Industry Committee on Dec. 9th, 2010

[The Chair, Conservative, David Sweet]

As brief as possible, Mr. Bilodeau.

[Richard Bilodeau]

When we have reasons to believe, we do have ways to collect the information from a variety of sources, from the industry but also from independent parties in the marketplace.

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

Do those exist, Mr. Bilodeau, independent parties?

[Richard Bilodeau]

We have formal powers, whether it's gasoline or any other. When we have an investigation into certain allegations of wrongdoing, we can issue subpoenas to people who have relevant information. Those can be refineries, obviously, or retailers, but it can also be other participants in the marketplace.

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

Thank you.

[The Chair, Conservative, David Sweet]

Thank you very much.

Now on to Mr. Wallace for five minutes.

[Mike Wallace, Conservative, Burlington, ON]

Thank you, Mr. Chair.

I want to thank our guests for being here today.

I really don't have many questions, but I do have some comments I'd like to make.

First of all, I was part of the Texaco-Esso merger. And it wasn't a merger. They sold off their Texaco unit because of a lawsuit south of the border. I was working for Texaco and ended up working for Imperial Oil for a number of years--loved Texaco and no comment on Imperial Oil.

Let me start with Mr. Vincent. Mr. Vincent, I've sat on committee with you before. I appreciate your commitment to things. My issue is this. This is my third private member's bill in the last number of weeks, which is down to one or two clauses. One had seven clauses and eight amendments. Another one is down to one clause. This is a one-clause bill. I'm not a big fan of private members' bills. I think it highlights the issue. But this is a one-clause piece, and we're calling it legislation.

I want to know who you consulted with. Other than sending it over to the Library of Parliament to send you the legal wording, who did you meet with? Did you talk to the Competition Bureau about what you're proposing? Did you meet with individuals in the field? What I don't like about them is normally there's zero consultation. Normal bills, bills that are presented by whoever is in government, are usually a binder full of stuff, have full consultation with the public. Can you name me anyone you talked to about this before you brought it forward?

[Robert Vincent, Bloc, Shefford, QC]

If that is what you need, Mr. Wallace, that does not cause any problem to me whatsoever. I have a binder full of newspaper clippings. People have called me to talk about gas price-fixing. You asked me whether I had met with the people from the Competition Bureau, and the answer is yes. I met with them in my office. I discussed the bill with them. They told me that they did not want any more power, that they had enough and that they were able to work with what they had. I asked them the question that I have asked here in committee, namely, whether they thought there was any price-fixing in the refinery sector. They replied that they had not seen it from that angle.

How are they supposed to launch an inquiry? They are unable to do so.

[Mike Wallace, Conservative, Burlington, ON]

Monsieur Vincent, I'm happy to answer that question.

Here's how it actually worked when I worked at Texaco Canada 25 years ago. Depending on my territory, I had 28 to 30 gas stations that were my responsibility. Every retailer had binoculars. We would see what was happening on each corner with our competition. We would decide if we would match their price.

Do you know who made that call? I did, for my gas stations. They would call me—and I was with Texaco at the time—and say Imperial Oil, Esso, is at this; Shell is at this; Sunoco is at this--what do you want to do?

At 23 years of age, I made the decision on what the price was. The system was a little bit different when I went to Esso, but it was still a call-in. It was based on what others were doing.

At the opposite end, I would call my retailers and say what we're doing today is we're going to restore, what we called a restoration. We were going up 5¢ based on what the barrel had been and what the refining costs were. We would sit on it and were hopeful that our competitors would match it.

Do you know who else does that? Bread companies, tire companies, everybody does price shopping to see what the price is. Do you know what the difference is, Monsieur Vincent? The price is on the street, not on the shelf in the grocery store. It happens in every single industry. People know what people are spending on the retail side.

I applaud Mr. McTeague for being able to determine the price. It is a formula. You get the New York barrel price and you apply a formula, and it tells you approximately what the gas price is going to be the next day. It's not real rocket science.

[The Chair, Conservative, David Sweet]

Mr. McTeague.

Hang in for just a moment, Mr. Wallace. I have a suspicion about this point of order.

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

It's more of a clarification for Mr. Wallace. It doesn't come from New York, it actually comes from the rack price by the few players that are left.

[Mike Wallace, Conservative, Burlington, ON]

The rack price?

