the game with a price that's offered to you, how long do you think you would survive under that circumstance? More precisely put, how long do you think you can compete against your own supplier if he or she wants you out of the business?

Mr. Paul Crampton: Well, I think the answer to the point you raise is self-evident. What I said at the outset was it doesn't make any sense as a business strategy for anybody to be putting their customers out of business that way. If you don't want to deal with somebody, you're free, in this country, not to deal with them. But you don't have to put them out of business so they're then not in a position to pay their bills. It doesn't make any sense.

Mr. Dan McTeague: Unless you want to control and dominate the entire price structure, as you've seen in the gasoline industry.

Now, Mr. Hunt, you've stated and your boss, David Leonhardt, I believe made a number of statements last week to the effect that gas prices at 59 or 60 cents a litre had let up. They went a little higher in the Toronto area. We know there's a correlation with the fact that there is no independent left in the metropolitan region. Do you not find it somewhat passing strange that prices in the GTA now rise uniformly, that the margins that you think are one or two cents a litre are now eight to ten cents a litre?

• 1655

Do you not find it passing strange that the two studies you've cited, both Mrs. Mahoney's and Dr. Sen's, which obviously were paid for by the Competition Bureau, which will be here tomorrow, of course.... Ms. Mahoney has suggested there are a number of independents she's included in her study to make the assertion, in her retail gas market shares analysis of experience of the integrated companies.... She's actually used flawed data, and you have put yourself in a situation of basing an opinion on flawed information.

Mr. Brian Hunt: Mr. McTeague, we've had this ongoing discussion with you in terms of competition—

Mr. Dan McTeague: No, I'm talking about Ms. Mahoney's study. I don't want to talk about previous discussions.

Mr. Brian Hunt: I think you made a number of statements. Can I address them?

The Chair: You have the right to respond and Mr. McTeague will listen.

Mr. Brian Hunt: It strikes us that this bill is introducing regulation within the gasoline pricing structure. We are against that. I'm sorry Mr. McTeague continues to harp on this. He seems to feel we should be supporting the bill. We have surveyed our members and they do not support regulation. I cannot change their minds. I'm sorry. I feel like I must apologize for our position. This is our position and we'll go forward with it. I'm sorry.

Mr. Dan McTeague: No, you're not—

The Chair: Let him finish, please.

Mr. Dan McTeague: Mr. Hunt, this is not about price regulation. If the wholesale price, whatever that should be, is set by the major refiners, and there are only three of them controlling 75% of the volume, how can you suggest the market is competitive and that somehow, if you're the only game in town selling the supply at wholesale, retailing at a lower price is regulation? What does it require? Could they sell it at zero cents a litre and you'd be happy because it's competitive?

I'm not sure your membership really understands the position you've given, except for the fact they're asking questions. Your organization seems to jump on the bandwagon when prices go up, but it says very little when they go down, to the point where they're detrimental to the competition that's there.

Surely you must know, given the flawed information dealing with the independents who have exited the industry, notwithstanding the errors of Ms. Mahoney, you're premising yourself on fairly flawed information, except when it comes to the 29 recommendations of the Liberal committee, one of which is to remove the tax on tax. You've accepted that one. You haven't given credit to the author on that one, but you've attacked this bill. Is the CAA affiliated with any major oil company in any way, shape, or form?

Mr. Brian Hunt: I would answer to Mr. McTeague that I resent very strongly his accusations. We have presented information we feel is accurate. We have consulted with our members and are presenting our members' opinions. We have member benefits connected with Sunoco, Mohawk, Husky, and a number of other oil companies. We see that as an issue of business, and it has nothing to do with our position here. If he is insinuating it is, I think it's a disgrace.

Mr. Dan McTeague: You're saying the—

The Chair: We have Mr. Hunt, and then Mr. Crampton also has a reply.

Mr. Brian Hunt: We have presented our position. We are against regulation. We are not changing our position.

Mr. Dan McTeague: You may suggest the world is flat too, but the reality is Mohawk is not even an independent, for God's sake.

The Chair: Mr. Crampton.

Mr. Paul Crampton: Mr. McTeague, you spoke about prices, and I think that's a good place to start. If there's a problem, it must be manifested in higher prices in some industry than you would think should exist. Is there any industry where the prices have gone up as a result of the conduct you're talking about?

