An Act to amend the Competition Act

This bill was last introduced in the 37th Parliament, 1st Session, which ended in September 2002.

Sponsor

Dan McTeague  Liberal

Introduced as a private member’s bill. (These don’t often become law.)

Status

Not active, as of Feb. 25, 2002
(This bill did not become law.)

Elsewhere

All sorts of information on this bill is available at LEGISinfo, provided by the Library of Parliament. You can also read the full text of the bill.

Committees of the HouseRoutine Proceedings

June 12th, 2002 / 3:10 p.m.
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Liberal

Walt Lastewka Liberal St. Catharines, ON

Mr. Speaker, I have the honour to present, in both official languages, the 10th report of the Standing Committee on Industry, Science and Technology, entitled “Canada's Innovation Strategy: Peer Review and the Allocation of Federal Research Funds”.

The committee believes that the three federal granting agencies, the Natural Sciences and Engineering and Research Council of Canada, the Social Sciences and Humanities Research Council of Canada and the Canadian Institutes of Health Research, all have vital roles to play in improving Canada's innovation strategy. The committee believes that the 11 recommendations contained in the report will further assist the granting agencies in their work of supporting research and development.

I wish to thank the individuals and organizations who took part in our hearings, the research staff of the Library of Parliament, particularly Dr. Lalita Acharya, and the members for their invaluable contributions.

I also have the honour to present, in both official languages, the 11th report of the Standing Committee on Industry, Science and Technology.

Pursuant to Standing Order 97.1 the committee is requesting an extension of 30 sitting days to consider Bill C-248, an act to amend the Competition Act, referred to the committee on February 25, 2002.

Competition ActPrivate Members' Business

February 25th, 2002 / 11:25 a.m.
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Liberal

Dan McTeague Liberal Pickering—Ajax—Uxbridge, ON

Mr. Speaker, I wish to thank all my colleagues for giving me a few minutes. I will be brief.

First, I wish to congratulate the new Industry Minister, who is responsible for this file, as well as his new parliamentary secretary, who made a speech a few minutes ago.

Without belabouring the point, it has been stressed here enough that there is no doubt that the prime trigger for the changes in Bill C-248 and, prior to that in the previous parliament in Bill C-509, was indeed the Superior Propane case. About that there is no argument. I think that what is important for the House to understand is that it for the first time creates a precedent in law whereby someone may use the efficiencies defence to obtain a monopoly.

I need only give the initial judgment of August 30, 2000 to relay my point. After looking at this, the tribunal realized just how dangerous this takeover of Petro-Canada's ICG by Superior Propane would be when it said:

Although the Tribunal finds that the merger is likely to prevent competition in Atlantic Canada and lessen competition substantially in many local markets for national account customers, the majority...dismiss the application...on the grounds that the respondents have been successful in demonstrating their efficiency defence--

That sets not just a precedent but a very dangerous precedent. While I understand that the Supreme Court of Canada has said let us not deal with this and the federal court ordered the tribunal to revisit this issue, the effect of which is that the competition bureau has suspended part of its merger guidelines dealing with this because we are in sort of a no person's, no man's land on the bill, it is important for us to stress that the role of members of parliament will become extremely pivotal in doing our job: creating legislation.

We do not have rule made law in this country. It is for that reason that the bill is very timely. I have heard a couple of other comments from members suggesting that we should wait until the tribunal or whoever makes its decisions. I respectfully submit that we are the ones who create laws and we are the ones who will protect the interests of consumers to the extent that does not collide with other laws like, for instance, the constitution of this country and the Canadian charter of rights. I see no reason why those important pieces of our mosaic are not challenged. I cannot see why the parliament of this country, in particular beginning with the House of Commons, would not refer this matter to the committee.

I am pleased to see that the government and other parties will be doing so. I would not characterize the comments that we have made here as being somehow selective or, as one of my colleagues from the Alliance has suggested, very narrow minded. While I appreciate his concerns, I would also remind him that the very concerns that I have brought forward can be found in the Treaty of Rome, by which the competition bureau in that country operates on a set of assumptions very similar to what has been presented in Bill C-248. It states that it is clear that there is a limit for the defence under section 85 of the Treaty of Rome:

The limit of that use of the defence efficiencies argument is the elimination of competition. Even if parties can prove that an agreement would bring about high efficiency gains, these efficiencies are not able to justify the elimination of a competitor.

This is a very pivotal sector of our economy: heating. I do not wish to trivialize the importance of Superior Propane. As many people in the country know, last year a lot of people did without and had to turn their thermostats down. They are people who are listening today and people who are on fixed incomes, individuals who live in every single riding of the country. They now know that with this proposed legislation they would at least have some semblance of hope that there will be some meaningful competition.

That is not to say that companies cannot create some kind of efficiency by simply being the only player in town. Sure they can. We are simply saying that if they do that it has to be passed it on to the customers. There has to be a very real trade-off between having a monopoly or a near monopoly or a dangerous anti-competitive monopoly and the ability for that to flow through to customers or at least to consumers.

