Bill C-56

Affordable Housing and Groceries Act

An Act to amend the Excise Tax Act and the Competition Act

Part 1 amends the Excise Tax Act in order to implement a temporary enhancement to the GST New Residential Rental Property Rebate in respect of new purpose-built rental housing.
Part 2 amends the Competition Act to, among other things,
(a) establish a framework for an inquiry to be conducted into the state of competition in a market or industry;
(b) permit the Competition Tribunal to make certain orders even if none of the parties to an agreement or arrangement — a significant purpose of which is to prevent or lessen competition in any market — are competitors; and
(c) repeal the exceptions in sections 90.1 and 96 of the Act involving efficiency gains.

[Keldon Bester]

You make a phenomenally important point that's been missed from the discussion over the past couple of years. It's that the issues with food system consolidation and concentration are not just at the retail level, but at the distribution and wholesale levels, with all processors and input providers. You mentioned Cargill, both at the level of providing inputs to primary producers and also as a dominant processor in the beef space in Canada.

What I'm encouraged by is the market study power from Bill C-352, brought in through Bill C-56. We need to go further up that chain and understand beyond what the consumer sees. We have had—and I use the term “concentration begetting concentration”—a process over many years that would be very difficult to unwind. However, the first step is a stronger approach to competition and understanding that consolidation is costing us today not just at the grocery store shelf, but all the way up the chain.

[Brian Masse, NDP, Windsor West, ON]

Thank you.

I haven't had a chance to get Professor Iacobucci and Professor Quaid in, so I want to take the opportunity to have them reflect on European law. A good example is the U.K., which just extended their windfall taxes on oil and gas. As Mr. Ross mentioned, that's one strategy out there.

All we have available to us as a tool, and what Mr. Singh had available to him, is a private member's bill, which was eclipsed by other stuff. We can either choose to make some improvements or ignore it altogether and wait for probably another three years to do anything.

Where do we fit in now that we've had Bill C-19, Bill C-56, Bill C-59 and Bill C-352, whatever we choose to do with it, compared to our American and European colleagues, in your opinion, as it pertains to competition protection for Canadians? I'd really appreciate your input and analysis. I know it's pretty hard to do, but just give us a snapshot of where we are.

I understand you're advocating—and so am I—for a larger picture, but this is what we have in front of us, and we have it for a lot of different reasons. It's part of our democratic process until we get a government that wants to do a full review.

[Edward Iacobucci]

There's overlap, but I'd have to go back and cross-reference. One of the challenges I find with this process is that it has come in iterations.

As to what's in Bill C-56 versus Bill C-59 versus Bill C-19 versus Bill C-352, I'd have to take a moment to respond to you on that. I'll just wait and pass.

[Valerie Bradford, Liberal, Kitchener South—Hespeler, ON]

You may have addressed this, Professor Iacobucci, in your opening statement. I'm wondering to what extent the amendments brought forward by Bill C-56 address the proposed amendments in Bill C-352.

[Keldon Bester]

That's a good question.

With Bill C-56, we argued for the commissioner's independent authority to pursue market studies. I think this airline market study will be a good first test of that independence.

Bill C-56 was amended to allow the bureau a freer hand. We do have a balance between the elected officials' oversight of the Competition Bureau and the independence of the commissioner. Focusing on the independence of the commissioner is important, and the airline market study is a first test of that.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Thank you, Mr. Chair.

I want to swing back to some changes that have already happened and some that we're looking at in this bill. Bill C-56 gave new powers to the minister to do market studies. Mr. Bester, I'm not sure if you're aware, but a letter went out. The Competition Bureau was going to study airline competition, which was great news for everyone. Then a letter went out from the industry minister saying that, while this was great, it should focus on domestic competition and stay away from the airports. We had concerns in this committee that maybe giving all of this power to the minister was a bad idea, and we're seeing that.

The Competition Bureau was here the other day, and I asked them a question. I didn't get a direct answer online, but off-line they said that yes, the terms of reference have to be made with the industry minister. Should the minister be involved in directing where the bureau should be looking with an important piece like airline competition?

[Keldon Bester]

I'll just jump in quickly.

Bill C-59, Bill C-56, Bill C-352 and Bill C-19 are all very sound investments in the future of competition law in Canada. They're not a silver bullet. We're not going to turn the tap on and have competition increase tomorrow. However, in grocery and markets well beyond it—and I'll reference again the bureau's investigation into property controls in the grocery sector and the market study on airlines—these are foundational improvements that are going to pay off for generations to come.

