Industry Committee on Dec. 14th, 2010

[Serge Cardin, Bloc, Sherbrooke, QC]

Merci.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Janigan.

Merci, monsieur Cardin.

Now on to Mr. Van Kesteren for seven minutes.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you, Mr. Chair.

Thank you, witnesses, for appearing before us again.

My friend and colleague, Mr. McTeague, offered me a formula a few years ago. I keep it in the back of my book. That reminds me, I haven't transferred it to this book yet, but I keep it there. It's a formula that explains the cost of fuel. It's quite clever, and it makes sense time and time again if you want to know why fuel is charged at a certain amount. You just follow this simple formula and you come up with the end results. I keep it there because inevitably I'm going to run into somebody who tells me again that there is a conspiracy going on and prices of fuel are the result of a vast network of clever schemes by oil companies.

I don't want to belittle that because if that were the case we'd certainly need to do it. But we've had so many inquiries into this. And in particular I have a friend who...every three months we get together and he tells me again. So I explain the situation and I settle him down. Inevitably, three months later I have to have the same conversation. I've quit the conversation now because this has become an urban legend, I think. It's kind of like J.F.K. I don't think there are too many people in the United States who believe that Mr. Oswald really shot J.F.K. It's that smoking gun. But we come up with this time and time again.

I say that too because really this bill is about oil companies. This bill is about the fact that there's this perception that we're being cheated at the pumps. If this would result in proving that, I'd be the first one to stand up in front...but I've just seen so many cases tried and we've gone through this so many times that I guess I'm a skeptic as to whether or not this is the solution.

Mr. Janigan, I think we've asked this question, or it's been stated: has this bill been tried in other countries? Are there other countries that have used this type of legislation?

[Michael Janigan]

Yes. Actually, when the competition commissioner presented her endorsement of the market reference study back in 2005, it presented a number of different examples in the accompanying document, both with relation to Australia, the United Kingdom, the European Commission, and—

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Have they uncovered any schemes by the oil companies as a result of them?

[Michael Janigan]

I have to say I'm not here as an advocate of investigating the oil companies. I understand your position on this. We're not an organization that has delved deeply into that issue, and I don't want to disparage positions on it, but I don't approach this as an opportunity for an inquiry into the oil companies.

But yes, as a matter of fact, when Deputy Commissioner Taylor attended before the INDU committee, he indicated in his testimony:

Yes, I'm familiar with a number of the actual studies that have been undertaken.

In the U.K. a few years ago, the price for cars in the U.K. was considerably higher than it was on the continent, and there was concern about that price differential, given that they're in a common market. They analyzed that particular trend. They confirmed the trend and they looked to the possible reasons why, and they felt it was generally a systemic low level of competition among dealerships. So they took action to actually allow dealers to carry more than one line of cars. With that activity, prices for cars came back in line with the European level within about three years.

They did a similar thing with the breweries and the vertical integration between the breweries that owned all the pubs in England, and they did take action. They again observed a problem. Whether it led to lower prices for beer, I don't know. I can tell you there is action taken. These studies aren't just filed on a shelf to collect dust.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

I suppose if this could result in lower prices for beer we might get re-elected.

Ms. Rodal, we need to ask the question why or why not. Is this really a bad thing? What kind of affect would C-452 have on the industry as far as cost? Mr. Janigan aptly mentioned that other industries would be affected. What kind of negative affect would it have on other companies?

[Shuli Rodal]

The first thing to say is that if a power exists there will be an expectation it will be used. The CBA and I thought about what the outcomes of an inquiry can be. We cannot come up with an outcome that puts the Commissioner of Competition in a better position to do something than having properly thought about a market, obtained information from market participants, and, if the circumstances warranted it, proceeding with an inquiry on a targeted basis.

The costs need to be measured relative to the benefits of undertaking an inquiry, and certainly the costs would be very significant. Resources would be redirected. There are limited resources at the bureau--I think they'll be the first ones to tell you that--and to redirect resources to a massive market-wide inquiry that would have to be comprehensive in order to be fair, in order to reach an outcome that really can have no positive effect, is a cost that is not outweighed by the benefits.