I am heartened to hear that other members will be supporting the bill. I want to take this opportunity to thank the members of the industry committee who are now beginning to really sink their teeth into the issue of competition. This will fall at a very good time since our industry committee chair is now beginning to understand the issue of efficiencies, not only from the perspective that there are 200 economists and lawyers who have an opinion but in fact from the perspective that there are people in the House of Commons who have also developed a modicum of understanding of this very complex act. They are now realizing that if Canada wants to compete with its global partners, and I am sure that the members of the Alliance will agree with this, we should not have laws that are weaker than those of our American or other trading partners. We should have laws that, while showing similarities, differences and nuances between ourselves and the rest of the world, do not leave consumers in a situation where they are always paying the highest price for their own product.

Therefore I leave this with you, Mr. Speaker.

Mr Speaker, I am very grateful for the time you have given me. I know you are aware of the energy situation in your riding. A few years ago, a Liberal committee on gas travelled to northern Ontario to express itself, study the situation and find the problems. I wish to acknowledge the effort you made with other members of parliament to create a great momentum in terms of changes to the Competition Act.

I believe we all agree with that. I will say to my colleagues that I look forward to at least the opportunity to have the bill discussed before a committee of the House that has some expertise. I have faith in the committee system and I think we can do this by ensuring that the bill is sent to that committee.

Competition ActPrivate Members' Business

February 25th, 2002 / 11:25 a.m.
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Liberal

Dan McTeague Liberal Pickering—Ajax—Uxbridge, ON

Mr. Speaker, I rise on a point of order. As you know, I have spoken to Bill C-248 and I thank all hon. colleagues for doing the same. I understand that there may be an opportunity for a few more minutes. Could I seek the indulgence of the House to make a few more comments before the House decides to deliberate?

Competition ActPrivate Members' Business

February 25th, 2002 / 11:25 a.m.
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Progressive Conservative

Norman E. Doyle Progressive Conservative St. John's East, NL

Mr. Speaker, I want to say a few words on Bill C-248, an act to amend the Competition Act.

The bill has a couple of very important sections that we should talk about and highlight, one being proposed subsection 96(4), which states:

--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.

That is a very important subsection.

Also, 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.

In layman's terms, proposed subsection 96(4) stresses that mergers resulting in a monopoly or near monopoly must ultimately be of benefit to the consumer. Proposed subsection 96(5) states that we should not approve a merger that in addition to creating the position of market dominance provides economic efficiencies to only the merged companies. In other words, monopolies can only be tolerated, and rightly so, if they are in the public interest.

My colleague from Fraser Valley spoke on this bill on October 24 and pointed out that one of the incidents that provoked the drafting of the bill was a merger in the propane industry in 1998, giving Superior Propane control over 70% of the Canadian propane market. The competition commissioner opposed the merger on behalf of consumers but the competition tribunal approved the merger because of efficiencies that would amount to roughly $29 million over a 10 year period and would accrue to the merged companies.

The purpose of Bill C-248 is to force the tribunal to give more weight to consumer protection when making these decisions. Efficiencies, as we all know, are fine, but they have to play second fiddle to the right of consumers to enjoy the benefits of a highly competitive marketplace.

In North America we have mainly a private enterprise economy. We have a North American free trade agreement among Canada, the U.S. and Mexico. Monopolies are not something favoured in such an economic climate. There are those who feel free enterprise is based exclusively on self-interest, and to some extent that may be true, however, self-interest on the part of more than one person or company also breeds competition and competition is good for the consumer by decreasing prices for goods and services.

Monopolies may involve greater internal efficiencies but in the long run a monopoly that is well established has the tendency to keep prices for goods and services very high. The self-interest is still there and when it is unfettered by competition the consumer is almost always the one who will lose in that particular case.

Let us look at a more recent case. I remember that when I came here in 1997 my constituency was served by a two airline industry made up of Air Canada and Canadian Airlines International. As we are all very much aware, there was lively competition between the two airlines. The traveller benefited a great deal by getting better service, better frequency of service and much cheaper fares.

In short, the travelling public was serviced by an airline industry that actively sought out business. It is not 1997 any more; it is now 2002 and I know my constituency in St. John's is no longer serviced by an airline industry. It is now serviced by Air Canada, which has a virtual monopoly in the Atlantic region. Gone is the lively competition that we had in the airline industry. Up went the prices, down went the frequency of service and down went service, period.

A few years ago the Liberal government was faced with a tremendous upheaval in the airline industry. The nation's second largest airline, Canadian Airlines International, was in a great deal of trouble and the questions were these. Should Canadian be allowed to go bankrupt with the hope that someone would pick up the pieces? Can we find someone or some company that would build another national airline to operate in competition with Air Canada?

In the end, of course, the powers that be decided that Air Canada would be allowed to absorb Canadian, with the attendant pain in terms of job losses and service reduction. Canada now has one national airline. Yes, WestJet may still be alive, but the other newcomers have been chased off the block.

We need at least two national airlines in order to have a real airline industry. Instead, we are served, and I have to use that term served quite loosely, by a monopoly. Herein lies a role for the Government of Canada. It has to develop economic and transportation policies that are in the public interest, policies that encourage entrepreneurship in the airline industry. It has to develop competition laws that actually foster competition in the marketplace and discourage the formation of monopolies.

Bill C-248 helps in that it turns thumbs down on the creation of a monopoly that does not pass on its efficiencies to the customer. Bill C-248 should have been in force when Air Canada was trying to take over Canadian Airlines. It might have prevented the takeover altogether. The evidence so far certainly shows that air travellers have not received better service or lower fares as a result of any efficiencies arising from the merger of these two airlines.

