Debates of Oct. 24th, 2001
House of Commons Hansard #101 of the 37th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was competition.
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The Acting Speaker (Mr. Bélair)
The House will now proceed to the consideration of Private Members' Business as listed on today's order paper.
Private Members' Business
October 24th, 2001 / 5:10 p.m.
Dan McTeague Pickering—Ajax—Uxbridge, ON
moved that Bill C-248, an act to amend the Competition Act, be read the second time and referred to a committee.
Mr. Speaker, I would like to thank all of the members of the House as well as those who, like myself, sat on the Sub-Committee on Private Members' Business of the Standing Committee on Procedure and House Affairs.
I would also like to take this opportunity to say that this is not the first time, that we have been given the consent of the House to discuss the issue of competition. It has happened on numerous occasions.
I am pleased to be here today to discuss Bill C-248, which in the previous parliament was known as Bill C-509. The bill deals with a substantive change to section 96 of the Competition Act. It is part and parcel of the efficiencies defence. There is the following exception in the Competition Act:
The Tribunal shall not make an order under section 92 if it finds that the merger or proposed merger in respect of which the application is made has brought about or is likely to bring about gains in efficiency that will be greater than, and will offset, the effects of any prevention or lessening of competition that will result or is likely to result from the merger or proposed merger and that the gains in efficiency would not likely be attained if the order were made.
These are the factors to be considered. On July 20, 1998, Superior Propane announced that it was about to formalize an agreement with ICG from Petro-Canada. Some three weeks later the competition commissioner commenced the inquiry into the transaction as is required under law for all merger reviews.
On December 1, 1998, the commissioner applied to the Competition Tribunal for an interim order to prevent the completion of the transaction. The tribunal rejected the application and the parties completed the transaction.
The commissioner filed to obtain a divestiture order from the tribunal under section 92 of the Competition Act that would have Superior divest itself of ICG. On December 11 the tribunal issued a hold separate order pending its decision.
In the period of time from December 11, 1998 to August 30, 2000 the tribunal announced in a rather interesting landmark precedent setting decision based on section 96 that it was dismissing the application brought forward by the competition commissioner under section 92.
It found that the merger was likely to prevent competition in Atlantic Canada and lessen competition substantially in many local markets and for national account customers. The majority of the tribunal dismissed the application brought by the competition commissioner pursuant to section 92 on the grounds that the respondents had been successful in demonstrating their efficiency defence in accordance with section 96.
The commissioner appealed that finding. I introduced the first bill on October 17. On April 4, 2001, on the request of the competition commissioner the Federal Court of Appeal allowed an appeal.
In the decision on that date the court ruled that the tribunal incorrectly applied the efficiency defence in section 96 of the Competition Act. It found that according to the tribunal the fact that the merged entity of Superior and ICG would eliminate all consumer choice and remove all competition in the propane supply market, as it is likely to do in Atlantic Canada, is not an effect that legally can be weighed under section 96 against the inefficiency gains in the merger.
Justice Evans looked at the decision and stated that such a conclusion seemed so at odds with the stated purpose of the act, namely to maintain and encourage competition and the statutory objectives to be achieved thereby, as to cast serious doubt on the correctness of the tribunal's interpretation.
The federal court effectively ordered that the matter be remitted to the tribunal for determination and in effect to rehear the case.
In his case the competition commissioner stated that the court agreed the efficiency defence was not intended to sanction mergers that result in a monopoly or a near monopoly without taking the impact on consumers into consideration. The issue was then appealed by Superior to the Supreme Court of Canada which literally refused to hear Superior's appeal.
We have an example of where private members' business and initiatives by the House have anticipated a concern in many respects. If we think for a moment about the potential impact this had on the farming community in western Canada, suppliers, producers and consumers in Atlantic Canada, and ultimately its devastating impact on the competitive process, the decision by members of parliament to correctly put this issue before the House of Commons and deem it votable was the correct one.
Last year I was responsible for assisting a number of Canadians through a very difficult winter when energy prices were soaring, much as a result of arbitraging the market.
We saw natural gas prices, home heating fuel, propane and the like all rising rather dramatically and suddenly, causing the government to try to take correct appropriate action to help stave off what would have otherwise been a perilous situation for many Canadians. I compliment the government for having taken that position. I believe it was the correct one at the time.
I also believe the House has a responsibility to ensure that our Competition Act is interpreted in such a way that the precedent set by the Competition Tribunal is clearly set aside by the House of Commons.
There may be members of parliament who would dare to suggest that this is rule made law and that somehow the supreme court or the federal court has made decisions. I assure the House that they have not come to any decision. We must ensure with respect to Bill C-248, if we are to qualify the efficiencies defence in the Competition Act, that those efficiencies and gains which occur when two entities merge together to create a substantial and possibly dangerous monopoly are found to be transferred either to customers or to consumers, not simply to individuals who happen to see a good deal, take over their competitor, shut their operations down and consolidate their monopoly.
This is the shortcoming of the way in which the act is written. The act also suggests incorrectly that it is possible to use a hypothetical economic efficiencies defence argument. Again there is no clarification. Parliament is being called upon to ensure that the clarification coming from those who understand the Competition Act as I do, because I have interpreted and worked in many facets of that act, also gives them an opportunity to have a say in terms of how the deliberation occurs.