Mr. Dan McTeague: You're not supposed to ask me questions, but talk to any motorist in Toronto this week who's getting hosed to the tune of ten cents a litre, or anyone in Newfoundland who's been screwed out of twenty cents a litre for the past couple of years, as a result of independents and your organization being successful.

I don't hear the Chamber of Commerce making any comments about these thousands of independents in the grocery and retail gas industries who are losing their shirts, not because of taxes or access to capital, but because of predatory pricing conducted by groups like yours.

Ms. Nancy Hughes Anthony: We don't hear those comments and complaints, Mr. McTeague. I don't think we can in any way talk about these lightly. This is a very important issue or accusation to be flinging around.

Mr. Dan McTeague: I agree it's an important issue. That's why, as a legislator, I am here, and so are these members, to listen to this. In this simple context, I would urge you, your organization, and the CAA to remain here, to hear what the witnesses have to say. It seems to me you are listening to a very select group of people who might have had a lot to do with creating the Competition Act in the first place. I think that's certainly not just my position; it's evidence that's been brought before us in this committee at the outset.

Thank you, Madam Chair.

The Chair: Thank you very much, Mr. McTeague.

We will probably go to motions at five o'clock. That is my suggestion now. We will suspend for about sixty seconds to allow our witnesses to gather their belongings before we move to motions.

I want to thank you all for being here. It's been a very interesting session.

• 1700

• 1704

The Chair: I'm going to call the meeting back to order.

Members, please take your seats. In front of you is item four, future business. The first item on future business is our budget submission, which everyone should now have in front of them.

• 1705

This budget takes us until the end of June and deals with witness expenses. We proposed, instead of travelling, that we would do video conferencing for the update on the Y2K study in May. We need a motion to adopt the budget.

Mr. Jim Jones: I have just a quick question before you adopt it.

The Chair: No. We need the motion before you can talk about it.

It is moved by Madam Jennings.

Mr. Jones, do you have a question?

Mr. Jim Jones: Yes. What is the item, video conferences, for $12,000?

The Chair: That's for the Y2K study in May.

I apologize. There's also one there for sustaining growth. That's the one with the United States. We were going to try to finish that chapter of the study we began a long time ago. Instead of travelling, we decided it would be more cost-effective to do it by video conferencing. Is that okay?

Madam Lalonde.

[Translation]

Mrs. Francine Lalonde: Madam Chair, I wasn't here when we approved our future business. I was sick at the time. I've gone over this carefully and it seems to me that the committee would be overstepping its initial mandate quite a bit if it were to ask each province to report on its state of preparedness. I think we need to let provincial officials do their work. According to our mandate, we were supposed to focus on large companies and SMEs. There seem to be other subjects listed here. I'm not in favour of incurring these expenses. Right now, many people are hard at work addressing Y2K problems. We have taken a leading role and done the initial work. Now I think we should leave people alone to do whatever it is they must.

[English]

The Chair: Madam Lalonde, with all due respect, we had a committee meeting and it was agreed at the steering committee meeting that we would proceed on that basis. You had representation at that meeting.

Mr. Bellemare, are we ready for the vote?

Mr. Eugène Bellemare: We were to visit the aerospace.... What happened to that? It was postponed. Is it out totally?

The Chair: We are waiting for approval from House leaders. The meeting's tomorrow.

The money has already been approved by the liaison committee. It's now up to the House leaders to agree that we can travel on April 26. We should know by the end of our meeting tomorrow. This is our operating budget.

(Motion agreed to)

The Chair: We now have four motions. The first motion is by Mr. Jones.

I just want to remind you, Mr. Jones, before you move this motion, we already agreed as a committee to meet on Monday afternoons and incorporate shipbuilding into that meeting on Monday afternoons, as soon as we received a research document on productivity from the researchers. We now have that.

Mr. Jones.

• 1710

Mr. Jim Jones: On a point of order, I wasn't aware of that. I was aware that we had agreed to meet sometime in the future on Mondays about productivity. Okay. I wasn't aware that at the same time we had agreed that we were going to incorporate shipbuilding. In February, when the motion was brought forward by the Bloc, it was defeated, and I guess one of the reasons it might have been defeated was that the motion said “immediately” look into a shipbuilding policy.