I support the free enterprise system. I support a competitive marketplace. I support the thrust of the hon. member's bill. I request that it be forwarded to the appropriate standing committee for study and action.

Competition ActPrivate Members' Business

February 25th, 2002 / 11:10 a.m.
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Canadian Alliance

Charlie Penson Canadian Alliance Peace River, AB

Mr. Speaker, I am pleased to speak today to Bill C-248, an act to amend the Competition Act with respect to the efficiency defence on merger proposals.

This private member's bill seeks 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. While I appreciate the intent of the hon. member in bringing forward this bill, I have great misgivings about reactionary legislation.

As the member for Pickering--Ajax--Uxbridge has told the House, Bill C-248 was drafted in reaction to the Superior Propane case, which is the first and only time the efficiencies defence was successfully proven at the tribunal. The competition commissioner appealed to the federal court, which ordered that the tribunal hear the case again. I understand we will have a final decision from the tribunal very shortly which should clarify this situation.

However, Bill C-248 seeks to change a law before we have heard the last word or the interpretation of the federal court. I have trouble with reactionary laws or amendments tinkering with existing legislation or 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. I would rather see the process at the tribunal run its course. We need to hear from the tribunal before we seek to amend. In other words, we need more case law in situations like this to understand the implications.

I want to look for a moment at the efficiencies defence as it was prescribed in the Competition Act. Section 96 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 those offset by the effects of any prevention or lessening of competition.

In other words, if two companies were set to merge and the efficiencies were such where both could survive or both could fail if there were no chance to merge, what would be the ultimate outcome of the merger? It seems to me that at least there would be one merged company providing a service that maybe no other company could offer if the merger were not allowed.

Section 96 further instructs the tribunal to consider whether gains in efficiencies 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 defence. 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 those instructions would muddy the waters and quite possibly stand merger review on its head.

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. That would be considered merely a redistribution of income.

However, proposed subsection (4) would require that the majority of benefits derived from gains in efficiency be passed on to customers and consumers. In addition to requiring the tribunal to favour consumer interest over producer interest, the amendment would also straitjacket producers into passing on the gains of a merger to customers in the form of lower prices only. Bill C-248 does not take improved services or quality into consideration. I suggest that is a narrowminded and misguided point of view.

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 would require the tribunal to discriminate against dominant players. We have a lot of industries where there are dominant players in Canada but that does not mean that there is no competition. In a country with a domestic market as small as Canada's, this may not make economic sense in a number of sectors.

What is even more worrisome is that Bill C-248 would enshrine in legislation outright discrimination against dominant players in the Competition Act. I do not believe that the dominant players in the market automatically are abusing their dominant market positions. This is presuming guilt before innocence. There is nothing inherently wrong with a dominant player in a market. However, subsection (5) could have the effect of preventing dominant players from emerging even if that is the best situation for the market.

It never ceases to amaze me how the Liberal government feels that some monopolies are in the national interest and some are not. Canadian ownership laws and other regulations specifically designed for the airline, banking, book retail industries and, I might add, the Canadian Wheat Board and many others, have prevented competition policy from dealing adequately with issues such as market power and monopoly. However I suppose it goes along with the way in which Liberals approach industrial policy: they like to pick winners and losers.

I would suggest that it is fairly easy to be a winner when the federal government is backing one's operation. We see industrial grants to certain industries favoured over others. No wonder these businesses are winning and able to compete in the world market when the Government of Canada is their banker.

Bill C-248 was designed for a specific scenario but it has a broad spectrum of implications. It implies that the purpose of the Competition Act is not to enhance real competition but regulate competition.

Canadians deserve real competition in the market not a regulated competition of a few industries under strict rules where others have no regulation at all.

I would say that we have been studying competition law for approximately two and a half years at committee. This is a very narrow group of specialists, as many people know. Most business goes on in Canada day in and day out not subject to competition law but normal business practices. I would say that this only applies to a very small sector of our economy.

Nonetheless I do think we need competition law but we cannot go along with this Liberal government's approach of thinking that it can have competition law to browbeat or beat industries over the head in the place of good policy that fosters a good economic situation in which companies can thrive and compete not only in Canada but internationally.

We need laws in place in this country, such as low taxes and lower regulation, that will allow companies to compete without tying one hand behind their backs. We need competition law that is reasonable and a government that recognizes a healthy business environment to accomplish the goal that we all want.

Competition ActPrivate Members' Business

February 25th, 2002 / 11 a.m.
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Beauharnois—Salaberry Québec

Liberal

Serge Marcil LiberalParliamentary Secretary to the Minister of Industry

Mr. Speaker, I am pleased to rise to speak to Bill C-248, an act to amend the Competition Act.

I want to thank my colleague, the hon. member for Pickering--Ajax--Uxbridge, for his constant efforts on behalf of all Canadians to ensure that the objectives laid out in the purpose section of the Competition Act are fully achieved. In particular, he dealt with the role of the act in preserving and enhancing competition in order to ensure that small and medium size businesses get a fair opportunity to take part in the Canadian economy and to ensure that consumers get competitive prices and a choice in products.

The bill before us today addresses directly those objectives and the way gains in efficiency are dealt with in the review of merger transactions.

We have found that there is considerable support in the House for the principles of this bill, the purpose of which is to clarify the clause in the Competition Act concerning the argument of gains in efficiency. The bill stipulates that consumers should benefit from a merger which results in gains in efficiency but that these gains should not be used to justify a merger which will result in the creation or strengthening of a dominant market position.