I well understand there will be those who will make the argument that it is before the courts. I can assure my hon. colleagues it is not sub judice. It is not a criminal matter. This is before the Competition Tribunal, a quasi-judicial body which will have to hear it again. I suspect the decision may very well come ultimately some time in the month of January.
That does not preclude parliament because it ultimately wrote the Competition Act with the help of certain very powerful individuals in 1996.
I am interested in this issue because I also find that even our friends at the OECD make it very clear to many of us who have looked at the issue time and time again that using gains in efficiency is simply not acceptable.
As I try to find the appropriate document, it is very clear to me that other international bodies have already spoken very eloquently to the need to ensure that a merger request which results in and is designed to create an efficiency situation for a particular entity is not used in a way that does not see the value being returned to customers or consumers or, more important, to offend the competitive process.
OECD roundtable No. 4 competition policy on efficiency claims and mergers and other horizontal agreements states very clearly:
--there is a clear limit for the efficiency defence: the elimination of competition. Therefore, even if the parties can prove that an agreement would bring about high efficiency gains, these efficiencies are not able to justify an elimination of competition.
It says, in terms of the European act:
--85(3) provides for a kind of “sliding scale”: the more competition is restricted by means of co-operative agreement the higher the efficiency gains have to be in order to qualify for an exemption--up to the limit where effective competition is eliminated--
Given the OECD's position, given what we experienced last winter in a very cold winter for many, and given what the House has seen with respect to the right decision that was taken by a competition commissioner, I do not think we have much time for silly arguments that it should not be considered because we want to wait for the tribunal to ultimately make a decision.
It is not that we in the House want to rush judicial or quasi-judicial interpretations. The interpretation of the federal court not to hear this and the decision taken by the commission bears out the validity. This is a clear sign that members of the House should take inventory of what is currently before us and be able to point the Competition Act in a direction to ensure that above all it meets the goals and expectations of the Competition Act.
I want to point out to members of parliament that the federal court did point out the purpose and interpretation. Article 1.1 of the Competition Act states:
The purpose of this Act is to maintain and encourage competition in Canada in order to promote the efficiency and adaptability of the Canadian economy, in order to expand opportunities for Canadian participation in world markets while at the same time recognizing the role of foreign competition in Canada, in order to ensure that small and medium-sized enterprises have an equitable opportunity to participate in the Canadian economy and in order to provide consumers with competitive prices and product choices.
A lot of us in the House have this great fear that if a large corporation says it must be bad, and it has a few jobs in the riding, we should ultimately ignore the plight of many of our small and medium sized enterprises and, more important, the very people who elect us, the consumers of this country.
We have every bit of evidence to demonstrate that there are shortcomings in the Competition Act. I will not get into the details as to who wrote the act. No doubt a select group of individuals may have had something to do with it. However I assure members that when it comes to the interpretation of this important regulatory body, which is there to protect a market oriented process, it is the plaything of a select group of individuals who, in their infinite wisdom and reason, may have another interest, and that is of course of their clients. In the House of Commons, we have a greater obligation to the broad public interests in this country.
That is why I say that the provisions in the bill make good sense. I urge other members to support them, not just to improve competition but also to assure our constituents that this parliament is alive, is capable of being effective and can easily react to problems peculiar to the times we live in.
That is why I am here, not just to debate the issue of competition. Obviously there are other members sitting on various committees. Generally speaking they recognize the need to supply our country and to anchor this bill in reality.
It is important to infuse a reality check in what we are doing here. I commend members of parliament who have worked with me on previous endeavours and initiatives such as Bill C-235 in the last parliament.
Mr. Speaker, you were part of the Liberal committee on gasoline pricing many years ago. On a very cold day in January you invited us to talk about the plight of individuals who could not get supplies or consumers who were having difficulties. I recall that it was in Timmins where people were forced to pay 10 cents or 15 cents more than people were in southern Ontario. Everybody knew that driving a truckful of gasoline from the Toronto refineries all the way up to Timmins could cost no more than a cent or two a litre more. Yet we were seeing various discrepancies of 10 cents to 15 cents and even more in remote areas.
That is only one segment. The media will also look at gasoline. I find it funny when my little four year old son, Bradley, calls me the gas man. I am not sure what he means by that. However, I assure hon. members that the concerns this side of the House has raised, and I see that members on the other side of the House are starting to raise similar concerns with respect to the Competition Act and gasoline, apply to a general pattern of concentration in Canada which is in need of review.
We know that concentration may be, of necessity, an inevitability of globalization. We have the authority and the ability to ensure that at the end of the process its effects can be minimized if consumer choice is removed or, worse, if consumers are forced to pay more for a product which in many respects is one that comes from under the ground or is harnessed by other means.
A nation that is abundant in so many resources finds itself in a bit of a contradiction where it may pay more for its products or have less choice than our competitors south of the border.
I do not want to go on at great length about that. The reason that parliament should now address the efficiency defence is important because a dangerous precedent has been set.
The tribunal said that it was okay to have a harmful, anti-competitive merger as long as one could prove that one could have some kind of efficiency gain. It did not say to whom that efficiency gain had to go, but presumably corporations are not stupid. They will put it in their own pocket. That will benefit those who are interested from a shareholder's perspective.
