Agriculture Committee on May 28th, 2009

[The Chair, Conservative, Larry Miller]

Requested.

[Pierre Lemieux, Conservative, Glengarry—Prescott—Russell, ON]

Exactly. So I'm trying to think of a way that we could perhaps do this so that we can determine whether we have the right material and then is it what we need translated or not, as opposed to passing the motion and then end up translating, perhaps, another big brick that might not be all that relevant.

[The Chair, Conservative, Larry Miller]

I'm going to take Mr. Easter's comment, then I'll maybe let Alex finish up on it.

Mr. Easter.

[Wayne Easter, Liberal, Malpeque, PE]

I understand the problem the parliamentary secretary alludes to, but one of our experiences with this government is that often the key documents are what we don't get. I don't expect the same thing would happen with the Competition Bureau, but our experience is that if there's any way the government can prevent us from seeing some documents, they will do so. Therefore, we pretty well have to be pretty broad in terms of what we ask for.

Therefore, I'm quite supportive of the motion, Mr. Chair. What goes around comes around, I guess. It will be costly, but the government has no one to blame but themselves for the cost because of our experience with them.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

I think regardless of what has happened or what's happening or cost and government and so on, I think the main thing here is that all I asked for was any and all studies, briefings, and analysis documents pertaining to the approval and denial of all sales, mergers, acquisitions of meat slaughter, packing, processing facilities and livestock auction facilities.

These are studies and analyses. We have a clerk who understands her job, I think, and perhaps she could then determine, once she receives a document, whether it is in fact what we need. If it is, then that could be translated, and we can do it in consultation. We're not asking for this today. We're asking for this in September, so I think if we pass the motion, it gives us the green light to get it done properly. That's all I'm trying to do.

[The Chair, Conservative, Larry Miller]

I am going to call the motion.

(Motion agreed to)

Go ahead, Mr. Atamanenko, for your seven minutes.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Thank you, gentlemen. We understand what we're facing here, so hopefully we can get some information.

Here's a question in regard to Tyson and XL Foods. Less than two months ago, you approved the sale of the Tyson beef packing plant to XL Foods. Now XL has closed the only major beef packing plant between Toronto and central Alberta—its Moose Jaw plant. The Canadian Cattlemen's Association says that the closure may be permanent. The association's research arm, CanFax, is quoted as saying that “The closure will lower prices for both fed and non-fed cattle.” The CCA's CanFax also said of the closure, “We're reducing capacity and the plants don't have to go out there and be quite as aggressive on their bids to procure cattle.”

So did the Competition Bureau anticipate this? Did it know that the Tyson-XL sale would lead to less aggressive bidding and lower cattle prices? Isn't that exactly what a Competition Bureau examination is supposed to determine? Did the Competition Bureau fail when it approved the sale?

[Adam Fanaki]

Thank you for that question. I'm going to answer certain parts of it and ask my colleagues to speak to some specifics of other aspects of it.

Obviously we are concerned about the temporary closure of the plant in Moose Jaw. We have asked for more information from XL in order to obtain an explanation. What we understand from XL and industry sources is that the corporation has temporarily ceased production there until September because cull and fed cattle supplies have recently diminished to the level where it is not possible to effectively operate the plant. That cattle shortage is unusual and is expected to abate in the coming months.

I think the best answer I can provide to you is that we are certainly aware of the issue. We are concerned about the issue, and we are taking steps to try to determine what the facts are around that. I appreciate your input into that from your own factual information.

I'm not sure if my colleagues have anything to add.

[Morgan Currie, Acting Assistant Deputy Commissioner of Competition, Mergers Branch, Competition Bureau]

When we heard about it, as Mr. Fanaki explained, we did go back to the industry as part of our continuing monitoring of the effects of that transaction. The more significant part of it to date, I can tell you, has been our look at MCOOL and our concern about what's going on with MCOOL. But when the plant closed we did go back and receive that explanation.

We understand that cull cattle is still moving south, along with fed cattle.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Are there any other comments?

I'm just concerned that there is this monitoring and it's taking place. What if you see a tendency for this less aggressive bidding and lower cattle prices? What steps are you prepared to take as the Competition Bureau?

[Adam Fanaki]

In terms of the steps that are available to us, we have a period of time following the closing of the transaction where we're able to seek a remedy in respect of any transaction that has the result of substantially lessening or preventing competition. What my colleague is referring to is that we are in a mode of continuing to look at that issue and to monitor and understand what the implications are.

Predominantly, I think what we're telling you is that we're watching to see whether or not the MCOOL has an impact on the incentives of U.S. packers to continue to purchase cattle, or an impact on their ability to continue to purchase Canadian cattle, and whether that would result in a significant depression in the price level for fed or cull cattle.

Certainly what's available to us is to continue to seek remedies in respect of the transaction for a period of time following the closing of that transaction, should our assessment reveal that there is a substantial lessening or prevention of competition.

[Alex Atamanenko, NDP, British Columbia Southern Interior, BC]

Thank you.

I'm okay.

[The Chair, Conservative, Larry Miller]

You're okay.

Mr. Hoback, for seven minutes.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Mr. Chair. I just want to let you know that I will share my time with Mr. Shipley.

Unfortunately, seven minutes isn't enough to ask all the questions I want to ask you guys. We could talk about the fertilizer industry, we could talk about the packing plants, we could talk about grocery stores. It seems like whatever we talk about, you don't have big enough fangs to tackle it properly. I'm always concerned that the person who pays is the farmer. I get really concerned when I listen to things like what Mr. Bellavance was talking about, where we're trying to get stuff into the grocery stores and the grocery stores are starting to charge for shelf space. I just wonder how in the world that's allowed to go on. Or there's the case of an independent grocery, and when they want to go shop around for a local supplier, their wholesaler comes up and says, if you buy locally we're going to penalize you and make sure you don't have supply when local supply isn't available.