This bill was triggered by the acquisition of ICG Propane by Superior Propane. The Competition Bureau challenged the merger because it would have created a monopoly in several local markets, particularly in rural and northern communities. The competition tribunal recognized that this would markedly reduce competition, and at the same time that the anti-competitive impact of the merger was offset by the gains in efficiency cited by Superior Propane, such as savings in delivery costs and the operation of client information centres.

It has been pointed out by several members just how contradictory it seems for a act of parliament aimed at encouraging competition for the benefit of consumers to be used to enable Superior Propane to establish a monopoly or semi-monopoly in several markets on the grounds of gains in efficiency.

We ought perhaps to examine more closely the underlying intention of Bill C-248. The bill would not allow gains in efficiency to be used to justify a merger or proposed merger which, and I quote:

—will result or is likely to result in the creation or strengthening of a dominant market position.

This is an attempt to disallow scenarios where a merger would result in a monopoly.

We must be cautious when making reference to businesses with a dominant market position. Dominance pertains to the situation of a competitor within a market, and not its behaviour. It is too tempting to make a connection between dominant and large, and between large and bad. Abuse is the exception, not the rule.

The Competition Bureau examines proposed mergers and attempts to predict future effects based on specific factors. It examines market share, concentration, existing competition, and accessibility of the markets in question to new competitors.

Dominance is not, in itself, a problem under the act. Let us not forget that anti-competitive behaviour is addressed separately under civil provisions. The Bureau does not oppose mergers merely on the conjecture that the merged entity might engage in anti-competitive behaviour. However, anti-competitive behaviour will most definitely be contested under civil provisions.

Our economy is not always able to sustain a great number of competitors. Such is our reality. This compels us to ask whether it is more important to have more competitors or more competition. There is a difference between the two.

Regardless of their size, competitors are always welcome to our markets, on the condition that they act fairly and respect the rules. A merger must not be prohibited on the grounds that it will create a bigger competitor. Size and success is a characteristic of a competitor; it does not mean that it is guilty of anything in terms of competitive behaviour.

The purpose of Canada's competition policy is to protect competition, rather than protecting individual competitors, in order to ensure for Canadians the many benefits that come from fair and healthy competition. Among these benefits are greater choice, lower prices, better service and increased innovation.

By now, those who are listening have probably concluded that this is a very complex subject. Efficiencies play an important role in assessing mergers. Our colleagues on the Standing Committee on Industry, Science and Technology spent a great deal of time and effort in understanding how efficiencies are treated and assessed.

The issue now is one of timing. The Competition Tribunal finished its hearings in October 2001, and is now in the process of reviewing its decision based on the instructions given by the Federal Court of Appeal. The tribunal's upcoming ruling will outline clarifications on how to deal with gains in efficiency. However, it will be important to continue to examine the issue. Regardless of the tribunal's findings, I believe that we have heard convincing arguments for a full and careful analysis of this very complex question. The results may prove that the Competition Act requires clarification.

I would like to thank the hon. member for Pickering--Ajax--Uxbridge for his tireless support in helping improve our Competition Act. He has once again highlighted the important and difficult issues involved in competition policy.

I would invite my fellow members to vote to have Bill C-248 referred it to the Standing Committee on Industry, Science and Technology for a more thorough examination.

Competition ActPrivate Members' Business

December 3rd, 2001 / 11:55 a.m.
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Parkdale—High Park Ontario

Liberal

Sarmite Bulte LiberalParliamentary Secretary to the Minister of Canadian Heritage

Mr. Speaker, I too am pleased to take this opportunity to speak to Bill C-248, which is an act to amend the Competition Act. First I would like to join with the rest of my colleagues in thanking the hon. member for Pickering--Ajax--Uxbridge for his efforts on behalf of Canadians to ensure that the Competition Act achieves its objectives. We must remember that our colleague has been a tireless advocate on behalf of consumers and has served as a watchdog for our caucus, watching for a dominant position to happen or watching for where gouging was likely to happen.

As mentioned by the hon. member for Peterborough, one thing my colleague from Pickering--Ajax--Uxbridge worked very hard on was the issue of gas prices. When gas prices were increasing he took a task force across the province before the province ever got involved. Our caucus truly owes our colleague a great debt of gratitude. My thanks are nothing compared to the thanks the member got from the Minister of Finance in the last budget. At that time, the government looked at how best to assist consumers with rising gas prices when the world price hit record highs. It was felt that something had to be done about the oil companies. In fact, it was through consultations and the work done by our colleague from Pickering--Ajax--Uxbridge that the government looked at giving the rebate to consumers, to ensure that money went back to the consumers and was not hidden somewhere by the government or gouged by the oil companies. I would again like to thank our colleague very much for his efforts.

At issue today is Bill C-248. The bill would specifically amend section 96 of the Competition Act which addresses an issue known as the efficiency defence. This defence comes into play when mergers occur. This defence was not previously applied in practice until Superior Propane proposed to acquire ICG Propane in 1998. Prior to that date, the interpretation of that section of the act was untested. Now, with the bill before us, it turns out that the interpretation is very contentious indeed.

Bill C-248 is an attempt to clarify and impose limitations on the efficiency defence by adding two new subsections to section 96. The new subsection (4) states that:

--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.