However that flies in the face of the intention of parliament in 1986. The parliament of today must ensure the enhancement of the competitive process whereby consumers and business can enjoy the fruits and labour of a competitive process. It is for these reasons that parliament has an obligation to ensure that it provides timely and effective responses to individuals who may from time to time find themselves without a voice.
I find it interesting and passing strange that in terms of this bill and other bills that come before the House on the issue of competition, and we see this in committees, the only individuals who tend to speak out against these things are people who are there on behalf of very large entities. The irony is that at many of the meetings I attend off Hill and on Hill as a guest speaker, an intervener or facilitator, I always see the same people.
One of the most important pieces of legislation including amendments and considerations tends to be decided by a handful of individuals. The same individuals probably have a lot to do with being able to attend various international competition conferences around the world. It is interesting because they tend to knock the lack of timing, effectiveness and efficiency of our competition bureau.
I would probably have some cause with that except I see it from their perspective. They are not getting their mergers quickly enough. They think that the process of enforcement in the writing of the guidelines should be toward their own ends.
I think that is a very dangerous thing for us to observe. In papers like the National Post and the Financial Post we always see articles written about how international bodies, which tend to be our own competition lawyers who work for some of the largest corporations in this country, are out slagging the bureau. They cannot do it locally, they have to do it internationally and hide behind that sort of shield.
Let us expose this for what it is. Let us begin to take back a piece of legislation that is important to all of us. It is a piece of legislation that is critical to the good functioning of our economy. We need to stand and become relevant as members of parliament to ensure that a handful of individuals is not going to be the gatekeeper of what is in that act. If they can get away with it in the Competition Act, I am sure there are possibilities for them to do it elsewhere in other pieces of legislation.
Just to qualify, that is not to suggest there is not an important reflection and review of the Competition Act. Again, it is very strange that I always see the same individuals coming forward. Members of parliament more often than not receive criticism from small business or consumers who are left with no choice and wonder why there is no effective enforcement of our act, real or perceived. We as members of parliament are their best shot. It is for that reason members of parliament have to take the time to write legislation that makes sense, that is reviewed within the context of the decisions that are made, but also responds effectively to the needs of Canadians.
This bill is the third such bill that has been made votable on the Competition Act which I have been able to bring forward. With the private right of access I am proposing with respect to Bill C-23, I believe we are now making headway. It is important to recognize that I applaud the government for allowing members to do this, but let this not stop in the House. Let us ensure that the Senate also understands its validity and impact on Canadians.
I believe we will have gone a long way not only to address the shortcomings that are clear and abundantly obvious to anyone, including our government and opposition, with respect to the Competition Act, but we will have done something to improve legislation generally in Canada and earn our own pay.
Private Members' Business
Gurmant Grewal Surrey Central, BC
Mr. Speaker, I am pleased to speak to Bill C-248, an act to amend the Competition Act with respect to the efficiency defence for merger proposals.
The official opposition's chief critic for industry, the hon. member for Peace River, unfortunately cannot speak to this bill due to some urgency, but he has done quite a bit of work on this issue and is very interested in it.
This bill was introduced in the last session of parliament but as the member said, it died on the order paper.
Bill C-248 is a deceptively short bill with only one clause and two subclauses. However there is more to the bill than meets the eye.
The purpose of the private member's bill seems to be that the enactment amends the Competition Act to clarify the competition tribunal's power to make or not make an order in the case of a merger when gains in efficiency are expected or when the merger would create or strengthen a dominant market position.
Section 96 of the Competition Act specifies that a merger may be approved by the competition tribunal even if it substantially lessens or is likely to prevent competition within a specific market, trade or industry as long as those advocating the merger can prove that such a move would bring about or would likely bring about gains in efficiency that would be greater than and would offset the effects of any prevention or lessening of competition.
I appreciate the intent of the hon. member in bringing forward this bill but when we look at the details, we find that this is mere tinkering.
Section 96 further instructs the tribunal to consider whether such gains in efficiency will result in a significant increase in the real value of exports or a significant substitution of domestic products for imported products. The Competition Act is clear that a redistribution of income between two or more persons or groups cannot be considered an efficiency. In other words, if a proposed merger will benefit one person or group to the equal detriment of others, that cannot be considered an efficiency.
Bill C-248 would create two new subsections for section 96, subsections (4) and (5), to further instruct the tribunal on the consideration of efficiencies in a merger case. I would argue that these instructions would muddy the waters and quite possibly stand merger review on its head.
The motivation behind Bill C-248 was the competition tribunal's decision to allow the merger of Superior Propane and ICG Propane against the wishes of the competition commissioner. I agree with the commissioner that the merger probably should not have gone ahead. I was pleased to hear that the competition bureau won its appeal at the federal court and that this case will be heard again by the tribunal. I would like to see the process run its course.
The hon. member from Pickering has crafted a private member's bill that he thinks will fix the problem. I commend his initiative and efforts. However, I have trouble with reactionary law or amendments tinkering with existing laws that are designed to resolve a specific situation. This is not the way to make coherent legislation that will stand the test of time.
Currently when considering gains in efficiency, the tribunal does not discriminate between groups as long as one group does not benefit at the expense of another group, which is considered merely a redistribution of income.
