Agriculture Committee on April 3rd, 2008

[The Chair, Conservative, James Bezan]

I call this meeting to order.

I want to welcome everybody to committee. We're kicking off our new study today on “Product of Canada” claims.

I want to welcome, first, from the CFIA, Debra Bryanton, executive director of the food safety directorate; and Carla Barry, acting director of consumer protection. From the Competition Bureau, we have Colette Downie, deputy commissioner of competition; Andrea Rosen, acting deputy commissioner of competition in the fair business practices branch; and Richard Taylor, deputy commissioner of competition for the civil matters branch.

Welcome to all of you. I'll open it up.

Andrea, I believe you're going to start us off with the first comments. Please keep it to 10 minutes or less.

Mr. Gaudet.

[Roger Gaudet, Bloc, Montcalm, QC]

Who is Mr. Taylor, is he a deputy minister? What does he do?

[The Chair, Conservative, James Bezan]

Mr. Latimer.

[James Latimer, Procedural Clerk]

Mr. Richard Taylor is Deputy Commissioner of Competition, Civil Matters Branch, Competition Bureau.

[Roger Gaudet, Bloc, Montcalm, QC]

Thank you very much.

[The Chair, Conservative, James Bezan]

Okay.

With that, Madam Rosen, perhaps you'd kick us off.

[Andrea Rosen, Acting Deputy Commissioner of Competition, Fair Business Practices Branch, Competition Bureau]

Thank you, Mr. Chairman. Bonjour, tout le monde.

The Competition Bureau is pleased to appear today to take part in the committee's deliberations on “Product of Canada” claims. My name is Andrea Rosen, and I am the acting deputy commissioner of competition for the fair business practices branch. I am joined today by my colleagues Colette Downie, deputy commissioner of competition, legislative and parliamentary affairs; and Richard Taylor, deputy commissioner, civil matters branch.

First I'd like to apologize on behalf of Commissioner Scott. Unfortunately, due to other commitments, Commissioner Scott is unavailable to appear before you today.

The bureau is well aware of the concerns raised by Canadians, particularly since last summer, over the labelling of food products and related health and safety concerns. The bureau is also keenly aware that consumers need accurate information in order to make informed purchasing decisions.

It is my understanding that the committee wanted the bureau to appear to discuss our Guide to "Made in Canada” Claims. I would like to state at the outset that the bureau's guide was developed for the purpose of assisting businesses and consumers in understanding how the bureau would likely deal with such claims when discharging our mandate under the legislation that we administer and enforce.

In my remarks today, I will briefly describe the roles and responsibilities of the Competition Bureau generally, its role with respect to labelling and, specifically, our Guide to "Made in Canada” Claims.

The Competition Bureau is an independent law enforcement agency. It contributes to the prosperity of Canadians by protecting and promoting competitive markets and enabling informed consumer choice. Headed by the commissioner of competition, our organization investigates anti-competitive practices and promotes compliance with the laws under its jurisdiction. We also advocate in favour of market forces to government law and policy-makers, as well as administrative boards and tribunals. Competitive markets drive innovation and investment. Innovation and investment drive productivity, and productivity is a vital ingredient of our well-being. Consumers with access to accurate information, who are able to make informed consumer choices between competing products and services, are a key part of this formula.

False or misleading representations and deceptive marketing practices do not achieve these objectives and, therefore, are violations of the legislation we administer and enforce, namely the Competition Act; the Consumer Packaging and Labelling Act, with respect to non-food items; the Textile Labelling Act; and the Precious Metals Marking Act. It is important to stress that the CPLA is administered and enforced by the bureau with respect to non-food items, and by our colleagues at the CFIA with respect to food items.

Each year, the bureau receives complaints from consumers and competitors about anti-competitive activity falling within the bureau's mandate. False or misleading representations and deceptive marketing practices constitute the area where we receive the largest number of complaints—from 10,000 to 15,000 per year. Approximately 25 of these complaints per year relate to labelling issues.

With that context in mind, I will now turn specifically to the bureau's Guide to “Made in Canada” Claims. As I mentioned earlier, it is important that consumers receive accurate information to enable them to make informed purchasing decisions for all products, including those that use "Made in Canada" claims in their promotion.