The second amendment which is being proposed by the bill is a new subsection (5), which would make the defence of inefficiency unavailable and inapplicable if it resulted “in the creation or the strengthening of a dominant market position”.

When there is a concern about lower prices, benefits being passed on to consumers and when I hear the words dominant position, I again have to thank our colleague for teaching our caucus and members of the House that those are the terms and things we should be looking for.

Before I discuss what I feel we should or should not be doing at this point, I think it is important to return to what happened in the Superior Propane case and what has transpired since Superior Propane proposed to acquire ICG in 1998. It was always the position of Superior Propane that efficiency gains would offset any anti-competitive effects and would justify permitting the transaction to proceed. Unfortunately for Superior Propane, the commissioner of competition disagreed with Superior Propane's view of efficiencies and filed an application with the Competition Tribunal challenging the transaction. What transpired then was that the tribunal agreed with the commissioner that the transaction had significant anti-competitive effects.

However, it accepted the argument of Superior regarding the efficiency defence and ruled that efficiencies would outweigh the anti-competitive effectives of the transaction.

That was not the end of it. The commissioner then appealed the tribunal's ruling on efficiencies to the Federal Court of Appeal which sided with the commissioner and instructed the tribunal to redetermine the propane case. That is still not the end.

Superior Propane then sought leave to appeal to the Supreme Court of Canada. The supreme court refused to hear the matter and, in fact, upheld the ruling of Federal Court of Appeal.

The Competition Tribunal recommenced hearings on the Superior Propane-ICG Propane merger on October 9, 2001. It was required to do this because it had been so ordered. We are anticipating that a decision will be made very shortly. We hope such a decision will appear in January.

I would recommend at this particular time, and I stress the words to my hon. colleague, at this particular time and only at this time, it would be unseemly to amend the law while the matter is being reconsidered by the tribunal with the benefit of these court rulings. Perhaps there will be things in that tribunal ruling which may take my colleague's position or there may be things in that ruling which may assist my colleague enhancing the amendments to the act.

We should also remember the federal court's reasons for judgment gave direction to the tribunal in the form of parameters, but not explicit direction.

At this time I would ask colleagues on both sides of the House to perhaps await a decision. I also encourage my hon. colleague to continue his great work on behalf of all consumers in Canada.

Competition ActPrivate Members' Business

December 3rd, 2001 / 11:50 a.m.
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Liberal

Peter Adams Liberal Peterborough, ON

Mr. Speaker, I am pleased to have this opportunity to address Bill C-248, an act to amend the Competition Act. It does my heart good to be engaged in one of these quieter debates when members on both sides of the House who disagree on some of the fundamentals of this legislation add different things to the subject matter and add examples of the dangers of concentrating too much power and too many resources in too few hands, as was stated by the member for Kings—Hants just now and, before him, my colleague from Hull—Aylmer.

I would like to repeat, if I may, one phrase of the member for Palliser which I think people should bear in mind. It has to do with the agrifood industry in his case. He stated that it is $4 a bushel for corn and $133 a bushel for cornflakes. I think everyone should think on that in the context of the bill and also, by the way, in the context of our daily lives.

Like the others, I would like to thank the member for Pickering—Ajax—Uxbridge for his tireless efforts to ensure that the Competition Act serves Canadians to the greatest possible extent. I would particularly like to thank him for his work on behalf of all consumers during the very difficult time when gas prices rose to such an extraordinary and unjustified extent.

At that time he truly did work tirelessly for all of us and for all consumers, drawing our attention to the fact that we are overly dependent on oil, one source of fuel, that within that we are overly dependent on a few sources of that oil, and that within that, and I remember him saying it in the House, we in Canada are particularly overly dependent on a few refineries. That is an interesting example of the focusing of power in one area. Some people have the oil, some transport it and some refine it, but in the end we buy it from the people who refine it. If there is a concentration or a monopoly situation at that level, that is when Canadians suffer most directly.

I share the concern of the member for Pickering—Ajax—Uxbridge about these matters. I would like to point out that I am not surprised that he has been so effective, because, after all, he was born and brought up in my riding and educated there. I will tell you, Mr. Speaker, that my riding is full of young, well trained, intelligent people like him and they are all waiting to join him in the Liberal Party of Canada.

I share his concern that the recent merger between Superior Propane and ICG Propane may have revealed a weakness in the act. The Competition Tribunal ruling that the efficiencies resulting from the merger would more than compensate for the creation of a monopoly or near monopoly in many local markets and for national account customers was not the ruling that many people expected. That includes me. I hasten to remind the House that this was the first significant test of this legal defence based on efficiencies, so-called efficiencies, I would say, and it was the subject of considerable debate in the competition community.

My concerns were eased somewhat by the ruling of the Federal Court of Appeal, which overturned the tribunal's ruling. The federal court considered the matter, determined that the tribunal had not interpreted the so-called efficiency defence contained in section 96 of the act correctly and returned the matter to the tribunal for redetermination. I was very relieved at that, Mr. Speaker, and I know that you were. Superior Propane sought leave to appeal the federal court ruling to the Supreme Court of Canada, which refused to hear the matter. The federal court ruling stands.

The federal court, in its reasons for judgment, has provided guidance on the interpretation of the so-called efficiency defence. The tribunal's new ruling will be watched with great interest from many quarters because it will have implications far beyond today's propane industry in Canada.