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

Thank you, Mr. Chair.

Thank you for a great panel today.

I'd like to reiterate MP Généreux's comments about the staff today. It's been a really long year at the industry committee, but we've done a lot of great work for Canadians. I want to thank all the staff for their extended efforts, especially on Bill C-27.

I'll pose an open-ended question to the witnesses today.

There has been great discussion on Bill C-56, Bill C-352 and Bill C-59, but when we bring this to our communities and our constituencies, the number one thing I'm asked—and that I'm sure pretty much every politician in Canada is asked—is when we are going to see lower grocery prices.

With Bill C-56, Bill C-352 and Bill C-59, have we done enough to lower prices for Canadians so their paycheques will take them a bit further every month?

[Keldon Bester]

You're highlighting a good point. The structural presumptions are a response to the bias against intervention and against the bureau blocking mergers, which has persisted over the past four decades, since the introduction of the Competition Act. To refer to some analysis, of the eight mergers challenged by the bureau, seven resulted in market shares above 60% and four of them in near or literal monopolies. Only two of them had any sort of remedy, and none of them were blocked. We think of the structural presumption as strengthening the position when the bureau decides to challenge a merger, rather than imposing a stricture on the Competition Bureau.

It's important to note that the bureau doesn't approve mergers; it makes the decision about whether or not to challenge a merger. The structural presumptions—the 30%, rising up to the 60% in extreme cases—are a way of rebalancing the foothold of the bureau when it seeks to challenge one of these mergers. Again, it's in response to the four decades of bias towards consolidation. That's most evident in the efficiencies defence, which was removed in C-56.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair. It's good to see you.

I think there's a misunderstanding or lack of understanding about how a private member's bill takes place and the scope that a private member's bill can have. This is the way we got here. Basically, Bill C-19, Bill C-56 and Bill C-59 were pieces of government legislation that had various changes. Ironically, some of the changes we tried to get in the first set of laws are finally being included in Bill C-59—15 years later. However, many people came here from different institutions and spoke against those changes, quite frankly. When you go back and look at Hansard and the blues, there's been a consistent public outcry for improved competition laws, but there has not been consistency in academia and the private sector with regard to how to do so. That's been the challenge.

This bill is part of what a private member can do after being selected in a lottery system, but legislative issues have to be scoped. They can't include increased funding, taxation and a whole series of other things. Also, we're left with a bill that later on was eclipsed by another piece of legislation, which took some of the ideas of this bill. Here we are today trying to see whether we want to continue to increase competition laws for Canadians. This is the opportunity we have for amending parts of the bill to get some improvements that the Competition Bureau, the commissioner and many others continue to advocate for.

My first question, Mr. Hatfield, is on what you're hearing from the public. If we do not use this opportunity to at least make some improvements to the Competition Act, do you think Canadians would be disappointed? Although it has been raised that we need a more comprehensive process—even the Competition Bureau commissioner mentioned it—we still have tools available in front of us right now. With Parliament winding down, having a bill selected high enough in the Order Paper to try to squeak through in five years, if we last that long.... I'd like to know what your outreach can tell us about public confidence in institutions like the Competition Bureau.

[Ryan Turnbull, Liberal, Whitby, ON]

Thank you for that very detailed answer.

I'm going to switch to structural presumptions and ask Mr. Iacobucci and Mr. Ross a question about that. I think they made some really good comments.

I understand that Bill C-56 repealed the efficiencies exception. However, the tribunal can still consider whatever factors it deems relevant under the merger review. In essence, it can still consider efficiencies. I think both of your statements were that reintroducing elements of efficiencies into the statute would be problematic.

Have I misunderstood that, Mr. Iacobucci?

[Ryan Turnbull, Liberal, Whitby, ON]

Thanks.

Ms. Quaid, I'm going to start with you. I appreciated your opening remarks, and I appreciated specifically you outlining what pieces of Bill C-352 have overlap and remain as questions we can consider. Where I'm starting this conversation is that with Bill C-56, Bill C-59 and Bill C-19, to some degree, we've dealt with rounds of reforms to the Competition Act. We've had lots of debate about that. I think there are some very good steps forward.

