Agriculture Committee on Feb. 8th, 2024

[Anthony Durocher]

Bill C-56 has been very significant for us. It has brought about major changes that will help bring Canada in line with other countries as far as enforcing the law is concerned.

In our view, the Competition Act can always be strengthened in order to ensure a modern and effective regime. Bill C-59 also includes significant changes to the act. Through the government's consultation process, the bureau made over 50 recommendations to improve the act. Considerable progress has been made.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Thank you.

You said that you're happy with Bill C-56 and that Bill C-59 will be helpful. You made recommendations to the government. Can you give us your top two or three recommendations, the ones that are crucial to strengthen the act? We could include them in our report to the government.

[Anthony Durocher]

A number of recommendations that aren't covered in Bill C-59 come to mind.

I think provisions pertaining to mergers are important, which ties in with the discussion with Mr. Williams. Specifically, I'm talking about provisions to ensure that mergers don't harm competition.

I'll give you an example: the remedy standard for transactions that have an anti-competitive effect on the market. Currently, when a transaction lessens competition substantially, the remedy standard in the case law merely requires that the lessening of competition cease to be substantial. It's fine if competition is lessened, because there's no remedial requirement that competition be restored to pre-merger levels. That's one of the recommendations we provided during the consultations.

We also submitted recommendations pertaining to concentration thresholds and the importance of building concentration-related presumptions into merger reviews to ensure that the merger does not exceed a certain concentration threshold. The burden would be on companies to prove that it was not an anti-competitive merger, which is similar to the practice in the U.S.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

What's the ideal threshold in the market?

[Anthony Durocher]

It really depends on the market.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Thank you for those three tips. We will make sure to move them forward.

I'm listening to everything you're saying, and you seem to be very knowledgeable and well-intentioned. Given how the bureau is structured, however, I've always had the feeling that it is more about optics than it is about results. Things are heading in the right direction, but we aren't there yet. Unfortunately, a lot of things in government are like that. The government tries to look as though it is doing the right thing, but nothing really gets done in the end. That's just an editorial comment.

I listened closely to what you said about being careful when it comes to mergers. If I look back over the mergers that have taken place in the grocery industry, as a citizen—not even as an MP—I can't help but wonder what happened. We saw mergers in 1986, 1990, 1992 and twice in 1998. More followed in 2003, 2005, 2009, 2013, 2017, 2018 and 2019. Thanks to the transactions that took place in each of those years, the number of grocery chains in Canada went from 13 in 1986 to just three today. Luckily, we have two American chains, which brings the total to five. Even at five, we are dealing with an oligopoly. No matter what the CEOs say, the industry is an extremely powerful oligopoly.

I think it's awful that it was allowed to happen. I know the bureau had less power back then, but it existed. I'm not blaming you, personally, but I do question all these government bodies.

As I listened to the Conservative member's questions and the discussion you were having earlier, I couldn't help but get a little worked up.

Correct me if I'm wrong, but you said that you opposed the merger of Rogers and Shaw. Is that right?

[Anthony Durocher]

Yes.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

The merger still went through. Who decides? Who is to blame?

[Anthony Durocher]

The Competition Tribunal decides.

In the case of the Rogers-Shaw merger, the Competition Bureau applied to the Competition Tribunal to block the transaction. The tribunal works just like a court. It hears witnesses and considers evidence, and in the end, it decided that the transaction could go through.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

What we need to do, then, is change the laws that the tribunal interprets, because this is ridiculous. We are studying a situation that is totally unacceptable to the public at large, and the same thing is happening in another sector. You'll have to forgive me for getting worked up this morning, but the situation is really mind-boggling.

I think the three recommendations you listed earlier fit this description, but if there are any crucial changes you feel the act needs, you can send them to the committee in writing. We would certainly appreciate it.

Again, thank you very much for working so co-operatively with the committee.

[The Chair, Liberal, Kody Blois]

Thank you, Mr. Durocher and Mr. Perron.

I'll echo what Mr. Perron said. I think this committee would benefit from having some of the recommendations that ultimately didn't find their way into legislation—particularly the most pertinent. Maybe that's a submission you can make, independent of your testimony here today.

We'll go to Mr. MacGregor for six minutes, please.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Thank you very much, Mr. Chair.