Bill C-248 would impose two new conditions on the use of the efficiency defence in mergers to ensure consistency. The first condition is that any merger for which efficiencies are claimed must pass a price test, that is to say, the savings to the company realized through efficiencies must also be realized by consumers through lower prices. Those efficiencies must arise purely as a result of the merger and not for any other reason. If that were not the case, the company would not be required to pass on savings from other types of efficiencies. The second condition Bill C-248 would impose would be that the efficiency defence would not apply at all if the merger would result in, or would likely result in, the creation or strengthening of a dominant market position. The extreme case would be a merger to the condition of monopoly.

While these are interesting approaches to providing clarity to the Competition Act and may be worth considering in detail at some time in the future, it is not clear to me at this moment that this is the time to introduce such amendments. The tribunal has just finished rehearing the propane case and we are awaiting its decision. It is not appropriate to speculate on what the tribunal's decision will be, but it is safe to say that its ruling will say much about whether further clarification of this aspect of the Competition Act is needed beyond that provided by the federal court's reasons for judgment.

Consistent interpretation of the efficiency defence would be a welcome thing and we may already have it thanks to the Federal Court of Appeal and the Supreme Court of Canada. It is premature to involve ourselves further in this matter until we can see a clear need to do so. I urge the members of the House to vote against the bill for that reason.

In conclusion, I would like to again thank the member for Pickering—Ajax—Uxbridge for bringing this important issue to the attention of the House. Often in this Chamber we seek simple ways of doing things because each day we are faced with the complexities of society out there, in this case with the competition bill. We often wish that we could wave a wand and the problem would be solved or that we could pass a new law which of its own accord would solve the problem that triggered it.

However the fact of the matter is that society is very complicated. For example, our market economy is an extraordinarily complicated thing. We want it on the one hand to be as free as is humanly possible and, on the other hand, to have controls in it to safeguard individual consumers in particular. That balance is always just that, a balance. At the present time we do have through the federal court an opportunity to see whether the balance is right in this case with regard to this defence before moving toward the legislative stage. On that basis I would encourage members not to vote for this legislation but to wait, see what the future holds and then return to the matter if it is absolutely necessary.

Competition ActPrivate Members' Business

December 3rd, 2001 / 11:40 a.m.
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Progressive Conservative

Scott Brison Progressive Conservative Kings—Hants, NS

Mr. Speaker, it is with pleasure today that I rise to speak to Bill C-248. The need to strengthen the Competition Act has never been greater in Canada. I congratulate the member for Pickering—Ajax—Uxbridge for his continued hard work and vigilance in defending the underdog, in many cases smaller companies, and consumers in the long run.

A competitive marketplace is a requirement and a requisite for an effective market in Canada. We in my party are supportive of a free market economy, more consistently perhaps than members on the other side. However, a free market economy can be successful and functional only if we ensure the continuation of a competitive marketplace. Clearly we need to strengthen and amend the Competition Act to provide for that.

The rules need to be strengthened. I will focus on one particular area, the Canadian airline industry. The Competition Bureau needs to be given the teeth to ensure monopolists pursuing predatory policies are stopped in their tracks before they destroy smaller competitors.

We have seen many examples in the last couple of years, particularly with Air Canada. We have seen the Competition Bureau not take immediate actions to order Air Canada to cease and desist the predatory trade policies that have ultimately destroyed competition.

By the time the Competition Bureau has done something we have seen companies like CanJet, a Nova Scotian company, destroyed. In more recent weeks we have seen Canada 3000 destroyed by the predatory trade and pricing practices of Air Canada. Historically we could go back even further.

Instead of using business practices to strengthen its profitability, Air Canada has focused on market domination not just to the detriment of the Canadian air traveller and individual Canadians but ultimately to the detriment of its own company. Air Canada has not focused on strengthening its profit position. It has focused on market domination to the detriment of both the Canadian traveller and ultimately Air Canada's shareholders.

Clearly we need to strengthen and amend the Competition Act to ensure that cease and desist orders can be placed and enforced immediately. We need to impose multi-million dollar fines on companies like Air Canada that choose to pursue predatory pricing practices and destroy competition unfairly.

An interesting poll was done recently of Canadian corporate leaders. Rarely have we seen Canadian corporate leaders supporting greater levels of government intervention.

When polled about the need to have a more functional Competition Bureau and more functional policies under the Competition Act, Canadian corporate leaders pointed to Air Canada and said clearly that government must have a more active role in Canadian airlines if we are to ultimately have competition that will benefit individual Canadian travellers and Canadian business.

I assume part of that comes from the fact that many Canadian corporate leaders are frequent travellers. They can attest to the near toxic levels of arrogance emanating from the CEO of Air Canada, the boardrooms of Air Canada and the policies of Air Canada, as can any of us. Its policies effectively say that if any company anywhere in Canada has the gumption to stand up against Air Canada it has the God given right to run that company into the ground.

The government has failed to create a more competitive environment. It has failed to give Canadians the security in air travel that they deserve.

Clearly we need to radically improve our Competition Act. We need strong amendments. The best place to find the impact of weak competition laws and a virtually unenforceable Competition Act is the airline industry. For years the government has claimed to be trying to deliver a more competitive environment for air travel in Canada. It has failed not because it has not put enough money into the airline industry. It has failed because it did not address issues in the Competition Act and amend it far earlier, as it should have done.