On the other hand, allowing the commissioner to focus on its role as an enforcer, to take action where it's warranted in the market, where the protections in the act have been well contemplated, where market participants will know in advance they are the target of an inquiry and will take appropriate action to protect themselves, that's worth it. To go down this road only sets us up for the bureau being pressured to undertake a market study at tremendous costs to numerous market participants--and all market participants would have to be included--who then fear the consequences of not fully complying with a court order, which is the only way to compel production of information.

I can tell you if you go into a company and speak to employees who don't deal with lawyers every day and you say you need every document that uses the word X or Y, they're afraid of the consequences of not fully complying. It's a huge imposition on business, in terms of retaining lawyers but also lost productivity of people searching their files. And for what? What will be the outcome? Will there really be the benefit that is hoped for? Our concern is that there won't be, and that the costs will definitely outweigh the benefits.

[The Chair, Conservative, David Sweet]

Thank you, Ms. Rodal.

Thank you, Mr. Van Kesteren.

Now we're going to Mr. Thibeault, pour sept minutes.

[Glenn Thibeault, NDP, Sudbury, ON]

Thank you, Mr. Chair.

Thank you, witnesses, for coming here today.

I'll start with you, Mr. Janigan. There's been a lot of discussion today over study and inquiry. I have a couple of questions I'm compiling into one here. I'd like to hear what your thoughts are on getting studies in competition versus an inquiry. Does one have more teeth than the other? Just from the reading I've been doing on this bill, it seems that this bill tries to look at things from a proactive side rather than a reactive side. Rather than waiting for something to become a problem, does it give the commissioner the opportunity to--I wouldn't say the fishing expedition that was used earlier--have the tools necessary to do the job?

[Michael Janigan]

I think it does. I don't wish to diminish the importance of the development of regulations under the act in relation to this section to provide the kinds of procedural protections, the procedure for gathering evidence, the kind of transparency and certainty that's going to be required for this provision to work. I haven't done any advanced work on those provisions, but I think they're required.

Yes, I think it does present a very proactive view of the competition. As I said, the two views are basically the competition commissioner as cop or the competition commissioner as being generally responsible for the state of competition in Canada and acting as an advocate and promoter, and someone who can point out where policy changes need to be made. I think that's a tremendously important role.

I think the first role is important in relation to the development of competition law, in particular on hard cartel offences and things of that nature. They're significant, but they're not the only thing. I have some confidence that the competition commissioner would be able to develop an appropriate protocol, both in terms of the regulations and in the way this act is enforced, to ensure that these studies are undertaken with a view to advancing the interests of competition.

I think it's a mistake to try to look at this as another way to dig up evidence to charge people in the market. That might be one result, but that's not the intent of the studies. The studies are effectively to give you a window on the industry to see what has to be done. These changes may not be with business; they may well be with government. They may well be with other things that have to be done. We're in the 21st century now. We can't take an approach that the competition commissioner is like a cop going out and busting a three-card monte game on the corner. It's more than that now. If we get it wrong, the price will be paid in the economy as a whole, not simply in relation to individual business.

[Glenn Thibeault, NDP, Sudbury, ON]

I'd like to offer you the opportunity to respond, Ms. Rodal.

[Shuli Rodal]

The role of the commissioner as an advocate for competition is important, but I think it's important to recognize as well that we have decided in Canada that the Competition Bureau is really primarily an enforcement agency. For example, we would have had, at a certain point, the choice of looking at competition law in Canada as a way of protecting low prices for consumers, but that's not what we've said. We have said that under the Competition Act there's absolutely nothing wrong with attaining market power through having a better product or innovation. And if it puts you in a position of being able to charge higher prices than might otherwise exist, there's nothing wrong with that, as long as you have not abused your dominant position.

So we have decided in Canada that the Competition Bureau and the Commissioner of Competition protect consumers and competitors and competition from behaviour in the market that is anti-competitive. We do not regulate the market in Canada to keep prices low. That is not the role of the Competition Bureau. So when we think of the Commissioner of Competition as being an advocate for competition, it has to be with our having in mind that the enforcement powers of the Competition Bureau are not part of that advocacy role. The enforcement powers of the Competition Bureau are directed towards preventing and dealing with anti-competitive behaviour in the market.