My motion here is not trying to say “immediately”; my motion is on the feasibility of the federal government establishing a national shipbuilding policy and reporting its findings, along with the recommendation it deems necessary, to the full committee.

The Chair: Right. I just wanted to make sure everyone on the committee was aware of the decision the steering committee had taken. The fact was that we had agreed we would not strike a subcommittee because many members are already members of other committees. We would meet on Monday afternoons to deal with the productivity issue once we received the productivity research from the researchers, and we would incorporate the shipbuilding issue into our productivity study. That was the agreement of the steering committee, and I thought that was clear. I just raise that with you because that was the decision of the steering committee. Now, it wasn't a formal motion or anything, but it was a decision.

Mr. Jim Jones: Well, this Monday afternoon, is it a subcommittee of the industry committee?

The Chair: No, it's a regular full committee meeting. However, to hear witnesses we have a reduced quorum, and everyone who was interested in that subject or that issue had agreed they would be willing to attend on Mondays.

Mr. Jim Jones: I see Madam Jennings over there shrugging her head. I wasn't aware we had agreed on anything like that. I would suggest that if we're going to do that then one of the first things we should look at is a national shipbuilding strategy or policy.

The Chair: Again, Mr. Jones, it's what was agreed at the steering committee. And it was agreed that the researchers would prepare a productivity research paper, because there was some discussion about what productivity was and everyone was defining it slightly differently. It was also agreed that it would be an opportune time for us to take a look at the shipbuilding sector as part of that study. And we were agreed that we would meet on Monday afternoons instead of striking a subcommittee because we know many members of this committee are members of several other committees as well, and it would be very difficult with the level of work we have right now, with legislation as well, to try to fit meetings in during other times of the week. So Monday afternoons seemed to be a time when there wouldn't be other meetings, wouldn't be other conflicts, and people who were interested would be able to attend.

You can still propose your motion. I just wanted to clarify for you.

Mr. Jim Jones: I just want to get clarification that when we come to a series of meetings, for whatever length of time it is, if we know the topic is going to be shipbuilding, there are other members in my caucus who are interested in this topic, and I would think they'd want to make sure they're here. So I'd like to know that we're not just lumping it into the total realm of productivity and that we clearly say one of the mandates, and we're going to spend a month on it, is to look at a shipbuilding strategy or policy.

The Chair: You now have research papers. And I apologize, I didn't realize they weren't circulated in advance; I thought they were going to be circulated yesterday. You now have research papers. I believe there are three, and everyone has them in front of them. Maybe the best bet is we have a meeting scheduled for April 20 as a future business meeting to take a look at these papers and decide what meetings we want to have on the coming Mondays thereafter.

Madame Lalonde, you had a comment?

[Translation]

Mrs. Francine Lalonde: I support Mr. Jones' motion. I hadn't understood either that we would be examining shipbuilding as part of our study on productivity. In view of the interest expressed by several members of the committee, it would be a good idea to know exactly what our study will entail. I wonder if Mr. Jones would agree to our discussing this matter further on April 20.

• 1715

[English]

Mr. Jim Jones: Well, I was never under the understanding that shipbuilding was in the productivity, that it is included in there. I just want to make sure that when we do discuss that topic it is clearly defined when it's going to be on the agenda, so that appropriate members of my caucus and other caucuses who are interested can attend that section of it.

The Chair: Definitely it will be clearly defined when it's going to be on the agenda.

I apologize, but the reality is we did have a steering committee meeting. It was decided; it was agreed on by all parties. There didn't seem to be a need to have any formal motion. I believe Mr. Dubé was there in your absence, Madame Lalonde. I think that may be why there's some confusion. I apologize. We should have brought it to the full committee to let everyone know. That was the intention. I thought I did mention to the committee that we were waiting for a productivity paper. I thought I did mention that at one point.

However, that being said, we now have the papers in front of us. It's up to you, Mr. Jones, if you wish to proceed with your motion.

Mr. Jim Jones: Well, I don't want to be defeated.

The Chair: Okay. You can withdraw it. He hasn't even moved it yet. To be honest, we've been discussing it without it being moved. So if you don't want to proceed with it at this time.... I raised that just to let you know that was what was decided already. That was the plan.