What tools do you have available to address those issues? The person getting penalized here is the farmer and the independent grocer.

[Adam Fanaki]

Let me just talk for a moment again on the issue of the grocery stores. I'm not sure if there's a broader point if you're asking about “fangs”, if that was the word you used--

[Randy Hoback, Conservative, Prince Albert, SK]

I guess you're there to protect competition within the industry, and I know in the Wheat Board situation I don't have competition, and that's the way it is. But in the situation of a grocery store--and I'll just use the example of an independent grocer--he uses one wholesale supplier, and that wholesale supplier has been very blunt, and--we've had testimony in front of us to this effect--has told him that if he even thinks of using somebody else to supply similar products, they'll penalize him: the trucks won't show up on time; his volume bonus will be cut--there are many different avenues that the wholesaler will use to penalize that retailer. Why can't you get in there and do something about that?

[Adam Fanaki]

Really your question raises issues that relate to the abuse of dominance provisions of the Competition Act. Let me speak about the “fangs” for a moment. Recently, as I mentioned, Bill C-10 enacted a change to that provision to allow the tribunal to award administrative and monetary penalties of up to $10 million. That's designed to promote greater compliance with the abuse of dominance provisions of the act.

The rest of your question, though, really raises two other issues, and one of them has to do with what we call slotting fees or listing allowances or other restrictions on shelf space in grocery stores. Then the second part is what I would call fidelity rebates or exclusivity perks. Let me just talk for one minute about how the act addresses those, again in a broad context, without talking about any specific companies or specific issues. This will be in the guidelines, so if there's more explanation required, it's also laid out in there.

Where a firm or a group of firms holds a dominant position in respect of the market for a product, the guidelines state that the imposition of fees in exchange for shelf space--and the fact that shelf space is limited--means that such arrangements could have an exclusionary effect on some competitors or classes of competitors. Where a dominant firm does that, the bureau would be concerned that the payment of a slotting allowance is being used by that dominant firm in order to acquire exclusivity or to tie up enough of the available shelf space to preclude other competitors from entering or expanding in the market. That issue is described in further detail in the guidelines themselves.

Now on the issue of exclusivity--and I hate to sound like a broken record--that's something that is discussed in a fair bit of detail. What the guidelines say is that where you have these fidelity rebates, loyalty rebates, or exclusive dealing arrangements, the concern is that they may tie up the market or otherwise prevent competitors from being able to compete in the marketplace, or make it much more difficult for competitors to be able to enter into the market. In cases where those are engaged in by a dominant firm with the intent to exclude competition and with a significant anti-competitive effect, that conduct can be subject to proceedings from the tribunal.

Essentially, that's the kind of--

[Randy Hoback, Conservative, Prince Albert, SK]

So does somebody have to complain before you investigate those types of situations?

[Adam Fanaki]

Those types of situations come to us in a number of different ways. It can be through complaints. It can be from our own review of industries. It can be based on our own knowledge of that. An example would be back to the Canada Pipe case I was discussing earlier, which really dealt with an exclusivity program, if you will, and the impact of that program on the ability of competitors to be able to enter the market or to continue to participate in the markets. Those kinds of cases are being brought forward and are being addressed and can be addressed under the act where those conditions are made out.

Maybe time doesn't allow us to do it now, but I'd certainly be happy to talk to you further about what those specific conditions are.

[The Chair, Conservative, Larry Miller]

Bev, did you want a word?

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you, Chair.

I have two quick things. One, on the Better Beef and the Cargill merger, you interviewed and obtained information from feedlot owners, farmers, industry, and cattle brokers. Could you first just quickly tell me how that happens in terms of their response, their support in moving ahead in conjunction with all the other investors or stakeholders?

And second, on the XL-Lakeside transaction, you say there were some issues and that you're concerned about the MCOOL and a number of those unknowns. You put it through, and then you said at the end, “I can assure the members of this Committee that the Bureau will not hesitate to take appropriate remedial action....”

I don't know what that actually means, because once it's through, you can't disseminate it and put them back out there. You're going to give them a fine of $10 million or whatever. They make enough money to pay the fine, and then they continue to make the industry uncompetitive beyond their own best value.

Do you have any comments on those?

[Adam Fanaki]

The second question addresses what remedies are available under the merger provisions of the Competition Act. I don't want to leave you with a misimpression. The $10 million administrative monetary penalty we're talking about is in relation to abuse of dominance, not merger.

Our remedies with respect to mergers under the current act are that within one year of the closing of the transaction, we may seek a remedy from the tribunal in respect of that merger, which can include divestitures of assets, shares, and a full unwinding of the transaction, post-closing.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Back to where they were?

[Adam Fanaki]

It's post-closing. That is among the available remedies that exist under the merger provisions of the act, not abuse of dominance.

The first question is a good one, about how we gather this information and do these sorts of things. In the XL-Lakeside transaction, as we mentioned, we spoke to about 50 different industry participants. When we get a merger into our office, we generally have some knowledge about the industry, depending on whether we've seen previous transactions. Among the very first things we do is to go out to the marketplace, talk to farmers and other people in the industry, and understand what impact this transaction will have on them. We often get somewhat conflicting or differing views, depending on who you ask. We sift through that to try to understand what the true impact of this is going to be and what factual information and evidence we're receiving from the marketplace. It's very common for us in respect of any merger to go out and make these contacts with customers, suppliers, competitors, and other people who are knowledgeable in the industry to try to understand fully the potential implications of that transaction.

[The Chair, Conservative, Larry Miller]

Thank you. You are out of time.

We'll go to Mr. Valeriote for five minutes.