Overall efficiency gains are the main issue. The distribution is not important. However proposed subsection (4) would require that the majority of benefits derived from gains in efficiency will be passed on to customers and consumers. The amendment proposed by the member from Pickering would require the tribunal to favour consumer interests over producer interests. This is a serious change in tone and direction. I am not convinced it would benefit the economy as a whole.
Subsection (5) would disallow the efficiency defence entirely should the merger result in the creation or even the strengthening of a dominant market position. This amendment would require the tribunal to discriminate against dominant players. In a country with a domestic market as small as Canada's, it may not make economic sense in a number of sectors.
Unlike the member from Pickering, I do not believe that dominant players in the market automatically are abusing their dominant market positions. This is presuming guilt before innocence. I also do not see much merit in enshrining outright discrimination against dominant players in the Competition Act. It is not fair. There is nothing inherently wrong with a dominant player in a market but subsection (5) could have the effect of preventing dominant players from emerging even if that is the best thing for the market.
I would argue that this might not be a good strategy in a global economy. We should not allow the tribunal's hands to be tied by proposed subsection (5). That is what it will do. It will tie its hands. The tribunal must be able to make decisions on a case by case basis.
The bill talks about a specific scenario but it has a broad spectrum of implications. It implies that the bill does not want real competition but a regulated competition. That is the difference. We want real competition in the market, not a regulated competition of a few industries under strict conditions. It should be the market forces that dictate free and fair competition in the market, not artificially unfair conditions. It is only tinkering.
To further make my point, I will quote a recent article in the Globe and Mail which discusses a draft report by the Organisation for Economic Co-operation and Development:
Canada's Competition Bureau is plagued by an inconsistent policy framework, hampered by national monopolies, undercut by a lack of resources and tainted with a reputation for having no independence.
The competition bureau should be independent.
The bureau should be turned into a stand-alone agency, reporting to parliament through the industry minister...Such independence would help change the perception that the bureau's decisions are subject to political influence. However, the onus is on the Prime Minister...to make changes required to give the bureau more independence.
The report also states that laws that require Canadian ownership and control in several sectors, especially airlines, banks and bookstores, have prevented competition policy from dealing adequately with issues such as market power and monopoly.
Of course there are other issues such as enforcement and other things but I will not go there. In a nutshell, important decisions should not be subjected to political pressures to protect national competition interests.
I will support sending the bill to the industry committee, but I will not support the contents of the bill and the effect it will have on the market.
Private Members' Business
Jocelyne Girard-Bujold Jonquière, QC
Mr. Speaker, it is my pleasure to speak to Bill C-248, introduced by the member for Pickering--Ajax--Uxbridge.
I would like to state at the outset that I am very pleased to support this bill, as I believe the Competition Act needs to be strengthened.
It is sad to note that the act currently has no power to fight collusion. In our world where the role of the economy and markets becomes increasingly important, we need to ensure better protection for citizens of this country. Personally, I believe that Bill C-248 is a step in the right direction.
This private member's bill proposes a review of the application of sections 92 and 96 of the Competition Act. This would have the effect of prohibiting any one company from having a dominant market position following a merger.
Given the deficiencies of the current Competition Act, I sincerely believe that we must do everything within our power to restrict any possibility of dominant positioning and collusion at the outset, because once it has occurred, it is difficult to come back and ensure that the public is well protected and served by fair and healthy competition.
Let us look at an example. In my region of Saguenay, we have been in a very difficult situation in the past few months. The price of gasoline was so incredibly high at one point that we thought the price at the pump would go beyond a dollar a litre.
I would remind the House that, in January 2001, Irvin of Calgary published a study, which concluded that the retailers in the region of Saguenay—Lac-Saint-Jean had the highest profit margin in the country. While the national average was about five cents a litre, in the Saguenay, retailers were getting as much as 12 cents a litre. It is not surprising to discover the range of prices at the pump. How do we explain it? It seems to me that healthy competition should produce similar prices across the country.
In addition, strange as it may seem, on the same street, at the same point in time, retailers in my region were raising their prices. I can understand this happening when prices are being lowered, since no retailer wants to be outdone and uncompetitive. However, what is the explanation for the simultaneous price hike?
The people in the competition bureau call this phenomenon “conscious parallelism”. This means that a retailer will follow all price changes, be they upwards or downwards. Would it not, however, be logical for a retailer to keep his prices lower than the competition in order to increase his business?
I have to say I do not accept this theory of conscious parallelism for a moment. It is, instead, collusion among retailers who benefit from people's dependency on their cars.
I lodged two complaints with the competition bureau to get them to investigate. Nevertheless, although this price shift is disgusting to ordinary consumers, the competition bureau cannot investigate a mere observation. It must have written or oral proof to even initiate an investigation.
Let us get serious. With all the new technology we have, like cell phones and e-mail, it has become very easy to avoid being caught for fraud.
The review of section 45 of the Competition Act must be closely followed in the case of collusion in the oil industry. Indeed, the term “unduly” in this section forces the competition bureau to have written or oral evidence of collusion which, as I just explained, is almost impossible to get. We must adapt this section to the modern realities of the 21st century.
I am not the only one to promote this idea. When he appeared before the Standing Committee on Industry, Science and Technology, Professor Thomas Ross, with other witnesses, said:
It is important to remove the term “unduly” to facilitate price fixing investigations, which are currently too difficult to conduct.