Mr. Jim Jones: Well, I was at that meeting you're talking about, Madam Chair. Mr. Dubé was sitting here. It was my understanding—and I'd go back and check the minutes of the meeting—that the motion was defeated.

The Chair: No, you're talking about a general meeting of the committee. I'm talking about a steering committee meeting where we discussed future business and Mr. Dubé—

Mr. Jim Jones: Yes, it was in camera.

The Chair: No. Mr. Dubé raised the issue of shipbuilding again at steering committee. At the same time, we were dealing with the issue of productivity. We agreed that we would ask the researchers to look at productivity. Mr. Dubé raised the fact that he felt shipbuilding fell within that area. This is my recollection. I don't have the minutes in front of me. I agreed, and I think we all agreed that it would be an opportune time to take a look at it.

Mr. Jim Jones: I will withdraw my motion and check the minutes of that meeting. If it's not, then I'll just bring it back.

The Chair: Mr. Jones, I'm very clearly telling you what the plan is, and very clearly what I've agreed to do as the chair of this committee in scheduling meetings. So if you want to bring back your motion, you're more than welcome to.

Mr. Jim Jones: But I believe that meeting, Madam Chair, was in camera. It was in camera.

The Chair: Was it in camera?

Mr. Jim Jones: Yes.

The Chair: Yes.

Mr. Jim Jones: So I'd like to move my motion.

The Chair: Well, the clerk has minutes from that meeting. It says very clearly it's a subcommittee meeting. It was not a regular committee meeting. At the subcommittee meeting we agreed that in relation to the productivity study, the researchers would prepare a background document on what the study would entail by providing links to competitiveness in shipbuilding.

The clerk thinks you're confusing it with the other motion of Mr. Dubé, which was on February 2, which was also, I believe, in camera.

Mr. Jim Jones: If they both were in camera, can we just—

The Chair: We always have steering committee meetings in camera.

Mr. Jim Jones: —formalize this motion out in the public, saying we will be looking at it?

I'd like to move my motion.

The Chair: Well, you're not going to get approval, I think, for a subcommittee, but go ahead.

Mr. Jim Jones: I'll take out the word “subcommittee”. If it's going to be the committee of the whole on a Monday afternoon, and that's going to be included as one of the topics, then I'd like to formally say that I'd like to have that included.

The Chair: Mr. Jones, I'm very clearly already on the record. I think you're personally undermining the steering committee process we have in place, where we already agreed to do that. If we're going to have formal motions for everything the steering committee agrees to do, if there's going to be no goodwill at this committee, then I guess we're going to have future problems. But you're more than welcome to move the motion you presented, motion number six.

Mr. Jim Jones: I don't feel that what I'm trying to do is create any ill will. I'm just trying to formalize—

Mr. Walt Lastewka: Madam Chair, I'd like to say some words.

My understanding was clear that we were waiting for the researchers to do some work. We were going to go through what the researchers said. We were going to get feedback from our various parties. We were going to bring it back to the steering committee, and then the steering committee was going to decide on how we were going to approach it.

If that's changed, and you want the motion on the floor, let's go with the motion. But what I see here coming today is whatever is done in steering committee comes back here as a motion. I'm totally against having motions that are a repeat of what is happening in steering committee. If you don't want the steering committee to work and you want to bring motions, then we have to get another decision on how we're going to operate as a standing committee.

The Chair: There's a full committee meeting scheduled for next Tuesday to deal with future business. One of the items on the agenda is this very issue, because the researchers took a little longer to prepare the productivity study than we had hoped. Unfortunately, there are timelines and we had a very busy load with Bill C-54, so it took a little bit more time.

Madame Lalonde.

• 1720

[Translation]

Mrs. Francine Lalonde: Madam Chair, further to Mr. Lastewka's comments, I have a question. For several years, I sat on another committee. I was my understanding that the steering committee did preparatory work, rather than make decisions. As a rule, the work of the steering committee is reviewed by the full committee. The sub-committee does the groundwork for us and identifies members' concerns. I thought that was how things worked.