If the government had acted earlier to amend the Competition Act and give the Competition Bureau teeth to make the rules enforceable we would still have companies like CanJet providing a wider range of services at more competitive rates between Atlantic Canadian destinations and other parts of the country.

In Canada we have seen companies like WestJet survive and do fairly well against all odds. It is a miracle for an independent airline in Canada to compete against Air Canada and succeed. WestJet is the exception to the rule. I commend WestJet on the fact that it has remained competitive with Air Canada.

However where WestJet has succeeded against Air Canada many others have failed. They have done so not because they were poorly run airlines. If poorly run airlines failed in Canada, Air Canada would have failed a long time ago. They have failed because Air Canada has continued to abuse the principles of the Competition Act and dodge the bullet every time. They have failed because we have not given the Competition Bureau the teeth to enforce the rules that would have protected competitors and ultimately provided a better, more competitive and value oriented marketplace for Canadian air travellers.

I commend the hon. member for Pickering--Ajax--Uxbridge for his continued attention to some of the deficits in our competition policy. He should realize there is a great deal of support on this side of the House for strengthening competition policy in Canada such that our marketplace continues to be a vibrant one that ultimately delivers the best possible services on an ongoing basis to Canadian consumers whether they are airline travellers, purchasers or consumers of petroleum products.

I have not always supported every initiative the hon. member has promoted in terms of competition policy, but I agree with the general thrust and direction of his initiative in terms of creating a greater level of competition and, ultimately, better goods and services at more competitive prices for all Canadians.

Competition ActPrivate Members' Business

December 3rd, 2001 / 11:30 a.m.
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Liberal

Marcel Proulx Liberal Hull—Aylmer, QC

Mr. Speaker, when he spoke on October 24, the Parliamentary Secretary to the Minister of Industry voiced his comments and concerns on Bill C-248 which proposes modifying the exception based on gains in efficiency, i.e. section 96, in connection with mergers The hon. member for Pickering—Uxbridge—Ajax also explained the circumstances leading up to the introduction of this bill. I would not repeat what has already been said in these presentations, except to identify the points I believe to be important.

I understand that Bill C-248 proposes the addition of two subsections to section 96 of the Competition Act in order to clarify situations which would give rise to the use of the gain in efficiency defence. Briefly, the first one addresses the effects of gains in efficiency on the price of products sold to consumers. The second addresses a situation in which a merger would create or reinforce a dominant position in a given market.

On the latter point, my hon. colleague for Pickering—Ajax—Uxbridge spoke of a situation in which a merger creating a monopoly would be authorized on the basis of gained efficiency. I presume he was referring to the Competition Tribunal decision in the Superior Propane case, in which this situation occurred in a large number of local markets.

I will spare you the details on this case and the legal proceedings, because the Parliamentary Secretary to the Minister of Industry spoke very eloquently of this on October 23. A few points are worth raising, however.

The federal appeal court refused to prescribe the method to be considered in order to determine the extent of the anti-competition effects of a merger. Instead, it referred the case to the Competition Tribunal so that it might assess the effects of the merger on competition for the purposes of application of section 96.

The tribunal recently heard the Superior Propane case and a decision will soon be forthcoming. The outcome is being anxiously awaited because its consequences will go far beyond the Canadian propane market.

Having heard the comments by my colleagues on Bill C-248, I believe that everyone agrees on the importance of the Canadian policy on competition and gains in efficiency. I do not believe it would be in the interest of Canadians to proceed with Bill C-248 at this time and amend section 96 of the Competition Act when the Competition Tribunal is on the verge of providing us with clarifications on this both complex and controversial matter.

Accordingly, in my opinion, it is inappropriate to speculate at the moment on a defence of gains in efficiency. All debate will have to be put off until later, if necessary, when the legal process has run its course.

I would like to thank the member for Pickering—Ajax—Uxbridge for bringing this matter before the House. I take this opportunity to point out the excellent results of the government's expanded and improved policy on private members' business.

We will recall that the process has been improved since 1993 and is much more regularly used by members of the opposition, as it is by Liberal backbenchers. The backbenchers can have their say, get laws changed and improve the way our country works.

We will also remember that my colleague from the riding of Pickering—Ajax—Uxbridge has succeeded twice now in getting changes made. The first change concerned the criminal code and the question of escape, that is, people who flee police. Second, thanks to my colleague, the organ donor program was introduced in Canada and was adopted and refined by the provinces.

In conclusion, this process really helps Liberal backbenchers fill in gaps in the opposition parties and make major changes to the lives of Canadians.

I thank the House for the opportunity to speak on this.

Competition ActPrivate Members' Business

December 3rd, 2001 / 11:25 a.m.
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Liberal

Marcel Proulx Liberal Hull—Aylmer, QC

Mr. Speaker, I am pleased to take this opportunity to speak to Bill C-248, an act to amend the Competition Act.

Before going any further, I would like to point out to the hon. member who just spoke that on November 20, The New York Times reported Air Canada president Robert Milton as saying that he did not need any money. The member should perhaps read The New York Times , instead of limiting himself to Le Devoir .

Competition ActPrivate Members' Business

December 3rd, 2001 / 11:15 a.m.
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Bloc

Mario Laframboise Bloc Argenteuil—Papineau—Mirabel, QC

Mr. Speaker, it is my pleasure to rise today and speak to Bill C-248, an act to amend the Competition Act.