Generally, legislation administered and enforced by the Competition Bureau does not require businesses to put the country of origin on their products. Where businesses do make claims about their products, including for example that they are made in Canada, they must ensure that their claims are not materially false or misleading, or contravene one or more of the acts enforced by the bureau. For example, if a product is wholly made in country X and it is represented as made in Canada, this would raise an issue under the Competition Act. Moreover, if it is a non-food, pre-packaged product, it may also raise an issue for the bureau under the Consumer Packaging and Labelling Act.

Why do we have a guide? Essentially, it is to provide clarity and predictability to businesses and consumers as to the threshold at which country of origin claims may be considered to be false or misleading by the commissioner. The Competition Bureau publishes an enforcement guide for its interpretation of when “Made in Canada” claims may contravene the statutes it enforces.This guide is intended to help businesses comply with the legislation and to indicate when the commissioner is likely to take enforcement action under the laws she enforces. It is a guide only, and each situation is assessed on a case-by-case basis.

Now, as for the key elements of the guide, the key guideline is the one that states that 51% of the direct labour and/or material costs should be of Canadian content before a product can be designated “Made in Canada” without raising a question under our legislation.

This guideline was arrived at in the context of the realities of the Canadian market. Very often, specialized parts not produced in Canada have to be imported by Canadian manufacturers—and that's overall. Given this reality, it was felt that if the threshold relating to Canadian content were too high, most Canadian manufacturers would not qualify. This would limit the ability of Canadian manufacturers to distinguish themselves from foreign competitors and would deprive Canadian consumers who want to “shop Canadian” from obtaining helpful information. The 51% threshold also took into account the public's perception that the major part of a product should be of Canadian content for it to be called “Made in Canada”.

Over the years, the guide was tweaked for the sake of clarity, to add additional detail or to respond when stakeholders raised concerns. The last significant changes to the guidelines were in 2001.

First, expenditures on overhead incurred by the producer or manufacturer relating directly to the production or manufacture of the goods, and that can be reasonably allocated to the production or manufacture of the goods, may be eligible to be factored into the calculation of whether a product meets the 51% guideline.

Second, goods wholly obtained or produced in Canada are considered Canadian, as long as these goods do not undergo any substantial transformation outside the country, resulting in a new product.

Now, genuine and serious issues such as these are often brought to our attention by our various stakeholders. The bureau always responds to the issue by researching and analyzing it and, where warranted, by consulting with stakeholders. Based on the results, we may adapt our enforcement policy, develop new guidelines, or even seek legislative change if warranted.

With regard to our “Made in Canada” guide, the bureau, to date, has not been made aware by its stakeholders, nor has it come independently to the conclusion, that its current enforcement policy on “Made in Canada” is no longer relevant to the Canadian marketplace when it comes to those matters that are within our legislative mandate. Recognizing that recent events regarding food products have raised concerns in the Canadian marketplace and with the public, the bureau has not been subject to pressures from its various stakeholders to review its enforcement policy. Nevertheless, the bureau will be acting responsively, as it has always done in the past, as exemplified by the Canadian diamonds issue.

Mr. Chairman, the bureau agrees there is a need to have accurate information on product labels, whether for food or non-food items. With respect to the matters within our purview, that is, the labelling of non-food, we are monitoring this issue. As stated at the outset of my remarks, consumers need accurate information in order to make informed purchasing decisions. If it appears there is a need to further update our guide, we will always be open to any suggestions and will follow this committee's deliberations closely.

We would be happy to deal with any questions the committee may have.

Thank you. Merci.

[The Chair, Conservative, James Bezan]

Thank you very much.

Madam Bryanton.

[Debra Bryanton, Executive Director, Food Safety Directorate, Canadian Food Inspection Agency]

Thank you, Mr. Chairperson.

Good morning, ladies and gentlemen. We certainly do appreciate this opportunity to appear before the committee. My name is Debra Bryanton and I'm the executive director of the food safety directorate at the Canadian Food Inspection Agency. One of my divisions is the consumer protection division. Ms. Carla Barry, the acting director of that group, is here with me today.