[Glenn Thibeault, NDP, Sudbury, ON]

So if we're looking at what the changes would be to paragraph 10(1)(b), it talks about grounds existing for making an inquiry into an entire industry sector. When I read that, I don't know if that necessarily means that all of a sudden we have these sweeping powers that we're going to investigate everything; there have to be grounds existing.

Mr. Janigan, and then Ms. Rodal--if we have the time, if I can wrap up my question quickly--is this something that...? We've been hearing that this is the negative side of it, that you could be open anywhere. But “grounds exist”, it seems to me, sets some parameters.

[Michael Janigan]

I think it does. As well, I would think you would want to develop that in a more comprehensive fashion under the regulations, similar to the way a number of different items are developed, including abuse of dominance, the merger enforcement guidelines. In using that section we would presumably use it in a way that would best achieve the goal of attempting to create competitive markets.

While yes, the enforcement powers are directed primarily to achieving competition in the market, the identification of problems in the market is an important role that the competition commissioner has. For example, with respect to markets such as airlines or markets where you have essential facilities that have to be used by competitors, it would be extremely useful for the competition commissioner to have a market study that shows where the bottlenecks are, what's needed to bring competition to the industry, and what's needed to promote competition as a whole to bring better prices and choices to Canadians.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Janigan.

That uses up the time, Mr. Thibeault.

Now on to Madam Coady for five minutes.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

Thank you very much.

First of all, thank you for taking the time from your busy schedules to be here today and for the role you play in a good public discourse about public policy and law. We certainly do appreciate that.

I'm going to ask three questions up front, primarily to the Canadian Bar Association. As you know, I only have five minutes, and I'd like for you to wrap them all up at the end.

First of all, in the letter to us from the Canadian Bar Association, you talk about Bill C-452 proposals to amend subsection 10(1) of the Competition Act to mandate the Commissioner of Competition to cause an inquiry to be made whenever the commissioner has reason to believe that grounds exist for making an inquiry of an entire industry sector.

We had Mr. Bilodeau before us last week. He's the acting assistant deputy commissioner of the Competition Bureau—that's quite a title—and he says that in effect the commissioner now has access through the legislation to new and powerful provisions that clearly strike at the heart of this legislative matter. As you indicated a few moments ago, if the power exists, then the expectation is that it will be used.

My first question speaks to this issue. If the new provisions that were given to the commissioner eight or nine months ago in effect give them this power, why are you concerned that clarity or surety around those powers is a detriment? That's the first question.

The second question goes to jurisdiction. The committee has been told that jurisdictions like the United States, the United Kingdom, Australia, and the European Union all have similar provisions. Yet in Canada there's a concern—and you're expressing it quite clearly—around this.

Could you talk about why it is in Canada that we would be concerned about having this when other jurisdictions, partners of ours in global trade, would have the provisions that are being proposed in this bill?

The third question goes to what I'm going to call frivolous or vexatious types of investigations. You're saying it might be costly to do the investigations. Are there safeguards to ensure any investigation that's done is required? If we do move forward with this type of provision, based on the fact that the commissioner already has these provisions and that other jurisdictions have them, is there anything you could suggest to ensure there would not be any frivolous actions taken?

I'll leave those three questions to you to answer. I'd appreciate it.

[The Chair, Conservative, David Sweet]

Do what you can within two and a half minutes.

[Shuli Rodal]

Sure. First, on the new powers of the commissioner, I may have misunderstood, but I believe the representatives of the Competition Bureau yesterday were referring to the greater clarity that now exists under the criminal conspiracy provision. First of all, the language is very clear about the conduct that is a criminal offence; and secondly, the requirement that there be an impact on the market in order for there to be a successful prosecution has been eliminated. So automatically illegal agreements are anti-competitive, criminal in nature, and as soon as the agreement is established, that's the end of the story, the parties are guilty.

I think the reference was that where there may have been more difficulty to address the types of issues being alluded to, perhaps in the oil industry...or that is maybe the underlying reason there's a desire to do further inquiry into the market, to find out if there are illegal agreements to restrain pricing. The point is, to the extent that anything like that would exist, it is now much easier for the Competition Bureau to encourage the prosecution of those offences because they're much easier to prove.

Secondly, with respect to other jurisdictions, it's true that other jurisdictions do have—through their competition authorities, in some cases—the ability to undertake market research inquiries. But in Canada I think we need to recognize that outside of the Competition Act there is the Inquiries Act, and there is the International Trade Tribunal that can undertake inquiries.