Further on in his remarks, Mr. Ross said “It is high time to reform section 45 and I do hope that the industry committee will look at this issue very soon”.
I believe it is high time we as parliamentarians review our acts so as to give priority to the interests of individuals, on the competition issue as well as all other issues. As I said in my presentation, major companies, such as oil companies, have it too easy and can do whatever they want in their sector. They take advantage of the weakness of the Competition Act to gouge prices in an unreasonable fashion.
The hon. member who presented this bill has a great deal of expertise in the area of competition. He also presented Bill C-472 on private applications and I congratulate him on that.
I must say that I am more and more in favour of this idea. I believe that individuals themselves should have the right to bring before the courts a company that is guilty of fraud or price fixing. We must not forget as well that the chronic underfunding of the competition bureau greatly limits the number of cases heard by the tribunal.
Short of providing the adequate financial means for the competition bureau to do its job, allowing citizens themselves to institute an action is a very good idea. We must examine it carefully and move forward.
The competition sector is extremely large. Bill C-248 introduced by the hon. member for Pickering—Ajax—Uxbridge would restrict the influence of big companies. Finally, the competition bureau would have a say in mergers leading to an excessive market control.
However, I strongly urge members to ask themselves some questions about the implementation of section 45 of the Competition Act. Private access is also a solution that may be emphasized. The government must be open minded and finally be on the consumers' side. Perhaps these people do not put as much money into campaign funds as Petro-Canada or Shell do, but it is still taxpayers who are funding our salaries with their taxes.
It is time to give priority to the real citizens of this country. This is what I am doing and I am proud to speak on behalf of my constituents of Jonquière and to represent their interests.
I ask all members of the House to tighten up the Competition Act and to support Bill C-248, which was introduced by our colleague.
Private Members' Business
Claude Drouin Parliamentary Secretary to the Minister of Industry
Mr. Speaker, I am pleased to have this opportunity to address Bill C-248, an act to amend the Competition Act.
My colleague, the member for Pickering--Ajax--Uxbridge, has a long standing interest in competition law and he should be commended for raising its profile in this place.
Competition is important, not as an end in itself, but rather as a means to an end. Competition encourages firms to lower costs, reduce prices, improve services and develop new products. As consumers, this makes us all better off.
The Competition Act applies to virtually every industry and business in Canada. It seeks to maintain and enhance competitive market forces.
Bill C-248 would amend the act to limit the application of the so-called “efficiency defence”. Simply put, the efficiency defence allows for the consideration of gains in efficiency when examining the anti-competitive effects of a merger. Bill C-248 would limit this defence by addressing two specific circumstances under which it could not be used.
First, it would require that the gains in efficiency exceed the anti-competitive effects and lead to lower prices. This proposed price test is widely viewed as one of the simplest and most direct means of verifying that efficiency gains resulting from a merger will ultimately benefit consumers.
The second feature of the bill is that the efficiency defence would not apply if the merger would result in the creation or the strengthening of a dominant market position. The obvious extreme example would be a merger to monopoly.
Perhaps the inspiration for this bill was a decision by the federal competition tribunal in a merger between ICG Propane and Superior Propane.
This 1998 merger brought together the two largest propane suppliers in Canada and it was the first merger case where the efficiency defence was used to counter the anti-competitive impact of a merger.
The commissioner of competition challenged the merger on the grounds that it would clearly lead to both a substantial lessening and prevention of competition in the market for propane.
Superior Propane argued that the efficiency gains resulting from the merger would offset those anti-competitive impacts, so the merger should be allowed to stand.
In August 2000, the competition tribunal decided that the merger was likely to prevent competition in Atlantic Canada and lessen competition substantially in many local markets across Canada and for national account consumers.
It also concluded that the appropriate remedy for this anti-competitive result of the merger would be an order compelling the divestiture of ICG. However, the tribunal did not issue such an order.
The tribunal agreed with Superior that no order could be issued because the efficiencies resulting from the merger would be greater than and would offset the effects of any prevention or lessening of competition.
The commissioner appealed the decision to the Federal Court of Appeal. The federal court overturned the tribunal's ruling and sent the matter back to the tribunal for a re-determination hearing. Most recently, Superior Propane was denied leave to appeal the matter to the Supreme Court of Canada.
The matter of Superior Propane's acquisition of ICG Propane is important both for Canadians who use propane fuel and for Canadian competition law.
The question of how to treat various elements of efficiencies and how to balance them against the anti-competitive effects of a merger is one which became topical when Superior Propane proposed to acquire ICG Propane in 1998.
The hearings before the tribunal involved a large number of witnesses, including many economic experts. The tribunal heard a wide range of views on how efficiencies should be measured and how they should be balanced against anti-competitive impacts.
The federal court, in its reasons for judgment, disagreed with the standard of review used by the tribunal, but added that it would not itself tackle the question of what is the correct method for determining the anti-competitive effects, which reflects on the complexity of this area of competition law.
The bill before us received first reading on February 7, 2001, prior to the Federal Court of Appeal's ruling on the commissioner's appeal of the tribunal ruling. This was a period of uncertainty in Canadian competition law because it was unclear whether the federal court would uphold the tribunal's ruling, reverse it, or cast the efficiency defence in an entirely new light.