We are here today to discuss the CFIA's work regarding “Product of Canada” and “Made in Canada” labelling of food products. As has been pointed out by the Competition Bureau, CFIA does have the responsibility for labelling policy and legislation as it relates to consumer protection in food.

With regard to the current situation, food offered for sale in Canada, whether domestically produced or imported, must meet Canadian food safety standards. Manufacturers and importers are responsible for ensuring that the materials they use, as well as the products they sell, meet all federal requirements.

Canadians have a high level of confidence and trust in foods from Canada and in Canada’s food production system. We do have a world-class reputation for producing food that is good to eat, wholesome, and of a high quality. So it is no surprise that manufacturers sometimes voluntarily label their products with the claim “Product of Canada” or “Made in Canada”, both in their advertising and on their labels. To help promote their commitment to Canadian jobs and the economy, companies often use words or phrases, logos, pictures, or symbols to indicate that the product is of Canadian origin.

Companies can make such voluntary declarations as long as they are true and do not mislead the consumer. These general requirements prohibiting false and misleading information on food labels and advertising are found in both the Food and Drugs Act and the Consumer Packaging and Labelling Act. CFIA is responsible for administering the provisions that relate to non-health-and-safety labelling in these acts.

As for what “Product of Canada” and “Made in Canada” mean today, our guidance to the food industry and information to consumers on how we interpret legislation relating to consumer protection are included in our Guide to Food Labelling and Advertising. Through that document, CFIA provides guidance to industry to better enable it to comply with the law.

Currently, the guidelines for the labelling and advertising of products of Canadian origin recommend that two basic criteria be met before manufacturers use Canadian origin statements. As with the guidance used by the Competition Bureau, these include the criteria that the last substantial transformation of the goods must have occurred in Canada, and that at least 51% of the total direct cost of producing or manufacturing the goods is Canadian. If these criteria cannot be met, companies may take the opportunity to make other voluntary statements about Canadian content; but these must be qualified with more specific and accurate claims, such as “Roasted in Canada” or Distilled in Canada” or “Packaged in Canada”. These guidelines are used by the Canadian Food Inspection Agency to help companies comply with the laws that prevent false and misleading representations about the Canadian origin of food.

When assessing voluntary “Made in Canada” or “Product of Canada” claims, CFIA takes a case-by-case approach, because we do balance all factors, taking into account the nature of the food product and consumers’ expectations that may relate to that product.

We do recognize that Canada's food supply is increasingly global in nature and that Canadians are seeking clearer information about the foods they buy. In October 2007, in the Speech from the Throne, Prime Minister Stephen Harper did make clear the commitment to enhance the safety of foods and products imported into Canada and to provide information necessary to assist consumers in making informed decisions.

Further to that, on December 17, 2007, the Prime Minister did announce Canada's food and consumer safety action plan. This is a comprehensive set of proposed measures that will make Canadians safer by legislating tougher federal regulation of food, health, and consumer products. The action plan also includes a commitment to review the government's current policies on “Product of Canada” and “Made in Canada” claims on food labels and in food advertising. More information regarding these initiatives can be found on the new website, Healthy Canadians, at www.healthycanadians.gc.ca.

Furthermore, in the budget of 2008, the government did deliver further action on this commitment by identifying $113 million for the action plan to ensure that food safety systems evolve to meet some of these new challenges of the global market, and to provide clearer information to Canadians.

So we are taking active steps to review “Product of Canada” and “Made in Canada” labelling policies. We will be looking to that further. Any further action relating to the action plan will appear on the Healthy Canadians website.

In closing, we would like to thank you for allowing us to be here today. We would certainly welcome any questions you may have concerning CFIA's work in this area.

[The Chair, Conservative, James Bezan]

Thank you very much.

For your benefit, one of the reasons we undertook this study on “Product of Canada” labelling is that during our agricultural policy framework study that we did last spring and continued in the fall, “Product of Canada” labelling kept coming up over and over again as a concern, not only from producers but also from consumers and other players in the industry. So I do welcome those comments.