Obviously one must always be careful when studying amendments to the Competition Act; however, the proposed amendments in this bill are in line with Bloc Quebecois philosophy on this matter.

The Bloc Quebecois will support these amendments since they refer to gains in efficiency that would lead to an increase in competition, unless clients would benefit from lower prices, the result of such an gain in efficiency.

However, it is important to remember and I give as an example the airline industry, that the Liberal government, through the transport minister, has already announced on several occasions that the problems in the airline industry will be solved by amendments to the Competition Act. This is somewhat worrisome.

Recently Air Canada representatives appeared before a number of House committees, including the Standing Committee on Transport, where, in a brilliant presentation, they told us that Quebecers and Canadians would have to prepare themselves because in the future competition would no longer consist of several airlines operating on the same routes. We would have to get used to the idea that competition would mean competition with one single airline.

Clearly, when we hear the government tell us, through the transport minister, that we have to deal with the issue of competition by amending the Competition Act in order to avoid unfair competition, including in the airline industry, it is hard for users to understand whether or not competition is becoming a monopoly.

This is what we need to be careful about when studying or looking at the Competition Act to try to solve all of the problems with competition in every sector throughout Quebec and Canada. We must always guarantee the best service at the best price. Obviously the only way to guarantee the best service at the best price is to promote healthy competition in Quebec and in Canada.

Changes are therefore needed, and recommendations must be made, such as the one proposed in Bill C-248, in order to clarify this gain in efficiency. Obviously everyone hopes that this gain will not favour monopolies, but it is clear that the proposal contained in Bill C-248 still encourages competition.

Returning to the matter of air transportation, once again the Minister of Transport has said clearly, week after week, that the best way of guaranteeing the best air travel prices at all times everywhere in Quebec and in Canada is to amend the Competition Act. Although I may be repeating myself a bit, there must be two carriers in order to guarantee competition and ensure that the market will endeavour to provide the best services at the best price.

This is where attention must be focused in discussing the Competition Act and in trying to use it to solve all the problems of our society, including, as I have said, those in the airline industry.

A solution to the airline problem understandable by all those listening to us in Quebec and in Canada might have been found. After September 11, the decision was made in certain countries, the U.S. and Switzerland among them, to use public funds to guarantee the survival of the airlines in their country.

The Americans, let us keep in mind, have invested $15 billion directly into support for their airline industry. Switzerland has purchased or has promised to purchase, with public funds, 38% of the shares in the new company that will replace Swissair, which is under the protection of bankruptcy legislation. These countries have chosen to come forward and support the airline industry to guarantee at least to some extent a variety of carriers on routes and services in all regions of the country, something that Canada has yet to do.

No investment or support for air carriers leads to defeat. The government has before it already one unfortunate case of defeat, the bankruptcy of Canada 3000.

The government had announced in the House $75 million in loan guarantees for Canada 3000, knowing full well that the company could not survive with the requirements it had imposed on it. The government knew this full well two weeks in advance when management rejected a program of time sharing with employees, which would have cost the company nothing. This refusal was already an indication that the company would not survive the crisis it was facing.

So the government announced loan guarantees for a company it knew would not survive. When we ask the government in the House to offer these guarantees to any new purchaser of some or all of Canada 3000 shares, the answer is no. When we ask the government in the House whether it will offer loan guarantees to regional carriers struggling in a number of regions of Canada, we are told the government will now help the four major companies still operational in this country.The other smaller companies and regional carriers will survive if the big companies do. They will keep the small companies going.

That is not how things work in the regions. Cities in the regions need services. Some are served at the moment by only one carrier, Air Canada, which has cut its services and even cut its meal service. This is the harsh reality. For regional passengers and cities the service is poor.

All of this makes it clear that regional development in Quebec and Canada is at risk if cities in the regions do not get quality service and appropriate schedules for the business people in these cities. The solution proposed by the government, through the Minister of Transport, is to amend the Competition Act.

The Bloc Quebecois agrees with Bill C-248, which clarifies the gains in efficiency that could be achieved in the case of a merger or other measure. However, we want to caution the government. In order to have competition, there has to be a minimum of two businesses providing the service across Quebec and Canada. This is not currently the case in the airline industry.

The Canadian Liberal government must take its responsibilities, considering that the Americans have invested $15 billion to support their airline industry. There are 300 million Americans. Here, with a population of 30 million, the government is currently only offering $160 million. This is proportionally ten times less than what the Americans invested. It is not true that Canada's economy is ten times smaller or weaker than that of the United States. The government is acting in bad faith when it tries to tell us that things will get back to normal in the air transportation industry when our neighbours are investing to support their industry.

I hope that the government will realize today that amending the Competition Act will not solve the problems of the airline and aviation industries. We just suffered a setback with Canada 3000 going bankrupt. There has to be at least two carriers on each route to guarantee the best possible fare to all Quebecers and Canadians who are listening to us.

Competition ActPrivate Members' Business

October 24th, 2001 / 6:05 p.m.
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Mississauga South Ontario

Liberal

Paul Szabo LiberalParliamentary 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.

Competition ActPrivate Members' Business

October 24th, 2001 / 5:55 p.m.
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Canadian Alliance

Chuck Strahl Canadian Alliance 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.

Competition ActPrivate Members' Business

October 24th, 2001 / 5:45 p.m.
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Beauce Québec

Liberal

Claude Drouin LiberalParliamentary 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.