Bill C-248 appears to have anticipated a federal court ruling supporting the tribunal's decision, and therefore sought to clarify the issue by limiting the application of the efficiency rule.
It is difficult to propose rewriting a law while it is before the courts, but we must understand that there was considerable concern that if the tribunal ruling stood, there could be a wave of mergers to monopoly which would be unstoppable because of efficiency claims.
As I have indicated, the question of how efficiency claims should be treated in merger analysis is very complex. The Federal Court of Appeal has pointed this out in its ruling. While I understand the underlying motivation for this bill, I think the Federal Court of Appeal and the Supreme Court of Canada have spoken unambiguously on this subject.
I think it would be unfair to suggest already that the tribunal needs further guidance than that provided by the superior courts on the issue. It would not be helpful to change section 96 of the act while the tribunal is adjudicating a matter on that very section.
We do not presently have reason to believe that the act needs clarification through amendment in respect of the efficiency defence.
Let us be reasonable and let the competition tribunal do its job and revisit the propane merger now with the benefit of the wisdom of our superior courts.
Once again, I would like to thank the member for Pickering--Ajax--Uxbridge for bringing this important issue to the attention of the House.
The matter which gave rise to this bill is again before the Competition Tribunal and may yet again be brought before the Federal Court of Appeal and possibly the Supreme Court of Canada.
Given that this matter is currently before the courts, it would not be prudent of members in this place to presume the outcome. I trust members of the House will use their good sense to ensure that we make the right decisions.
Private Members' Business
Chuck Strahl Fraser Valley, BC
Mr. Speaker, thank you for the opportunity to speak to Bill C-248, an act to amend the Competition Act. It is a timely piece of legislation given the current situation in our country as far as our concern goes for our economy generally. However, it is also timely because we are reviewing parts of the Competition Act in committee right now.
I want to commend the hon. member for Pickering--Ajax--Uxbridge for bringing this legislation forward. He is becoming quite well known for his critique of the Competition Act and the tribunals and so on. It is a well earned reputation. He is someone who, both in committee and in the House, is building a reputation for the strength of his private members' bills and his committee work. It is a tribute to him as an individual MP who sometimes kicks over the traces a little bit, which is always to be admired in this place. More important, he does it on a matter that he has focused in on and I think he has done a good job of highlighting a concern he has about the Competition Act.
I do want to know how he always gets his bills drawn from the private members' bin. That in itself deserves a competition investigation.
In the time given to me I want to talk briefly about the specific circumstances that led to the need for the bill, and I think we have heard a good part of that, about the other changes possibly required in the Competition Act and then finally about the kind of overlying principles that I think are at stake when we talk about changing the Competition Act.
Bill C-248 would amend section 96 of the Competition Act by stating the following:
For the purpose of subsection (1), gains in efficiency cannot offset the effects of a lessening or prevention of competition unless the majority of the benefits derived or to be derived from such gains in efficiency are being or are likely to be passed on to customers within a reasonable time in the form of lower prices.
In layman's terms, if there are big savings to be made in a merger that results in a essential monopoly, then the majority of those savings has to be passed on. In other words, it is a quid pro quo. If there is a monopoly, under the amendment the customer then gets a benefit. They cannot have their cake and eat it too. If there is a monopoly there has to be something in it for consumers.
Proposed subsection 96(5) states:
This section does not apply where, after the transaction has been completed, the merger or proposed merger, will result or is likely to result in the creation or strengthening of a dominant market position.
My understanding is that this was brought about because in July 1998 Superior Propane put forward a proposal to purchase ICG Propane from Petro-Canada. This gave Superior control of nearly 70% of the Canadian propane industry and the competition commissioner commenced his inquiry into the transaction in August of that same year. In December the commissioner applied to the tribunal for an interim order preventing completion of the transaction. He was concerned because he felt that the deal would hurt farmers, small businesses and ordinary consumers.
The tribunal rejected his application and the parties completed the transaction in December 1998. After the tribunal's ruling, the competition commissioner appealed the decision to the federal court. The court ruled that the competition tribunal “had incorrectly applied the efficiency defence”, stating that the decision was in contradiction of the stated purpose of the act, that is, “to maintain and encourage competition”.
The case is now back before the competition tribunal which will make a new decision next year. Meanwhile Superior has merged its operations with ICG. To sum it all up in a nutshell, one company bought another company, giving it a virtual monopoly in the Canadian propane industry. The argument is how far we will let that go before a monopoly threatens prices or undermines fair competition and, in many cases, undermines the livelihood of Canadians who are dependent on the propane industry.
The Competition Tribunal of Canada allowed this act to take place and supported it. The argument it used is that the merger would save Superior $29 million over 10 years. In other words, the tribunal said yes, it was concerned about the monopoly but the savings were so significant that it was worth putting up with the monopoly.
The problem with the original ruling is that it was very precedent setting. It allowed or would have allowed a monopoly or virtual monopoly in the marketplace, so we were just supposed to hope against hope, I guess, that consumers would not pay a price for it down the road.
Almost every time we see a monopoly or virtual monopoly in the marketplace, if not immediately but certainly down the road, the consumer pays. Monopolies are not good for the marketplace, they are not good for consumers and often they are not even good for business.