One of the other things that came up through that study, and one of the reasons we wanted the Competition Bureau here as well, is the concern about concentration within the various levels of the agrifood chain, including at the retail level or the grocery store distribution system, and right through the entire industry. I know there's a lot of concern about that amongst our members, so I'm glad that Mr. Taylor is here so that he can answer some of those questions as well.

With that, we'll kick off our seven-minute rounds.

Mr. Easter, you have the floor.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair.

The chair has, I think, basically outlined the concerns that we have. I guess I should say, in the beginning, that we understand that your job is to administer the laws that you have been given. If the law doesn't give you the authority to deal with a situation the way we want it dealt with, that's not your fault. So I don't want you to think we're blaming you for the problems.

But to be quite direct, the farm sector has pretty well found the Competition Bureau, forever, to be absolutely useless in dealing with the concerns that farmers face on the farm input side. KAP, for instance, did a study of fertilizer costs, and they went to the Competition Bureau, but they might as well have walked around the block for all the help the Competition Bureau was to them. So the concentration in the industry and its impact on input costs is a real concern for the farm sector, as we feel there's potential price collusion, but because it's on the input side it seems hard to deal with.

Now, we made a recommendation about this in our June 2007 report. I don't know whether you've seen it, but we can give you a copy. We basically said that we're concerned about the domination and concentration in the agrifood chain, and we made a recommendation—and I guess the second point is perhaps the most important— that the government introduce a general administrative monetary penalty provision for abuse of dominance in any industry, which would encourage businesses in most industries to comply with the Competition Act. We felt that the Competition Act, the way it was—because something has to be almost criminal—should be changed. We suggested that the “government decriminalize the discriminatory and predatory pricing provisions in the Act in order that these practices receive a full hearing on their likely economic effects” on the industry, basically. But we'll give you a copy of that.

I don't know who can answer that, but what is your view of it? Our view is that the Competition Act doesn't work. What do we need to do to make it work for costs of inputs to the farm sector?

My second question—and Debra, you can think about this while somebody else is answering the first question—is about the definition of 51% of total direct costs. I think the definition was designed for industries that are manufacturing widgets and different parts for cars, and so on, but we're talking about food. Can anybody actually sit there and tell us that 51% of the direct costs, which really have not a darn thing to do with the product in the package, are “Canadian” and believe that's truth in labelling? When a consumer goes to the shelf and picks up a product that says “Product of Canada”, and it's the cost of the packaging, the box, the plastic around it, the labour of mixing water with it, or whatever, and it has nothing to do with the content, do you really think that's truth in labelling for the consumer who goes to the grocery store shelf?

Anyway, think about that, Debra, and tell me what we can do about it. You're a good Islander, so I wouldn't want to criticize you.

[An hon. member]

Oh, oh!

[Wayne Easter, Liberal, Malpeque, PE]

Now to the Competition Bureau.

[Richard Taylor, Deputy Commissioner of Competition, Civil Matters Branch, Competition Bureau]

Mr. Chair, I'll try to address the honourable member's question on concentration.

We do two things that affect, or could affect or be relevant to, concentration. The first thing is that we review mergers. Those that would lead to unacceptably high levels of concentration we challenge or adjust, pursuant to our legislation, to make sure that the excessive part of the concentration is divested to another hand.

It is true that under our act—under our legislation and guidelines—the safe harbour is at 35%. You don't have to be a mathematical genius to figure out that 35% really means there can be three companies in the sector. That is our legislation, and it's not that different from legislation around the world for certain sectors. Within that level, we enforce the act rigorously. We would have a very close look—and a strong look—at companies that would seek to get 50% or 60% of a market.

I'll use an example from the agricultural space. We spent 10 years reviewing, challenging, and getting divestitures in the grain handling industry, going back to 2001, when we put some severe restrictions on the UGG/Agricore merger. We wanted a bunch of prairie elevators—the good ones too, not the garbage ones or the old ones, but the high throughput new elevators—divested into another company's hands. And we wanted the best terminal in Vancouver divested, and it ultimately went to another competitor.

So we're aware of those issues, and we apply the merger laws rigorously in this sector.

