Finance Committee on April 30th, 2024

[Samir Chhabra]

I think it's quite difficult to make the case that this would make the regime more or less strict. Because of the differences in the way the systems are established and the processes by which they operate, I think it's very difficult to say this would create a stricter system.

The issue on productivity is perhaps a bit distinct from the question here in particular. There is literature that speaks to the degree of a firm's size and market share, that speaks to their innovative capacity and their ability to manage supply chains effectively. There are, in any event, balances that need to be struck between market power and efficiencies that can be gained from size and scale versus the importance of maintaining effective competition.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Turnbull.

We have Mr. Ste-Marie, please.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

Esteemed colleagues, we're in a predicament here. It's really not easy to do what we're doing here.

On the one hand, we have a competition issue and that has an impact on the economy, that's for sure. There are a lot of things being done to address that. The commissioner of competition is suggesting amendments to the bill with respect to the Competition Act. I consider him to be an expert in the field. He's in a position of authority and he's suggesting that we adopt the amendment Mr. Davies proposed to us.

On the other hand, senior officials from the Department of Finance are telling us that some key issues around this could have serious consequences.

Our role is that of legislator, but we're caught between two authorities who are not saying the same thing. That's a real problem.

How did we get here? For years, the government has been promising that it will do a comprehensive reform of the Competition Act, but instead of going through with that reform, it's using a piecemeal approach with this omnibus bill, which deals with a whole host of subjects and acts and implements certain provisions of last year's budget. Meanwhile, this year's budget has been tabled and there's a briefing tomorrow on the notice of ways and means. That's where we're at. We never get to see the big picture.

That leads to situations like the one we're in right now. The government is telling us that we have to look at the Competition Act as a whole. That's its reasoning for rejecting the amendments proposed at the commissioner's request. For example, it's arguing that the threshold would be different in two parts of the act. The government never lets us see that darned big picture.

In my opinion, this shows that the government isn't doing its job well. If they'd wanted to do things properly and ensure that we, elected members who are legislators, had the time to get a complete look at this situation, they would have moved these amendments in a separate bill. That way, we could have taken the time we needed to get a good look at this.

The committee has heard from the commissioner of competition. We've heard the officials' presentations. Now, some officials with us are still making some very important and valuable points. We're flying half-blind, and we can't see the big picture. We're in this situation because the government is doing a bad job, and I condemn the situation.

Yes, the commissioner did say that the issue of his powers to block mergers was largely resolved thanks to the provisions in Bill C‑56 and what's in Bill C‑59. That said, when the Standing Committee on Agriculture and Agri-Food did its study on grocery prices, the commissioner of competition's arguments were the same ones this amendment is based on, and that committee accepted them. Therefore, if we don't pass this amendment, we're putting ourselves at odds with the Standing Committee on Agriculture and Agri-Food.

Frankly, I would have preferred that the commissioner be with us to debate this amendment in depth.

We're hearing from public servants that there are some very significant issues. However, their arguments are at odds with the commissioner of competition's request, even though the Standing Committee on Agriculture and Agri-Food accepted the commissioner's suggestions.

I find myself having to reject valid arguments to decide on this. As it stands, I will support the commissioner of competition's suggestions, agree with the Standing Committee on Agriculture and Agri-Food and the work it has done, and support Mr. Davies' amendment. Nevertheless, I strongly condemn this situation.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Ste‑Marie.

I see MP Lawrence's hand has come up.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you for your excellent intervention, Gabriel. I think you've really said it all.

[Ryan Turnbull, Liberal, Whitby, ON]

What about me? What about Julie?

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Ryan, you were good too. Exactly.

Julie was fantastic. She was the best. I was saving her for last, because she was the best.

[Don Davies, NDP, Vancouver Kingsway, BC]

I introduced it.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Okay. I want to end the Liberal filibuster, so we'll continue relatively quickly.

That was quite a lengthy discussion—one that was worthy of Kevin Lamoureux—about the threshold and the remediation.

I'm not against there being a punitive element to mergers that would have to.... I understand there is some calculation, but these are going to be large, sometimes multinational corporations. Many times, they will be million-dollar corporations or corporations worth tens or hundreds of millions of dollars. These are folks who employ some very intelligent people who can calculate whether it would be substantial, or at least if it's getting pretty darn close.

If you're going to go ahead, knowing that you're going to violate merger legislation, I am completely fine with the RBCs of the world and the Loblaws of the world having to face a somewhat punitive impact of going ahead with a merger that they know is reducing competition at a time in Canada when all experts and all parties agree we need more competition.

Thanks very much. I'm glad to see the end of the Liberal filibuster.

[The Chair, Liberal, Peter Fonseca]

There is further debate.

Go ahead, Mr. Davies.

[Don Davies, NDP, Vancouver Kingsway, BC]

One quick thing just occurred to me. For those of us with a legal background, one of the primary principles of restoration in contract laws is to put the parties back in the position they would have been in but for the transgression. That's a very common application in law in many circumstances.

I just want to conclude by saying that I thought there were a lot of good points made. This is not a hill I would die on, but I do think that this amendment is really doing nothing more than that. I'm fortified by my Bloc Québécois colleague's comments. I'm fortified by the fact that the person who deals with this the most, the Competition Tribunal commissioner, is asking for it.

I think we could try this, and if it proves to be unworkable and the concerns that were raised turn out to be real, we can always revisit it in a few years, but we have a real problem in this country with concentration in a lot of industries, and I think sending a message that we want more competition is a good thing.

I'll conclude with that, and hopefully we can vote.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Davies.

I don't see any further debate. Shall NDP-12 carry?

(Amendment agreed to on division)

Now we are on to NDP-13.