[English]

The Chair: I guess I was jumping the gun. That's the reason for the meeting next Tuesday, to deal with the issues the steering committee had raised and to go forward from there and to see what everybody wants to do. So I apologize if I was assuming the decision has already been made, but there was unanimous consent at the steering committee that this is the direction we wanted to go in. I assumed everyone would discuss it with the different party members. That has not happened, I understand now, and we have a meeting scheduled for next Tuesday.

Mr. Jones, it's your decision.

Mr. Jim Jones: I personally don't want to create any ill will. I was not under the understanding that you've explained, but I am willing to withdraw the motion and next Tuesday we'll discuss it, so you know that I am putting this motion forward legitimately with no malice intended or anything like that. I just want us to look into the feasibility of developing a shipbuilding policy.

The Chair: No, I think everyone's in agreement.

Mr. Jones, number seven.

Mr. Jim Jones: Yes. I move that the committee convene a public comprehensive review of the agreement on internal trade, whose purpose would be to improve the AIT's effectiveness in meeting its stated objectives.

The rationale is that the agreement on internal trade was signed in 1994 by the federal government with all provincial and territorial governments and came into effect in July 1995. Since that time numerous problems with the AIT have been identified. In 1997 an Industry Canada document reported that the agreement had only addressed 13% of internal trade barriers previously identified in a landmark Conference Board of Canada report.

In response to questions raised last year by Senator Kelleher, the government admitted that 14 deadlines set in the agreement and subsequent negotiations had not been met. The government's response also raised the previously reported 13% figure to 18%. The ongoing Quebec and Ontario dispute regarding the mobility of construction workers is another reason, and the F grade given to the AIT last year from the Canadian Chamber of Commerce. Clearly, there is a need for an all-party assessment of this agreement.

I realize there is an ongoing review by the federal-provincial-territorial committee for internal trade. I also realize that there are no negotiations between Ontario and Quebec with respect to their troubles. It was the Minister of Industry himself who suggested last year that this committee undertake a review of the agreement on internal trade. While I do not always agree with the minister's opinion, this is certainly one I share. Internal trade barriers carry a heavy cost to Canada's economy, from coast to coast to coast. So let us as a committee follow the minister's advice and begin a review of the AIT.

The Chair: Mr. Lastewka, a point of order. I'm sorry, Mrs. Barnes has a point of order.

Mrs. Sue Barnes: Is this a matter that was dealt with at steering committee? I think we just had a discussion about the process of using our steering committee before we come back to the full committee. I just need a clarification of whether this was already dealt with at steering committee, or is this just a regular motion and we're sort of bypassing the steering committee process?

The Chair: Well, we've discussed the agenda during committee several times and discussed the workload at the steering committee several times, and we discussed the priorities of this committee at the steering committee several times.

Just for the benefit of the entire committee, I'll let you know that we have an obligation to deal with legislation first. We set some priorities as a committee with regard to other issues. This has come up several times at the steering committee and we just haven't had the opportunity or the time to go forward with it because of the fact that we do have a number of things on our work plate.

• 1725

Mrs. Sue Barnes: My point, Madam Chair, is that we already know we have a meeting to talk about future business, and there is a process for a steering committee without having to go through this over and over again. So I'm supporting what you're saying, that it goes to the steering committee, and then the steering committee brings it back to the whole committee for the vote. As I understand it, this was on my agenda for next week, not for today. This is another motion.

The Chair: But the AIT was not something that has been decided by the steering committee, and every member has a right to bring motions to committee.

Mrs. Sue Barnes: That's fine. I'm just pointing out that there is a process through the steering committee that I would appreciate people using.

The Chair: I would agree with you, Madam Barnes.

The bells are going to start ringing at 5.30.

Mr. Jones.

Mr. Jim Jones: Are you saying that this is not the appropriate way for a motion? This is—

The Chair: No, I'm saying that we have a steering committee process whereby the steering committee discusses and works out the agenda and brings it back to the full committee to say this is where we're going. The committee has agreed to do certain things. So when you bring up other items to add to our agenda or our load without first taking it to the steering committee, we have to remove something before we can add something.

Mr. Jim Jones: Madam Chair, one of the reasons I'm bringing this forward is because of the dispute that's going on between Quebec and Ontario over construction workers. I think it's something we should be looking at, and we should be looking at the internal trade barriers that are there.