More importantly, I think we need to think about Canada as being somewhat unique. We have taken a very clear position in the Competition Act on what we think are the enforcement rights and enforcement role of the Commissioner of Competition.

We also have a somewhat unique country. We have a vast geography, with a relatively low density of population. Because of that, we don't necessarily have the same level of competition as perhaps the United States, which is much more densely populated. In some cases we need to tolerate higher concentrations within certain industries because we can't support as many competitors in certain industries. So I think we need to be a bit more cautious in thinking about looking at pricing in the market or the number of competitors in the market.

[The Chair, Conservative, David Sweet]

Madam Rodal, I'm going to have to ask you to provide your third answer in some other portion of questioning. You did a great job trying to race through that. That was very good.

Now we're on to Mr. Lake for five minutes.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Thank you, Mr. Chair,

I'm just taking a look at section 10 in the actual Competition Act. It says under the heading “Inquiry by Commissioner”, “The Commissioner shall (a) on application made under section 9”, and it gives paragraphs (b) and (c). It gives three different areas where the commissioner can “cause an inquiry to be made into all such matters as the Commissioner considers necessary to inquire into with the view of determining the facts”.

Paragraph 10(1)(a) is an “application made under section 9”, which refers to any six persons resident in Canada who have a concern.

The concerns are similar to paragraph 10(1)(b), which is what we're changing: “whenever the Commissioner has reason to believe that (i) a person has contravened an order made pursuant to section 32, 33 or 34, or Part VII.1 or Part VIII”.

As I look at that, part VII.1 talks about deceptive marketing practices. Part VIII talks about matters reviewable by the tribunal and refers to restrictive trade practices, refusal to deal, tied selling, abuse of dominant position, and so on. That's number one.

Subparagraph 10(1)(b)(ii) says: “grounds exist for the making of an order under Part VII.1 or Part VIII”.

Subparagraph 10(1)(b)(iii) says: “an offence under Part VI or VII has been or is about to be committed, or”.

Now we're adding this fourth one. This is what strikes me as kind of odd. The fourth one, this new one, is very different from the others. The others seem to actually refer to something, some criteria or some condition, that has to exist for the commissioner to make that inquiry. I'll quote: “Grounds exist for the making of an inquiry into an entire industry sector”.

One of the things that strikes me is that the grounds are not actually defined here. In subparagraph 10(1)(b)(ii), “grounds exist for the making of an order under Part VII.1 or Part VIII”. There is a definition of those grounds. It tells you what grounds are.

What are the grounds here? I don't understand when I'm looking at this what the grounds would actually even refer to.

[Michael Janigan]

Of course, I didn't draft the proposed subparagraph, but I'll speak to it in terms of what in fact may provide the appropriate remedy for circumstances associated with the lack of specificity as to the grounds.

I would suggest that this would be a matter that might be dealt with by way of section 18 regulations. They would be set out, in terms of guidelines, in a way similar to abuse of dominance guidelines and merger enforcement guidelines--guidelines made under the act--that provide the terms and circumstances by which the authorities could be exercised.

It provides as well some appropriate procedures with respect to the gathering of information and the use of that information in further matters. This requires that extensive regulations be put into effect. Presumably, with respect to that section, you would wish to deal with the guidelines when such grounds exist.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Is an amendment needed here? Right now it seems pretty open-ended. There is no reference to regulations.

[Michael Janigan]

Effectively what's occurring here are the inquiries under section 10, but they take place with respect to the powers set out between sections 11 and 19, I believe.

The regulations section, which is under section 24, provides that the “Governor in Council may make regulations regulating the practice and procedure in respect of applications, proceedings and orders under sections 11 to 19”.

Effectively, you would want to use those sections to clarify how the powers for inquiries are going to be exercised.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

There might be some amendment needed.

Mr. Thibeault said he does not know what it means. I agree with Mr. Thibeault. I don't know what this means, and it's problematic for me.

Ms. Coady talked about safeguards. Are there any safeguards to ensure against frivolous investigations? It seems to me that this is the way the law is drafted as it is. The law, as drafted, provides safeguards. What this does is remove them.