I'll speak to one other point. The second thing that could obviously affect concentration is the abuse of dominance provision. That's when a company does become dominant or large—and again, that 35% is in our guidelines. When a company attains more than 35% of a given market, be it the fertilizer, the grain, or the slaughter industry, then certain things they might do that hurt their competitors, or stymie competition, we will take a close look at as well. And we do that.

Obviously those are two very important things we do.

The final thing, and perhaps one of the most important things we do, is that we make sure there are no agreements among competitors. I think, Mr. Chair, there was some reference to the potential of that happening. We have zero tolerance for that. It's a criminal offence: you go to jail. We have a number of ongoing investigations.

Over the years, I have gathered a list of some 100 cases that we have resolved and that involved cartels. I believe it's on our website. Many of them touched on the farm industry. I'll just mention a few. Lysine is a major ingredient that takes fat out of chickens and hogs, and it's used extensively in the rearing of hogs and chickens. That was subject to an international cartel. We stopped that. And the vitamins that were fed to animals, the bulk vitamins, were from a $1 billion cartel. We stopped that and imposed heavy fines. So when we're aware of these anti-competitive situations, we will look at them.

Right now we're picking up a number of complaints about price differences between the U.S. and Canada—and there are price differences. Let me just tell you about some of the sectors where we are getting price differences: first of all, TVs; books; gasoline; food products of all types, such as chicken, poultry, dairy products, vegetables; barbecues; electronics; cars; ATVs; and boats. In fact, the price of virtually every product is lower in the U.S. This has been the result of an 18% appreciation of the Canadian dollar since August. Prices are moderating, and if there is any evidence—any evidence—that these price differences between Canada and the U.S. are due to a conspiracy, then we'd certainly look at that. As every product in the U.S. is now cheaper than it is in Canada—since August—I find it a little hard to believe that every product is subject to price fixing and that we don't know about it. But there is the remote possibility that people are taking advantage of these exchange rate differentials. If that's the case, we will look into it. And we are looking into certain cases where there is evidence.

[Wayne Easter, Liberal, Malpeque, PE]

The problem with fertilizer, though, is that it's manufactured just outside of Brandon, with Canadian natural gas and Canadian labour, and it is more expensive to buy in Canada than it is south of the border. There's something wrong with that picture.

Can you not find a way to deal with that?

[The Chair, Conservative, James Bezan]

Mr. Easter, your time has expired.

I'm going to let Madame Bryanton respond briefly to your several questions.

[Debra Bryanton]

This will be brief.

When it comes to false and misleading claims, the legislation provides a basic prohibition on false and misleading claims. It's important there is an understanding of what government will be considering when it's evaluating a claim on a label to determine whether it's considered false and misleading. To accommodate that, we do have our Guide to Food Labelling and Advertising, which does put on paper our interpretation of the various claims that are being made on food labels. But more importantly, it provides advice on what would be considered a claim falling within the intent of that basic prohibition.

The current policy on “Product of Canada” claims is an old one; it's not an issue that has been looked at since the eighties. Consumer interests evolve, and of course we want to be able to respond to evolving consumer interests. So as we become aware of changing consumer interests on some of these issues, we do on occasion review policy. Based on the input we've received from consumers on our current “Product of Canada” labelling policy, this is a policy that we are looking at reviewing today.

[The Chair, Conservative, James Bezan]

Thank you.

Mr. Bellavance, you have four minutes.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Thank you.

Good morning. It's not every day that we can say this in Parliament, but I sincerely believe that we will manage to achieve something concrete on this issue. The proof is there seems to be some political will, not only on the part of the government but of all parties in the House of Commons as well as the stakeholders involved, to do something to improve the way food products are labelled. Perhaps I'm naive to think that we'll really achieve a satisfactory result for everyone. I dare to believe that. Perhaps I would not have come here today or I would not have run for office if I didn't think we could change things.

This is a file that affects a lot of consumers who are entitled to know what they're buying and consuming. There's the whole economic aspect for our agricultural producers, so that their products can be properly identified and that people can make an enlightened choice to consume a local product. There's also the whole issue of food safety that is related to this labelling.