It's you again, Mr. Davies. Would you like to move your amendment?

[Don Davies, NDP, Vancouver Kingsway, BC]

NDP-13 and NDP-14 amend clauses 249 and 250 to enact rebuttable presumptions for mergers consistent with those set out in the U.S. “Merger Guidelines”.

Mergers, of course, involving large players in highly concentrated markets pose a greater risk to competition than mergers involving small players in fragmented markets. I think we can all understand that moving from three to two options is worse than moving from 10 to nine, from a competition perspective.

The United States leverages this basic insight in the form of rebuttable structural presumptions for mergers. Where the U.S. agencies can prove that a merger will increase market share or concentration above certain thresholds, the merger is presumed to be anti-competitive, and the burden then shifts to the merging parties to rebut the presumption.

Parties can rebut the presumption by showing, for example, that barriers to entry in the market are low or that there are other countervailing factors that will prevent anti-competitive harm. The higher the parties are above the threshold, the stronger the evidence needed to be able to rebut the presumption, so it operates like a sliding scale.

I'll just quote from the written submission to FINA from the Competition Bureau:

While we welcome these steps, our February 2022 and March 2023 submissions called for a more definitive reform in this area. We recommend that Clauses 249-250 be amended to set out specific, rebuttable presumptions for mergers aligned with the thresholds set out in the 2023 U.S. Merger Guidelines.

This is beyond my understanding, but it says:

The U.S. Merger Guidelines set out two different structural thresholds, one based on levels and changes in concentration as measured by the Herfindahl-Hirschman Index and another based on the merged firm's market share.

In our view, adopting a structural presumption would strengthen merger review in Canada.

This is aligned with the “time-tested U.S. approach”.

I would so move.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Davies.

I have speakers.

Go ahead, Mr. Turnbull.

[Ryan Turnbull, Liberal, Whitby, ON]

Thank you, Mr. Chair.

Thanks to Mr. Davies for introducing this, although we have some concerns.

I understand that this presents a significant change to the merger review under the Competition Act.

Mr. Chhabra or Mr. Simard, could you describe what the change is? I know that Mr. Davies did that in his own words, but could you also provide us with your analysis of what that change is?

[Samir Chhabra]

Bill C-59, as drafted, obviously did not set out a statutory presumption for unlawfulness. Rather, what the bill proposes to do is to essentially repeal the bar against the tribunal issuing a merger remedy solely on the basis of evidence of concentration of market share.

The government has proposed to make a significant move from the current state of affairs, in which the tribunal cannot consider market shares as a basis for decision-making, to move towards a scenario in which, in fact, market shares can be used as an approach, which again eases the enforcement burden.

Additionally, the tribunal is expressly permitted to take into account any effect from the change in concentration of market share that the merger or proposed merger has brought about or is likely to bring about when determining the competitive effects.

Our understanding of NDP-13 is that it would further move the markers of the goalposts from a situation currently in which you cannot consider market shares to a situation in which, in fact, market shares would become a very critical consideration and would create a rebuttable presumption. In other words, it's another area among many that we've talked about today in which the burden of proof would be reversed. It would no longer be incumbent on the competition commissioner to make the case. Rather, the merging parties now would have to prove that it is not anti-competitive to move forward.

[Ryan Turnbull, Liberal, Whitby, ON]

How would that compare to the guidelines in U.S. competition policy or authority?

[Samir Chhabra]

Our read of NDP-13 is that it mirrors very faithfully the Herfindahl-Hirschman index that is used by the FTC. The difference in this case is an important one, which is that the guidelines in the United States are just that. They are guidelines. They can be refreshed and updated regularly. They were recently put to this level and in this formulation.

We don't have a great deal of time or jurisprudence to evaluate whether they've been effective in the United States context, and we don't have a sense of whether they would be particularly effective in the Canadian context at the moment either.

The big difference is that the United States' approach, while it's the same formulation, is codified in guidelines that can be adjusted, and have been adjusted quite regularly, whereas the proposal here would put it into a statute, which would make it somewhat more difficult to modify over time.

[Ryan Turnbull, Liberal, Whitby, ON]

In essence, in the United States, the regulatory authority sits with the U.S. government to change that threshold over time, whereas the NDP's proposal with NDP-13 would embed it in the law. This would make it considerably less flexible or adaptable in the future.

Is that correct?

[Samir Chhabra]

I think that's a very fair statement. It's much more malleable or open to change and updates on a regular basis by virtue of being a guideline versus being in a statute.

[Ryan Turnbull, Liberal, Whitby, ON]

In other words, to be truly comparable with the United States, it would be better for us to have the regulatory authority to be able to adapt that threshold over time.

Answer that, and then I have one more follow-up question.

[Samir Chhabra]

I think that's correct. It would be more comparable.

[Ryan Turnbull, Liberal, Whitby, ON]

Why would the threshold need to change over time? Why would that be so important?

[Samir Chhabra]

That's a great question as well.

Most nations don't have very restrictive statutory rebuttable presumptions on mergers. We're aware of Germany, which codifies 40% as the cut-off point for rebuttable presumptions on mergers.

It's really important to be able to continue to monitor the market and understand how things are evolving. There are situations, for example, where a large, dominant player might have 50%-plus market share, and two smaller competitors wish to merge to bring them just over the threshold of 30%. That would represent, in some cases, a positive for competition and a positive for consumers.

To codify it into law and then make it very challenging to modify a certain threshold could have some unintended effects on businesses, and on the economy and the markets as a whole.

[Ryan Turnbull, Liberal, Whitby, ON]

On unintended effects or consequences, can you expand further and give us some more detail? What would you anticipate?