Perhaps all of the panellists today have different opinions about different pieces of that, and I get that the legal community is not always going to agree. Neither are politicians. I think the debate is important.

I want to hone in on your comment because I found it a useful structure. You looked at clauses 3 and 4 as a package, although they're different. I think you said that you're not sure they are going to get the desired outcome.

Could you explain what you think the intended outcome was from listening to Mr. Singh's appearance? Then, could you explain specifically why the two changes being proposed to those clauses would not get the outcome that was intended?

[Matthew Hatfield, Executive Director, OpenMedia]

Good morning. I'm Matt Hatfield, and I'm the executive director of Open Media, a non-partisan grassroots community of nearly 270,000 people in Canada who work for an open, affordable and surveillance-free Internet. I'm joining you from the unceded territory of the Sto:lo, Tsleil-Waututh, Squamish and Musqueam nations.

I confess that I'm at a disadvantage in textual analysis compared to my fellow witnesses, whom we've just heard. I'm neither an economist nor a lawyer. Consider me a representative of ordinary Canadians in the room, reminding you of why this all matters. In that light, I'm very pleased to see this committee continue its work to strengthen our competition laws by studying Bill C-352. Bill C-56 and Bill C-59 have made a strong start to getting competition right in our country, but alone they are not sufficient to rebalance our laws to truly serve Canadians first.

Canadians do not believe that our competition laws are serving them. Last year, we conducted a Mainstreet Research poll that found that nearly 70% of Canadians believe our existing competition laws are designed to serve the interests of oligopolies more than those of ordinary Canadians. That was not a partisan finding. Majorities of Canadians who vote for each party felt that our laws serve large corporations ahead of them. A full 92% of Canadians believe that Canada's extremely high market concentration in many sectors is a key driver of our very high consumer prices. Again, there was a very small partisan difference.

Within telecommunications, OpenMedia's specialty, we have decades of evidence from across the country that prices track the number of competitors in a market. Prices go down when there's a third or fourth provider, and they spike when a company leaves the market. Put briefly, no matter who you come to this committee to represent, your constituents and your voters are looking to you to deeply reform the rules of the game in Canada to drive more competition between companies and more fairness for Canadian consumers.

Supporting Bill C-352 will demonstrate your commitment to better market competition. Placing the onus on large companies to demonstrate that their merger is unlikely to harm competition; giving the bureau expanded power to study what's going wrong in a sector and recommending how to improve it; and providing more meaningful penalties for subverting competition law and longer periods to undo damaging mergers are all smart, proportional proposals that we believe will meaningfully improve competition in Canada in ways that ordinary Canadians will feel in their daily lives.

Strengthened presumptions against mergers in already overly concentrated sectors in particular will be a very powerful tool against deals like the Rogers-Shaw buyout, which this committee condemned and which was soon followed by price hikes for many of Rogers' mobile consumers. With Bill C-352 passed, the Competition Act will continue to afford large businesses many opportunities to defend and successfully carry out mergers and buyouts that are in the public interest.

When I wrote my opening remarks, I expected that some witnesses would tell you that this set of amendments would place some of Canada's largest companies on the defensive when they contemplate buying each other out, uncertain that a merger and acquisition strategy will succeed. I know that some have. That's good. They should be on the defensive for a change. Businesses out-competing each other through vigorous market competition is much healthier for our economy and Canadian consumers than businesses solving their competition problems by financing buyouts and mergers and by reaping monopoly rewards for it. Some flexibility for the bureau and tribunal to examine different models of defining a market, for example, is a good thing, in OpenMedia's view, for better enforcing competition.

For decades, we've deferred to a very narrow view of how to define markets and identify competition problems. That has served us very poorly. Many democracies have gotten competition wrong over the last four decades, assuming that competition mostly sustained itself and that disruption would always come from market leaders. That has not happened. Competition is very powerful, but it requires an active and intervening regulator to sustain itself, particularly in sectors with naturally high investment costs, like telecommunications and tech. Canada has had the weakest competition laws in the OECD for many decades, and Canadians are paying proportional costs for that. From telecommunications to groceries to housing, we're a world leader in consumer costs, but we're far from a world leader in the quality of what we receive or the incomes we have to pay for it.