Ms. Bryanton, when you referred earlier to the Throne Speech and the budget, you stated that action had been taken in the area of food safety. I'd like to know what has actually changed. This week, there was a series of articles—you certainly read them in La Presse newspaper—which presented a number of cases of products from overseas which contained salmonella, bacteria, glass, metal and chemical disinfectants.

I've always felt that products entering Canada were not sufficiently scrutinized. It's often been said that the use of pesticides that are prohibited in Canada should suffice to prohibit the entry of a product grown elsewhere, even in the United States. This isn't clear. Unfortunately, this rule has never been applied to the letter. Despite what you say, perhaps the government has uttered some pious wishes about food safety and security, but I get the impression that with the seizures, the recalls... Products are being withdrawn from the shelves. Recently, it was cantaloupe, spinach, carrot juice, pear juice. Those are the examples that spring to mind. We even had trouble with pet food.

I don't know if there's been any improvement, but I'd like to hear your views on this and I'd like to know whether, in concrete terms, we're really moving toward tighter inspection of food entering the country.

[Debra Bryanton]

Thank you.

First, Canada does have one the safest food supplies in the world. The food inspection systems put into place to verify the actions taken by food manufacturers and importers are based on a risk-based approach, using the history of compliance; and when we take into account that history of compliance, it can, at times, include some of our previous non-compliance data.

Now, with regard to the food safety action plan, as has been noted, the food supply has become more complex. With the globalization of the food supply, we do find there are new products and new ingredients coming in from many countries. That same environment applies domestically, where we do have consumer demand for new and different products. Both industry and governments seek to respond in this new environment to verify that the products continue to be safe for Canadians.

There are occasions when we do find problems with the food supply. If that situation did not exist, you would not need CFIA. When do find there is a problem, we find that both the Canadian industry and importers do work with us to respond quickly to these events when they occur.

Further to that, we work very closely with other governments, and if we do find a problem that emerges with regard to a particular food product, we do work with other governments to verify that actions have been put into place to address some of these risks at source.

So the action plan itself is oriented at enhancing our capacity to do that, to further ensure the safety of the food supply, and it builds on the roles and responsibilities of those engaged in our food safety system, including industry, governments, and consumers. So it looks at better identifying those areas of risk, putting in targeted measures that will help us to address those areas of risk, working with foreign governments to address risks at source, and providing more information to consumers, so they too can play a role in the safety of the food supply.

So this announcement is relatively recent, and certainly we are working very actively to be able to work towards an action plan that will realize some of the objectives the government has identified in that action plan.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

I understand that inspectors cannot taste all the products that arrive here to make sure they're all right. However, I feel that the agency should have far greater means to inspect at the Canadian border, as well as in the field, where products are being purchased abroad. We should inspect them directly on-site, perhaps even conduct random tests. Perhaps we'd be surprised to see how people in other countries grow certain products.

Let me ask you a question. Perhaps it would be better addressed to the Competition Bureau and may seem bizarre to you, but I want to understand the difference in your mind between a product of Canada and a product made in Canada. Explain to me the difference in interpretation between the two, if there is one in your opinion.

[Andrea Rosen]

In our legislation, we don't oblige anyone to use either one of those two terms, but if they are using them, they have to be accurate.

Now, of the two terms, “Made in Canada” and “Manufactured in Canada”, the latter is the more specific term. As long as the company that is making the claim can show that the product was actually manufactured here, that the product fulfills the 51% requirement and that its last transformation happened here in Canada, then they could certainly say either “Manufactured in Canada” or “Product of Canada”.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Yes, and what's the difference compared to the label "Product of Canada"? I'll tell you what I understand from this in French and what I feel should be done. A product of Canada that someone buys, the he will eat—not the bottle, the liquid and the cover—is a product from here. Am I mistaken, or when this is written on a product label, that is indeed what it means?

[Andrea Rosen]

No, that's quite correct. One could use the terms “Product of Canada”. I've seen a lot of newspaper articles lately that talk about a will to add another term that means product of Canada. We agree that this could be done, there's nothing in the legislation that prevents us from doing so.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Does the term “Product of Canada” mean grown in Canada? Right now, when we buy a product which is labelled “Product of Canada”, do we have assurance that this is grown here, that it comes from here?