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

The rack price, the wholesale price, is established at 3:30 p.m. every day, in Mr. Wallace's area usually by his former company, Esso, and the rest simply follow. I think that's very pertinent here, Mr. Wallace.

[Mike Wallace, Conservative, Burlington, ON]

The rack price is based on the barrel price.

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

Whatever it's based on.

[The Chair, Conservative, David Sweet]

That's great.

Mr. Wallace, I'll restore your time. Go ahead, sir.

[Mike Wallace, Conservative, Burlington, ON]

Your bill is really concerned with gas prices—and we know the Competition Bureau, in the past, has found price-fixing in Quebec. We have to remember that in urban centres—I can't say for rural, but in urban centres—99% of the gas in the ground is owned by the oil companies, not by individual retailers. It's almost all agents. They're like professional retailers who don't own the product. Maybe they own the product that's on the shelf in terms of cigarettes and so on, but they don't own the product in the ground.

The gasoline is owned by the oil companies and it's their decision on the what the price is going to be.

[The Chair, Conservative, David Sweet]

Mr. Wallace, I gave you some extra time there because of the point of order.

[Mike Wallace, Conservative, Burlington, ON]

Thank you very much.

Anyway, I'm not supporting the bill because it doesn't make any difference.

[The Chair, Conservative, David Sweet]

Mr. Cardin, for five minutes

[Serge Cardin, Bloc, Sherbrooke, QC]

Thank you, Mr. Chair. Someone mentioned a clause in the bill where it says "grounds exist for the making of an inquiry".

In a statement, Mr. Bilodeau told us: "Whenever the commissioner has information that indicates that one of the enforcement provisions of the act has been or is about to be violated, regardless of the source of that information [...]." The word "information" is no longer defined in the current act. No mention is made of the type or relative importance of the information.

What do you understand by "information"?

[Richard Bilodeau]

That could really be just about anything, such as a case where someone would suggest to a competitor that they come to an agreement on the price. This competitor could call us. This would be information. We will study this situation in its context. We could therefore decide to launch a more in-depth inquiry. We do not need an official statement, signed under oath. If someone were to call us to say that his supplier, who has 90% of the market share, is forcing him to do certain things, we would study the matter under the provisions of the act.

If we determine that this is a matter that falls under the purview of the act, we would question this individual further, in order to get a better understanding of the industry and its actions. This would form the basis for the investigation. We would then talk to other merchants in this industry to determine whether or not they could corroborate the information. The inquiry would proceed. We do not just question the people who call us, we would question 5, 10, 15 or 20 people who play various roles in the market sector.

[Serge Cardin, Bloc, Sherbrooke, QC]

And once you have obtained information, what is the second step? Who decides whether or not to launch an inquiry and to go further?

[Richard Bilodeau]

During what we call a preliminary investigation, if we believe that there has been or may have been a violation of the law, in order to investigate properly, we need to use our formal powers, namely section 11 of the act, which provides that a court authorizes us to send companies a subpoena requesting information. That is one of the ways that we can proceed. This can also be done voluntarily as well. Sometimes companies, wanting to avoid getting a subpoena, provide us with the information.

Once we have all of that, we make a decision as to whether or not a section of the act has truly been violated. We launch an inquiry, we ascertain the facts as to whether or not the law really has been broken. If we believe that the answer is yes, we generally discuss the matter with the party that has potentially broken the law to find out whether or not the situation can be resolved. If we are unable to resolve the problem, our final option, in civil matters, is to turn to the Competition Tribunal, or, if it involves a criminal matter, we refer the file to the Attorney General who then decides whether or not to prosecute the company or companies.

[Serge Cardin, Bloc, Sherbrooke, QC]

Mr. Vincent, as far as the grounds warranting an inquiry are concerned, how do you see things unfolding, compared to what Mr. Bilodeau has just described for us, with respect to the process that follows the identification of grounds...

Let's suppose that one fine morning, somebody shows up at the commissioner's office to report that something is going on. This individual may come from the Eastern Townships, because that is where the collusion has been occurring. We clearly saw that municipalities were involved and that there was also significant price differences in the rural regions and unexplained sizeable prices differences compared to other regions, because there were no refineries there.

Let's say that this person noted certain situations and started asking himself some questions. She could have gone to meet with the commissioner to explain the whole situation to him. What would your bill enable us to do immediately compared to the process described by Mr. Bilodeau?