Just recently the 407 was purchased, and the leading purchaser.... What's going on?

The Chair: I have a couple of people on the list, including Mr. Lastewka.

Mr. Jim Pankiw (Saskatoon—Humboldt, Ref.): Janko is acting up.

The Chair: No, he's just pointing out that his name tag is backwards.

Mr. Jones, again, the bells are going to start in a few minutes.

Mr. Lastewka.

Mr. Walt Lastewka: We've discussed this at steering committee. It's a federal-provincial ministers responsibility. As you know, Mr. Jones, a member of your party provincially is the co-chair of this committee. I've said over and over that they have not coordinated—

Mr. Jim Jones: Whose party?

Mr. Walt Lastewka: One member of your party is a co-chair of this committee.

Mr. Jim Jones: Who?

Mr. Walt Lastewka: It's Mr. Al Palladini, and it's about time he called a meeting. We've said this before and I'll say it again, and I hope it's on the record: Not calling a meeting doesn't get anything done. That's the way it is. And I've attended them.

Now, I understand a meeting has been scheduled for June 12. I'm sure you know what's going to happen on June 3 or 10. That meeting will probably get delayed again. Maybe you should touch base with your provincial cousins prior to bringing forward a motion like this.

Mr. Jim Jones: I believe this is under Minister Manley's jurisdiction.

Mr. Walt Lastewka: With regard to provincial internal trade, the lead person is the provincial minister of the time. It happens to be Ontario's time. It happens to be that Al Palladini is the co-chair and lead person in making things happen. Yes, as of the last meeting, the federal minister is a co-chair in order to try to facilitate federal-provincial meetings. Mr. Jones, you might want to attend, like I did, and learn how efficient they are.

The Chair: I believe, Mr. Lastewka, that members of this committee were invited to the meeting that was held in Ottawa last spring.

Mr. Walt Lastewka: That's correct.

Mr. Jim Jones: Through the chair, I believe the Minister of Industry recommended that this committee look at the interprovincial trade problems.

Mr. Walt Lastewka: If we wanted to and if it were a priority of this committee, he would welcome that.

Mr. Jim Jones: Who's “he”—Mr. Manley?

Mr. Walt Lastewka: Mr. Manley.

Mr. Jim Jones: He suggested it.

Mr. Walt Lastewka: No, he said it was an item. He also said that the Competition Bureau is an item. He mentioned many items. He's open to many discussions. I'm sure that when he's here in the early part of May—

The Chair: We can only have one or two studies going at the same time. We already have the Y2K study, which is not complete, and the sustaining development project, which is not complete. Now we're entertaining productivity and shipbuilding, and you want to add AIT to the list.

Mr. Jones, just tell me when you're available.

Mr. Jim Jones: I'm just bringing it forward as an issue.

• 1730

The Chair: With all due respect, when I try to have a clause-by-clause meeting and give two days' notice and then another two days' notice, I can't get opposition members to show up and I have witnesses waiting for 25 minutes, and you want to add another item to the agenda.

As the chair, I'm just trying to be a little bit reasonable here. We all have—

Mr. Walt Lastewka: Move the motion, Madam Chair.

Mr. Jim Jones: I'd like a recorded vote.

(Motion negatived: nays 9; yeas 3)

The Chair: Just to let everyone know, the next item, number eight, is out of order. This is the last time I'm going to raise this at a meeting. So that we're all clear and it's on the record, Ms. Weinstein is a lawyer in private practice and is the solicitor for the Prime Minister. She is an individual. This motion infringes on solicitor-client privilege and does not relate to the mandate of the committee in accordance with Standing Order 108(2).

Next is number nine, Mr. Pankiw. Just to let everyone know, I have already scheduled the Minister of Industry and all the other ministers to appear during the first week of May with regard to the estimates, as was agreed at steering committee. Mr. Pankiw.

Mr. Jim Pankiw: Could you clarify for me that the minister will be here to answer questions on the spending estimates?

The Chair: He will be appearing before us on May 4.

Mr. Jim Pankiw: Then this is redundant, and I retract it.

The Chair: Thank you very much, Mr. Pankiw.

The meeting is adjourned till tomorrow.