Thank you, both of you, for appearing before our committee.

Ever since this committee embarked on this study at the end of 2022, there has been a flurry of activity. We have seen several pieces of legislation. We've seen your bureau act. There has been a tremendous amount of public and political interest in this issue.

After decades of far too much corporate deference from successive governments, both Liberal and Conservative, I think the pendulum is finally swinging the other way. That's a good thing for consumers.

You are from the competition promotion part of the Competition Bureau. My colleagues have outlined how three companies, in a sense, over the last number of years have swallowed up their competition. You just need to look at all of their subsidiary companies. Many of those used to be their competitors.

I'm wondering what the challenges are for you in this kind of environment to promote competition when we've had such a concentration over the years. We've all seen the direction it's taken.

How do you promote competition in the grocery sector with those realities having happened?

[Anthony Durocher]

Thank you very much for the question.

I think we promote competition relentlessly. We try to be as persuasive as we can, because we think the evidence speaks for itself. Competition is good for consumers. It lowers prices and leads to innovation. Competition is good for the economy. We have a productivity issue in this country. We firmly believe, and the evidence is clear, that competition is the key to unlocking this and stimulating economic growth.

What I would say is that my colleague Mr. Callaghan and I are in the business of promoting competition. There are a lot of positives coming out of the last year. It really feels like the pendulum is swinging, not only in terms of our law and strengthening our law, but in terms of the discourse. We're starting to see parliamentarians in particular speaking about competition and holding companies to account. It makes a difference. We're seeing this. The Globe and Mail had a really good editorial a couple of days ago. Its editorial board spoke to this shift in the culture and tone in Canada about prioritizing competition.

Our desire is for this to continue. We're going to work very hard to make sure that we continue to have these discussions in Canada, because they are very important.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

I think you're right. As a case in point, Loblaws had to climb down from its tone-deaf decision to reduce discounts from 50% to 30%. Of course, we then had the Manulife and Loblaws climbdown because of the intense scrutiny, I think, that exists at the moment.

You made mention of a couple of pieces of government legislation: Bill C-56, which has received royal assent, and Bill C-59, which is still in the works. There is another bill that received a second reading vote yesterday, which is Bill C-352 from NDP leader Jagmeet Singh. There are some similarities, but one of the interesting aspects of his bill—I know this is primarily with the Competition Tribunal—is that it would require the Competition Tribunal “to make an order dissolving a completed merger or prohibiting the merger from proceeding if the merger would result in excessive combined market share.”

I would just like to understand the Competition Bureau's understanding of that term “excessive combined market share.” How would you interpret that particular phrase in the law?

[Anthony Durocher]

We would want to give that some careful thought. If and when we appear at the INDU committee for the study of that bill, we want to be as helpful as we can with the interpretation.

Part of these issues come to something that we've advocated, which is the potential benefit of structural presumptions. This is how the U.S. jurisprudence around antitrust has evolved. It's basically the notion that past a certain increase in concentration and threshold, the onus should shift to companies to prove that they are not anti-competitive. That's certainly a discussion worth having.

There are changes in Bill C-59 that are important in that regard. We're removing a requirement that existed in section 92 so that we could not challenge mergers on the basis of market shares or thresholds. There might be a greater role to play in looking at market share and concentration in our work.

Of course, there are other factors that are always going to be relevant, such as looking at barriers to entry, effective remaining competition and the role of innovation in the marketplace. We hear there are significant concerns about concentration in the Canadian economy. We think it's important to debate these issues, especially when we look at our merger review framework and the law.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

I think grocery companies, because of their concentration, know that many Canadians are creatures of habit. They will just continue going to the same store. In a sense, they're a captive audience once they're stuck inside the store.

Just very briefly, we're doing a second round on this study because Minister Champagne has been talking a lot about his disappointment and about efforts to stabilize. This is in relation to his most recent letter at the end of January. What actions did it prompt the Competition Bureau to take when you saw the letter from Minister Champagne?

[Anthony Durocher]

You're referring to his letter from last week, on January 29. Obviously, it's a letter we took very seriously. I would say that we're an independent agency, but I think our interests are very much aligned. We want to protect and promote competition in this sector.

We truly are prioritizing our work here in a couple of respects. One is on the findings and recommendations of our market study. We continue to very actively work with policy-makers, including provincial and territorial governments, about them in the hope of enacting some of these recommendations. They will make a difference.