I only have to point out the example of Air Canada. I do not know if Air Canada got what it wanted, but when it got a virtual monopoly in the air travel industry that did not actually help it. It certainly did not help consumers, nor did it serve the marketplace well. In the long run not only did we pay a lot for our tickets and see a reduction in service, but now we see that the company itself is going through tough times. A monopoly is no guarantee of efficiency. A bad business deal or a bad situation, especially when dealing in international markets, means businesses go under rather than become competitive.
I will summarize by saying that according to the tribunal, efficiency is not in and of itself enough of a reason to acknowledge or recognize a monopoly. After the ruling of the court, this is back again for a further ruling. We will see how this legislation goes, but I think we will end up having to wait for that further ruling before we see the legislation before us today go the extra mile and actually become law.
While we are talking about competition, it is interesting to me to see that the recent report by the OECD points out that we do have problems in Canada with the Competition Bureau and tribunals in regard to how this is handled. It is often a political football. It is often used by government to either shirk its responsibilities or fob them off on someone else. It was pointed out by the OECD that occasionally the government turns a blind eye to monopolies, hoping that they are in the national interest. However, they are seldom in the national interest and seldom, if ever, in the consumer's interest, and I would argue it is not in the interest of the marketplace generally.
The marketplace is not well served by monopolies. No matter how much money monopolies think they are saving in the initial pass, in the long run the consumer will pay and our national competitiveness takes a blow.
Again, because we are now dealing in an international marketplace, it is pretty hard for us to go to another country when we have our own nice little Canadian monopolies and tell that other country that its monopolies are bad. Increasingly we will see the Competition Act and other bilateral agreements forcing Canada to be as concerned about our monopolies as we are about those of other countries.
In other words, it is like a free trade agreement. We will not be able to say that one monopoly is good for our one little part of the rock but another monopoly across the border is a bad one. We will have to say that when the marketplace is competitive it is competitive for all of us, not just when we think it is a good thing for our little industry or our part of the rock.
In conclusion I will summarize by saying that there are conflicting principles at stake. One is the free enterprise principle, that is, we should encourage free enterprise. That is a sound principle and I hope all of us in the House understand the need for it. Second, however, there is a role for the government to ensure that monopolies do not take place and that unfair practices are not foisted on consumers. When that happens, the government has a role to play to ensure that competition exists and that true free enterprise can take place.
The last thing, and the one concern I have with the bill, is that when we encourage companies to be as efficient as possible they do not realize any savings from being efficient.
In other words, we have to trade off the idea of “monopolies are bad”. On the other hand, when we create efficiencies, it is because companies are trying to save money. We have to allow them to save money and to be efficient, but we have to do it in an atmosphere that does not allow monopolies.
That is why the bill should go to committee for further study. The principles are sound. I hope that we can support it, at least at second reading, to see if we can integrate it into the Competition Act.
Private Members' Business
Paul Szabo Parliamentary Secretary to the Minister of Public Works and Government Services
Mr. Speaker, I have thrown my speech away. I want to support the member. Bill C-248 is a necessary bill and the member's speech laid out the detail.
We just heard about the Superior Propone case in layman's terms, as well as the technical language. It is absolutely astounding that in that case, the tribunal said that although it found the merger was likely to prevent competition in Atlantic Canada and lessen competition substantially in many local markets and for national accounts customers, the respondents successfully demonstrated their efficiency defence.
This is precisely why the bill is here. That decision is being appealed because it was a bad decision and there was not the clarification within the Competition Act. That is exactly what Bill C-248 would do.
The bill would bring clarification to the act so that we do not get decisions which contradict the stated purpose of the Competition Act itself, which starts on page 1. I do not have to read it. I think we understand.
In the last few seconds, let me simply compliment the member for Pickering--Ajax--Uxbridge for taking a lead role. I do not think there is any member in this place who has been so comprehensively active in Competition Act issues and has led the House, whether it be gasoline prices, taxation, et cetera. We owe the member our thanks and gratitude for this, for taking it on as one area of many and leading us to a very important bill, Bill C-248, to provide clarification. My congratulations to the member.
Private Members' Business
The Acting Speaker (Mr. Bélair)
The hour provided for the consideration of private members' business has now expired and the order is dropped to the bottom of the order of precedence on the order paper.
A motion to adjourn the House under Standing Order 38 deemed to have been moved.
Private Members' Business
Yvon Godin Acadie—Bathurst, NB
Mr. Speaker, I am pleased to speak tonight to deal with a question I asked the transport minister on September 27, 2001.
I was talking about airport safety and all that is being done in airports by the government and security firms.
The disappointing thing is that the official languages commissioner, in her report, has said that, three years from now, airports that have been privatized will no longer come under the Official Languages Act.
The French speaking minority communities in Canada will certainly be affected by this.
I was also disappointed to learn what my predecessor, Doug Young, did when he was transport minister, in 1993. I have not always been surprised by his actions, but after so many years, I look back and I say that his privatization of airports made it possible for the government to get out of its obligation to ensure that services are provided in both official languages. It is a disgrace.
It is a disgrace that in 2001, we still need to talk about this in Canada. It is a disgrace that we have to fight, in the Standing Joint Committee on Official Languages, to get Air Canada, which is subject to the Official Languages Act, to respect both official languages in our country on airplanes. Now, we are being told that airports will no longer be subject to the Official Languages Act, which is a slap in the face.