We believe that Bill C-352's remaining amendments that are not yet passed are modest and proportional to Canada's competition problems. If what's left seems bold to you, I encourage you to be bold. The scale of Canada's problems does not call for small, edge reforms. Nearly 24,000 Canadians have endorsed OpenMedia's anti-monopoly charter, which calls for our government to permanently block the formation of larger oligopolies in Canada. Bill C-352's strong presumption against mergers would be a powerful tool to this end. On behalf of our community, I ask you to support and pass it.

I welcome your questions.

[Keldon Bester, Executive Director, Canadian Anti-Monopoly Project]

Thank you to the committee for inviting me to speak with you today.

My name is Keldon Bester, and I'm the executive director of CAMP, a think tank dedicated to addressing the issues of monopoly power and building a more democratic economy in Canada.

We appreciate the opportunity to appear before this committee to discuss the proposed amendments to Canada's competition law contained in Bill C-352. After nearly four decades of proconsolidation law, Canada is turning the corner on competition policy. With the passage of Bill C-56 last year, Bill C-59 being studied in the Senate and Bill C-352 being studied by this committee, this government and, in fact, all parties have made much-needed improvements to Canada's competition law.

Canada is on track to having a tougher stance against harmful takeovers, abuses of corporate power and practices designed to deceive consumers. These changes should be understood as the first step—echoing the comments of Professor Quaid—in rebalancing the relationship between dominant corporations and Canadian consumers, workers and entrepreneurs. The work of improving competition in Canada is really just beginning, and I want to take the opportunity to zoom out on some of the mechanics that might make that possible.

As important as strong laws are, just as important is the effective execution of those laws to the benefit of Canadians. The Competition Bureau is putting powers gained through Bill C-56 to work in investigating the use of property controls in the grocery sector. Along with the recently opened market study in the airline sector, also the result of Bill C-56, the investigation is an early sign that the Competition Bureau understands that its efforts need to be focused where competition matters the most to Canadians. These efforts raise an important point for the future of Canada's competition law: the need for a quick resolution of competition issues and greater transparency in the work of the Competition Bureau.

Our strengthened laws cannot help Canadians unless they quickly address practices that harm competition. Today, competition law investigations are a multi-year process. The ongoing investigation into Google's practices in the digital advertising market has been expanded after four years, with no timeline for the conclusion of the expanded investigation. For news organizations dependent on a competitive digital advertising market, four more years may be too much to wait.

When investigations become litigation, Canadians can expect to wait another three to seven years for a resolution of practices potentially harming competition. If property controls are indeed weakening competition in the grocery sector, Canadians should not have to wait for up to a decade for more competition in such a critical market.

Accordingly, the committee should consider ways in which the investigation and litigation processes could be reformed to speed up the resolution of competition cases. One step would be to improve the information-gathering powers of the Competition Bureau with powers more akin to the Office of the Privacy Commissioner or the provincial securities commissions. If an investigation leads to litigation, the ability to stop parties from engaging in potentially problematic conduct while the litigation is ongoing should be strengthened. Finally, for the speedy resolution of litigated cases, the process of litigation should be streamlined, and the future role of the Competition Tribunal should be a topic of study.

Along with a more rapid resolution of competition issues, Canadians also deserve greater transparency into the activities of a strengthened Competition Bureau. Balancing the needs of confidentiality and accountability, Canadians should not be left in the dark about the investigations that the Competition Bureau is currently engaged in. A positive step in this direction would be a repeal of the language. This requires the bureau to conduct its investigations in private, which introduces ambiguity with the Competition Act's existing confidentiality requirements. While this would still leave transparency in the hands of the Competition Bureau, it would be an important signal to Canadians that more transparency is desired and a first step towards a Competition Bureau that is more open with Canadians.

The work of this committee has resulted in a competition law better equipped to promote competition and protect Canadians. A necessary next step is to think about improving the systems responsible for executing that law.

Thank you for your time. I look forward to your questions.

[Dr. Jennifer Quaid, Associate Professor and Vice-Dean Research, Civil Law Section, Faculty of Law, University of Ottawa, As an Individual]

Thank you to the members of the committee for this invitation.

Testifying before you is always a pleasure, especially when it comes to competition law.

However, I won't hide from you that I was surprised to learn that the committee had decided to study Bill C‑352, tabled by Mr. Jagmeet Singh in September 2023, since most of the provisions of this bill have been incorporated, in one way or another, into the bills tabled by the government, namely Bill C‑56 and Bill C‑59.