The other component is our enforcement role. Enforcing the law and making sure that it works in the grocery sector is really front and centre. As I mentioned, we have an active investigation in the grocery sector related to property controls or restrictive covenants. We will continue to prioritize this work.

It's a letter that we took very seriously. I think we're very much aligned in prioritizing grocery prices and competition here.

[The Chair, Liberal, Kody Blois]

Thank you, Mr. MacGregor.

We'll now turn to Mr. Barlow for five minutes.

[John Barlow, Conservative, Foothills, AB]

Thanks, Mr. Chair.

Thanks for being with us once again. It's much appreciated.

I know that you don't study the grocery code specifically, but you do mention in your report that it would be of benefit by providing more accountability. When Mr. Weston from Loblaws appeared at this committee, he said that the grocery code of conduct will cost Loblaws a billion dollars.

In any of the work that the Competition Bureau has done, have you seen any data in the grocery code that would verify that comment, that the costs would be devastating to the grocery chains?

[Anthony Durocher]

We're certainly familiar with those statements. To answer your question directly, we have not seen anything that would make the bureau concerned in that regard. I think if we thought that the code could result in significant price increases, the Competition Bureau would be concerned and we would share that concern. Right now, the truth of the matter is that we've been keeping our finger on the pulse of the code. We talk with stakeholders about it and have reviewed it carefully. We have not seen any red flags.

Our role as we see it, with respect to the code, is as a competition advocate to provide a pro-competitive perspective on its implementation, should it be implemented. Our position on the code has been that if it can lead to greater predictability, transparency and certainty for suppliers in particular about how to conduct business in this sector, that can be a good thing for consumers.

[John Barlow, Conservative, Foothills, AB]

The Minister of Innovation made the comment that he's looking at trying to attract international companies to come to Canada to add to that competition. It was interesting. In the same news article, I saw that when Target came to Canada it had a massive footprint, invested $8 billion and lasted less than three years, even though it had all the Zellers locations. How is it possible that a company like Target...? The innovation minister says we're just going to get another company in here to add competition, but it's been tried and it failed. How do we expect a small Alberta company like Freson to grow and have an impact?

What are some of the impediments you're seeing that are keeping some of these companies first from coming, and then from being able to be successful in the long term?

[Anthony Durocher]

Certainly the Target experience came up. We mention it in our report in terms of something the international grocers told us about the Canadian market. We asked them what the barriers were that were keeping them out. What are some of the reasons? Target was mentioned, but there are other factors too that are related to it.

One that I can perhaps mention, in response to your question, is restrictive covenants in property controls. That is something that can really be a major barrier to entry and expansion in the Canadian marketplace. You can't start a new grocery store if you can't get access to the land. That is something that we heard particularly from independents as being problematic. That is why one of our recommendations in the report is something that a number of other countries have done—namely, consider limiting their use or banning them altogether in the grocery sector, because they can be harmful to competition.

Of course, we also have an enforcement interest in this space as well.

[John Barlow, Conservative, Foothills, AB]

On that same theme, I don't know if you've had those conversations, but in some of the work that you do you say you're trying to promote that competition, which is critical. Do other companies look at the landscape in Canada in terms of front-of-pack labelling changes, P2 plastic bans, carbon taxes? With some of the regulatory burdens that may be there, are they seeing that there is not a clear path to success in Canada?

[Anthony Durocher]

It's a difficult question to answer, because every industry, every company's calculus, when they look at the prospects of investing and entering Canada, is different. At the bureau, we believe fundamentally in the importance of pro-competitive regulations, and we're constantly trying to provide advice to governments at all levels in that regard.

In some instances it's removing regulations; in others it's making sure that regulations are smart and promote competition. One example is open banking. That is, from our perspective, a smart and important regulation to unlock competition in financial services.

All of that is to say I think every industry is different in terms of how companies are assessing the viability of entry in the role of regulation. Our job is to try to advocate in favour of smart, pro-competitive regulation and to lower barriers to entry when we can.

[The Chair, Liberal, Kody Blois]

Thank you very much, Mr. Barlow.

Thank you very much, Mr. Durocher.

We now turn to Ms. Taylor Roy for up to five minutes.