In the Liberal Speech from the Throne, last year, the government said that it would take the issue of official languages very seriously, and that it would undertake the required efforts to ensure that they are respected in Canada.
These same Liberals sold off our airports to the private sector and included a clause in the contract whereby the airports would no longer be subject to the act in ten years' time. This took place in 1993. That means that in 2003, they can say, “it is not our problem”.
I asked the question to the transport minister, and I was pleased with his response. However, tonight I would like to hear the follow up to his answer, when he said:
I accept the advice of the hon. member and I am prepared to discuss this issue with my officials.
He even said that he was ready to introduce a bill.
I am anxious to hear from the parliamentary secretary, to know if he can clarify at all what the transport minister said, because it is very important that there be no difference in the use of the two official languages. Both languages must be respected in our country.
Private Members' Business
André Harvey Parliamentary Secretary to the Minister of Transport
Mr. Speaker, I will begin by thanking my colleague from Acadie--Bathurst, who always defends with such passion the interests of fellow citizens in his entire region. Sometimes the causes he defends are even national in stature. I congratulate him for all the interest he has shown in important issues.
As far as the application of the Official Languages Act is concerned, I believe the hon. member is clearly differentiating this. It is obvious that full application of the Official Languages Act applies to the national airport system.
Application of the Official Languages Act therefore covers 95% or 96% of all Canadian air traffic. This does not necessarily solve the problem of the portion of the issue the hon. member has focused on: defending the value of respecting official languages. Even if we do not have complete jurisdiction over privately managed airports, I still want to point out to the hon. member that a review of the Canada Airports Act is under way. It will maintain application of the Official Languages Act in all of the national airport system.
With regard to airports that are not covered by the national airport system concept, it is important to point out that they are governed by the market. I fully realize that this is not enough. Measures are required, not necessarily coercive measures, but significant incentives.
While this may cover 1.5% or 2% of the overall traffic, I do not know if there is a particular problem at the Bathurst airport as I do not have a detailed knowledge of all regional airports, or even national airports, but all the measures taken and the report of the Commissioner of Official Languages also bear fruit. Through the measures that were put in place, managers developed an awareness of and a respect for official languages. Even if the Official Languages Act cannot be fully implemented in these sectors, the measures include an increased awareness by airport operators of the requirements in that regard.
Improving the government's monitoring efforts is also important.
Let me also say that the appointment of the Minister of Intergovernmental Affairs to deal with the issue of official languages will be a major asset in achieving the anticipated success in the future.
I think that the introduction of a protocol to codify the process for handling official languages complaints is an interesting guarantee, not necessarily a guarantee of perfection but an interesting guarantee for the attainment of an objective that is very important not just to the member for Acadie--Bathurst but for all members of the House, particularly the French-Canadian members who have an interest in seeing their language fully respected in all Canadian airports.
I repeat that there is full respect in national airports throughout the national system. Additional measures to ensure respect for both official languages throughout the system are, I believe, beginning to bear fruit and are in fact bearing fruit.
Transport Canada is working with the Minister of Transport and all stakeholders. I think we can be optimistic that the results will be interesting, but we are not there yet.
I wish to thank the member for his diligence on this issue. I think it is my role, as parliamentary secretary, but also as a French-Canadian, to defend interests having to do with the respect of the official languages, even in those sectors where full respect is not automatic.
Private Members' Business
Yvon Godin Acadie—Bathurst, NB
Mr. Speaker, I thank my colleague the parliamentary secretary for his kind remarks on the matters of concern to me.
Unfortunately, I must say that I do not agree with his remarks and I will tell him why. The government has a number of responsibilities including passing legislation. These airports used to belong to the federal government. The government changed its mind and decided to privatize them. Now it is pulling a fast one on us. How? By failing to comply with the Official Languages Act.
When the government opened the door to the privatization of Air Canada, it included a clause to the effect that Air Canada would be subject to the Official Languages Act. This was needed.
The contract signed with the private sector provides that this company must comply with the Official Languages Act for ten years. Why not make it forever? This is what we need in Canada.
I would point out that it applies not just to francophones but to anglophones who visit the Gaspé or Kapuskasing or Hearst. It exists to ensure respect for both official languages,English and French, in Canada.
I want the minister to work to change the law and guarantee that the Official Languages Act will be accepted and applied throughout Canada.
Private Members' Business
André Harvey Chicoutimi—Le Fjord, QC
Mr. Speaker, I can assure the hon. member that we are going to be following very carefully everything to do with respect of official languages, both in the national airport system and in airports not automatically covered by the Official Languages Act.
We will do this in co-operation with the federal Minister of Transport as well as with the Minister of Intergovernmental Affairs, whose responsibility it is to keep very close tabs on the respect of official languages.
I am certain that we will see progress in respect of the official languages and, ultimately, we will see whether that progress has been significant. If not, I am sure that the government will assume its responsibilities and take whatever action is required to ensure full respect of official languages.
Private Members' Business
The Acting Speaker (Mr. Bélair)
The motion to adjourn the House is now deemed to have been adopted. Accordingly, this House stands adjourned until tomorrow at 10 a.m., pursuant to Standing Order 24(1).
(The House adjourned at 6.21 p.m.)