Industry Committee on Dec. 9th, 2010

[Robert Vincent, Bloc, Shefford, QC]

That is part of the problem. We could also talk about the construction industry that has been making headlines recently. There has been collusion amongst the companies bidding on contracts.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Mr. Bilodeau, can you explain to the committee how the Competition Tribunal has been involved in addressing the specific issue Monsieur Vincent has just described?

[Richard Bilodeau]

Gasoline has always been a hot topic for the Competition Bureau, dating back to the Restrictive Trade Practices Commission in the 1980s that Mr. Vincent referred to in his opening statement. But even more recently, we monitor gasoline prices and stay abreast of developments in the industry, specifically to respond to complaints we get about price fixing in the gasoline sector and other types of alleged anti-competitive activities in the marketplace.

I think we have studied the gasoline markets six times over the years. We've talked to people in the industry and collected information. Every single time in those six major investigations we did not come to any conclusion, except that market forces were responsible for specific spikes in the price of gasoline.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Okay, and in those six examples, were those triggered by complaints or were those triggered by your own process?

[Richard Bilodeau]

I would say a combination of all those. One of them was Katrina. That's a pretty big trigger. We did look at the price spikes in relation to Katrina and we did determine that it was due to a shortage of supply resulting from the hurricane in that situation.

I would also say that we've had enforcement matters related to gasoline dating back a number of years. We've had 13 price maintenance cases that we brought before the courts. I think we won eight of them; we secured convictions in eight of them. As Monsieur Vincent alluded to, we prosecuted a gas-price-fixing cartel in Quebec. We reviewed the Suncor and Petro-Canada merger last year and we secured remedies in that, and even dating back beyond that, mergers between Texaco and Imperial Oil, and Gulf selling its assets to Petro-Canada and to others.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you.

Are there any proposed powers in Bill C-452 that you do not currently have?

[Richard Bilodeau]

We can initiate inquiries of our own volition. We can initiate inquiries of six residents, supply an affidavit alleging anti-competitive activities. We can also commence an inquiry if the Minister of Industry directs us to do so.

We also have the power right now to conduct what we consider to be market structure studies, where we can go into an industry, ask questions to study the structure of the industry, and assess whether there are barriers in that industry that exist that don't make that industry particularly competitive or less competitive than it could be.

We've done two of those recently, one into generic drugs and another into various professions in Canada. But it is correct that we do not have right now the power to initiate an inquiry without any allegations of specific wrongdoing into an industry at wide to determine whether or not there is a violation of the act. So that is correct.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

So what concerns do you have about this proposed trigger in Bill C-452?

[Richard Bilodeau]

That is one of the concerns. There are no specific triggers in Bill C-452 to dictate to us or to tell us when we should open up an inquiry, but--

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Is it too open-ended?

[Richard Bilodeau]

Well, bigger than that is that there are costs on both sides, whether there are any costs on the bureau and costs on business. You can understand that issuing formal powers, going to a court to secure a subpoena power, forces companies to spend a lot of time to respond to those requests and to also ensure that they're complying with a legal order from a court, and if they don't comply with that order, they do open themselves up to criminal sanctions. So given the seriousness of that, they hire a legal counsel and they spend a lot of time going through documents. So that definitely is a cost for business.

There's also a reputational cost. You're putting an industry under investigation without specific allegations of wrongdoing, and on the bureau, it would run the risk of distracting us from our core enforcement activities and the mandate that was given to us by Parliament in terms of diverting resources from our key enforcement matters into these broader market sector studies.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Bilodeau. That's all the time we have for that round.

Now on to Mr. Masse for seven minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair,

Thank you to the witnesses for being here. I know that Mr. Vincent sat at this table for several years and raised this issue consistently in his career in the House of Commons.

Mr. Bilodeau, I think the big difference that I see coming out of this is that this power would allow you to really study an entire industry, as opposed to a situation. Is that correct?

[Richard Bilodeau]

That is correct. We could initiate an inquiry into an entire industry without regard to any specific allegations.

[Brian Masse, NDP, Windsor West, ON]

This is where I think Mr. Vincent has a point. And I have been concerned about the oil and gas industry. We were talking about that. The refining issue is that I think if you don't have competition, it's the same thing as collusion, and when you have vertical integration there is no competition, and it should be studied on a larger, broad base.

I'd point out the fact that we need refining capacity in this country, but we've actually seen refineries closed, not just in Burlington but also in Montreal recently, and we actually saw basically an attempt to block the purchase and development of that refinery. So I see the point Mr. Vincent is making here.

It appears that your department doesn't particularly want this, so you're probably not going to use it anyway until you get a commissioner. But if we had some type of scenario that emerged, wouldn't it be good to have that in the back pocket of the commissioner, who could put that through if an emergency or some type of an issue emerged that was significant to Canadian consumers in the general public?

[Richard Bilodeau]

If the situation were to arise, there are a variety of ways we could look at it. If it were a situation where a merger was happening in the marketplace between two refiners, as we saw with Encana and Suncor and Petro-Canada, we could look at it. In that case, we reviewed it, we collected information, and when we saw that we had concerns with that merger, we negotiated a consent agreement with Suncor. They were forced by virtue of that consent agreement to divest 104 retail gasoline stations and to commit to engaging in a ten-year supplier agreement for gasoline in southern Ontario.