It is for this reason, and to better understand his concerns, that I listened carefully to Mr. Singh's testimony before this committee on June 3. It seems that three aspects of the Competition Act are of concern to him, as he makes three main proposals.

First, clauses 3 and 4 of the bill would modify the penalty imposed on those convicted under section 45 of the act. Second, clauses 8 and 9, which my colleague Professor Iacobucci has just discussed at length, deal with so-called “structural” presumptions linked to market share. Finally, the third proposal, and the least important, is to add, by means of clauses 7 and 10 of the bill, provisions to sections 90.1 and 93 of the act that take the wording of the exception provided for in cases of efficiency gains and place it instead in the main provision on the factors to be considered in assessing anti-competitive effects.

In this statement, I will focus briefly on the positive aspects of these changes and close with two remarks of a general nature on the competition reform process.

On clauses 3 and 4, I must confess that I am puzzled. In 2022, the Competition Act was amended to remove the previous $25-million cap on fines under section 45. This brought section 45 in line with section 47, which is the bid-rigging provision. It ensures that courts have maximum flexibility to set fines at levels that are proportionate in the circumstances to the gravity of the offence and the blameworthiness of the conduct.

Mr. Singh wants to reimpose an upper limit on fines. The previous $25 million would be reinstated, but then proposed subsection 45(2) would allow for an alternative, scalable penalty based on either three times the value of the benefit derived or, if that can't be calculated, up to 10% of the person's annual worldwide revenues. The objective is to communicate to courts the importance of imposing a quantum of fine that has enough bite to have an impact on the offender.

While I understand Mr. Singh's motivations, the modifications proposed will not produce the outcome he seeks and are likely to be counterproductive. The proposal is based on a misunderstanding of how criminal sentencing works in Canada, particularly the purpose of maximum sentences and how fines are calculated in cases of economic crime involving business organizations. I've done a lot of research in this area, so I'm happy to take questions on this. I would urge you to reject clause 3.

As for clause 4, I don't have any objection to it, but the provision—section 49 on financial institutions—has never been applied. I wonder why you wouldn't just have a fine at the discretion of the court given the size of financial institutions, relatively speaking, rather than having a $25-million maximum.

On clauses 7 and 10, I will say two things. I agree with the commissioner that reviving the old phrasing of the efficiencies defence may indirectly import back into the law some of the legal interpretations that came with that defence, such as an undue emphasis, in my opinion, on quantification and a judicial preference for a total surplus standard when assessing whether efficiencies are pro-competitive. However, I disagree with the commissioner that relying on the so-called basket clause, paragraph 93(h), is the best way to ensure that going forward, how we evaluate pro-competitive effects and how they're factored into merger law evolve in a manner consistent with the expectations that were created by the repeal of the efficiencies defence. I think this is an example of where enforcement guidance is going to be essential.

With regard to clauses 8 and 9, you have the benefit of two fine economic minds here, Professor Iacobucci and Professor Ross. They are better positioned than I am to speak to the frailties of relying on market share data alone as an indication of market power. I will simply echo the comments of my colleague from the Université de Montréal, Pierre Larouche—who appeared before you last week—that market shares are an incomplete picture and they can both overstate and understate market power. Bill C-59 also includes structural presumptions, but they are based on different measures than just market share.

This brings me to my final two points.

The first is that the debate over clauses 8 and 9 underscores a more fundamental problem, and it's one that Professor Larouche already talked about. I won't have time to get into detail here, but on the debate about what measures to put in the act, to me, they're secondary to whether or not we should have an act full of these kinds of details. There is a real problem with how the act is designed. I am a bit disappointed, I must confess, that this reform process didn't give an opportunity to start over with some basic general principles and develop a law that is far more rationally coherent and not with so many details and provisions from all over the place. Unfortunately, that's not what happened.

The final thing I want to say is that I hold out hope, but it's not going to happen this time around, that.... We still haven't really answered the fundamental question: What are we trying to do when we promote competition? We've skipped over the first question, which is, why are we doing this? That would inform the remedies we want, the choices we make, the emphasis we might put on different parts of law or what kinds of considerations would be relevant. Any discussion of the purpose clause ended with the Wetston consultation. Professor Iacobucci actually wrote about it. After that, there really wasn't much else there. There is no agreement on it, but I think it's an opportunity lost.

I'll stop there, but I welcome your questions in both official languages.