So when those situations arise, we're fully empowered to act. If a merger were to occur, and there was an increased concentration in a particular market in Canada, we have the powers to investigate and to seek remedies if we think those remedies are necesssary.

[Brian Masse, NDP, Windsor West, ON]

Yes, I appreciate that work. The Burlington situation was particularly interesting. You saw Petro-Canada using Esso gas, so there can be no competition there at all in their refineries.

Mr. Vincent, have you consulted with any of the consumer groups with regard to this bill? Has there been any discussion with any of those organizations? What did they have to say about it?

[Robert Vincent, Bloc, Shefford, QC]

Not necessarily. However, I have read the minutes for all of the committee meetings held on gas and inquiries into this sector. Consumers were always saying that the Competition Bureau did not meet their expectations, that they felt wronged.

If other countries in the world have investigative powers, I do not understand why Canada should not. If someone can name an organization, any one whatsoever, that does not want to have more authority, then do so. This is the only organization I know of that does not want to be given the authority so that it can do its job properly. When you offer to provide more authority to an organization, be it a charitable organization or some other type, everybody is happy. The Competition Bureau is the only exception.

[Brian Masse, NDP, Windsor West, ON]

You're making an interesting point about the FTC being able to launch its own investigation. We often hear the government argue about consistency in different industries that want harmonization with the United States, like the auto industry and others. But when it comes to regulatory powers and the protection of consumers, we don't have that reciprocity. For example, this government cannot recall vehicles; it can only suggest recalls. Those decisions are made in Washington and Tokyo and then we comply.

I think this bill is reasonable. It's one that could be exercised by the commissioner.

I don't have any further questions.

[The Chair, Conservative, David Sweet]

Mr. McTeague.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Thank you, Mr. Chair.

I would like to thank our witnesses, particularly Mr. Vincent. I am, for the most part, in agreement with what he is trying to show in his bill.

Mr. Vincent, the words you have suggested in your amendment are "grounds exist".

that grounds exist for the making of an inquiry.

Have you got a definition? Who would be responsible for this? The Competition Bureau?

[Robert Vincent, Bloc, Shefford, QC]

I did not want the Competition Bureau to be restricted to doing very limited work. If it believes that it has a case and reasonable grounds, it should be able to investigate. Earlier I gave an example of these grounds. Refineries, regardless of what company we are talking about, always set prices at the beginning of the month. Why is it that the price is always the same from one company to the next? It seems to me that this indicator constitutes sufficient grounds justifying an inquiry. The price should not be the same.

We talked about refining earlier. I am certain that this is a very worrisome situation. Shell shut down in Quebec. There are three refineries in Quebec running at 95% capacity. They are more or less running at full capacity. By shutting one of these refineries down, we will create a scarcity because it will be impossible to refine enough oil to meet the demand. So there will be restricted access to oil. The price of a litre of gas will increase at the pump, people will consume less, and life is good.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Mr. Bilodeau, at the risk of eliminating my ability to predict gas prices--because they do move in lockstep at the wholesale level across the country--Monsieur Vincent is quite correct, the wholesale price remains the same over the years. Certainly in the 17 years since I've been involved we've seen a substantial decline in the number of players. Although there have been remedies, at the end of those remedies, including the Texaco-Esso intervention you had, the refinery is ultimately decommissioned and mothballed. We've seen this across the country. It may not necessarily be for competitive reasons. Environmental restrictions may often be in place--and I'll emphasize this to my colleagues--including in the case of Shell in Quebec as well as Petro-Canada with the 15 parts per million sulphur request. Companies are not going to make these kinds of investments, and therefore we wind up with a supply problem.

In your view, would the power of investigation that Mr. Vincent proposes lead to moving from an administrative to a judicial form of inquiry, realizing of course the separation between the two since the days of the Combines Investigation Act and the old Restrictive Trade Practices Commission? Do you see this as blurring that administrative versus judicial function that once existed?

[Richard Bilodeau]

Right now the Competition Bureau is the investigator. Criminal cases are referred to the crown for prosecution and civil cases to the Competition Tribunal for a decision in the litigated matter. It is one of the aspects of Bill C-452 that is unclear. Even if we were to conduct a study, what's next in terms of that result? There are some concerns because of confidentiality that we may not be able to release anything because our inquiries are conducted in private, as subsection 10(3) indicates. And we have section 29 of our Competition Act, which dictates that the information we collect, and specifically information we collect using formal powers, is confidential. It would put a limit on that.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Mr. Bilodeau, at the end of most of your inquiries there's almost a cheering from one section that there's absolutely nothing wrong with this industry, based on a couple of things. But I distinctly recall the previous competition commissioner advocated many of the changes in Bill C-10. Actually I advocated a lot of those in Bill C-10. I'm glad they finally came out a few years later. If it is a matter of resources to do an appropriate and in-depth study of this industry--for this purpose Mr. Vincent's industry would be the gasoline industry--obviously it wouldn't be limited. We could be looking at groceries. We could be looking at any other--automotive, whatever the case may be.

I'm wondering if this simply comes down to a question of resources, to a proper and independent investigation, because often I note the bureau has relied on industry personnel itself, J. Irving and Associates being an example, often using tainted data that may very well be supplied by the industry itself. Would you not want to avail yourselves of this kind of investigative power, provided of course you are properly and monetarily financed to do these things, to do a once-and-for-all determination as to whether or not the industry is effective and meets the objectives of the Competition Act?