Agriculture Committee on April 3rd, 2008

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

Thank you very much.

Anybody who looks at the stock markets and these industries knows this industry in particular is cyclical and at times that plays as much a role in their profitability as anything else.

I want to get something straight with this “Product of Canada” labelling. It's voluntary. What exactly are you allowed to say? Are you allowed to say it's made in Canada, produced in Canada, grown in Canada? What are the restrictions on the definition?

[Debra Bryanton]

The guidance does not instruct industry on what to say. It indicates that if a certain statement is made, it should be truthful and not misleading and should provide some guidance.

[Brian Storseth, Conservative, Westlock—St. Paul, AB]

If the statement is not untruthful it's okay, so you can say it's approved by Canada or something like that, as long as it's truthful. Are my constituents and my consumers supposed to go to the grocery store with their lawyer to figure that out? That's a very realistic question. It seems like silly, basic stuff.

According to Mr. St. Amand, we need more lawyers. I'm not sure we do, but it seems this is very deceitful. Does this legislation say this? Is this policy within CFIA?

[Debra Bryanton]

The legislation itself just indicates the prohibition of false and misleading claims. What the guidance does is identify certain statements that are commonly made by industry and identify what our current policy would indicate to be a statement that would be compliant with that intent.

The question was asked earlier about the current guidance and what was considered at the time. We did have some discussions on this within our own unit and do understand that, at the time policy was established, there was also a broader policy initiative that related to “Buy Canadian”. Some of the objectives and some of the consumer issues at the time may be somewhat different from the consumer issues today. That's why guidance with regard to labelling is reviewed on a fairly regular basis, because it does respond to consumers and it's about what the consumer would consider to be false and misleading, as opposed to anyone else.

[The Chair, Conservative, James Bezan]

Okay. Time has expired.

Mr. Easter.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair.

Mr. Taylor, I believe when Mr. Miller was raising questions earlier and you were talking about Loblaws, your answer was—and I understand this—something along the lines of making sure consumers get the best price. And that's fine. But I think where we have difficulty...and I'll use that example to explain what I mean, where our producers are in the same kind of box as independent grocers.

Somebody on the Conservative side as well mentioned the big chain stores. We've had the independent grocers before this committee, and they were so fearful that their business would be taken away from them that we had to have the meeting in camera. The only one who could talk publicly was the executive director of the organization based in Toronto. If they don't go back to the warehouse of the chain, then they're penalized gravely, number one. That's why you don't see local Ontario product or local Nova Scotia product in some of the chain stores, because they're not allowed to do it due to the penalties, even though they're called an independent grocer.

In your descriptions of Loblaws.... Yes, get the best price, but the independent grocers find themselves under other restraints, and that is not adding to competition; that in fact is causing, I think, great problems.

We have the same thing on the farm. The Competition Bureau is geared to consumer pricing. But there are other players in that system, in the middle, who are in a uncompetitive position because of the dominance in the market, and how they exercise that dominance is not related to the pricing issue. That's what we've got to get to somehow, to make the Competition Bureau work for us and, I think, the independent grocers.

[The Chair, Conservative, James Bezan]

This is the second time it's happened today. Things are happening in camera and are meant to stay in camera.

[Wayne Easter, Liberal, Malpeque, PE]

No, no, they know we met. There are no names named. The independent grocers said they were at the meeting.

[The Chair, Conservative, James Bezan]

Just as long as it was said outside of the meeting. I just want to caution you in you making a comment.

[Wayne Easter, Liberal, Malpeque, PE]

Not a problem, Chair.

This is the other point I want to raise with you about how the Competition Bureau relates to the farm sector. Are you aware of the tied selling that occurs from a fertilizer company or someone else? I'm going to do a contract with Cavendish Farms, which is in my province, with potatoes. In order for me to get the contract, I have to buy their fertilizer or to buy my herbicides and pesticides from them, etc., or to get trade credit. So it's tied selling, and I end up maybe paying more money on that end. Is the Competition Bureau aware of that problem that exists?

[Richard Taylor]

Yes, we are, and we receive complaints from time to time on it. We look at those complaints seriously, and I would urge anybody with those complaints.... We had a complaint a number of years ago against Monsanto for tying their canola seed to Roundup Ready herbicide. The seed would be totally unaffected by this particular brand of herbicide. Unfortunately it was a patented product, and the Competition Act can't override the patent. So they came up with the product.

But we do look at tied selling; it's one of the biggest areas we look at. If we have complaints, we'll look at them.

[Wayne Easter, Liberal, Malpeque, PE]

On the first question, do you see what I mean—the difficulty we're in, using the grocery store example, trying to have the Competition Bureau work for us?

What changes have to be made to make it possible for the Competition Bureau to work, in our instance?

[Richard Taylor]

I certainly see the issue, and it's an issue that is obviously of great concern to all Canadians and the bureau: that our farmers, who are deeply respected across the country and produce some of the best food at the best price, are having trouble. It is of concern to us.

The issue is the lever that the bureau has to do anything about this, when our act is about market power and making sure there's no market power excess profitability, so that consumers get the best price. We do that in all sectors: in fertilizers, in seeds, in herbicides, in grocery distribution and retailing, and in food trucking. We look and we make sure.

But our act has certain limits as to what we can and cannot do, and I've explained those. By and large, a company can have 35% of the market, and that won't raise an issue under our act. Simple math would tell you that under the Competition Act we would have a tolerance for three companies and not let it go below three.

Having said that, if somebody like a Loblaws, with over 30% of the market, were to announce tomorrow an intention to buy Sobeys, with 15%, I think we'd have a strong look at that. We would have a concern, because it goes through our concentration levels under the act.

[The Chair, Conservative, James Bezan]

Time has expired.

For the committee's information, we are going to go in camera. We have a couple of housekeeping motions we want to deal with.

Before I let the witnesses go, I have a couple of questions for you.

Everybody is using different examples of “Product of Canada”, “Made in Canada”, and one that came to mind for me is “Made in Canada” or “Product of Canada” packaged olives on the shelf. We don't grow a single olive in this country, yet in grocery stores across this country we have “Product of Canada” olives in nice green jars.

You talk about truth in labelling and making sure they don't violate that. How can you call something like that a product of Canada? I guess you can under the definition of the law today.

I'm wondering, as we move forward and as this committee considers this “Product of Canada” labelling, whether it is going to require regulatory change, or does it require legislative change, especially as you look at how it affects the food industry differently from the manufacturing industry, which the Competition Bureau has to oversee? Are we looking at changes within a particular act or a particular regulation so that we can bring about the changes we're interested in?

[Debra Bryanton]

The current guidance is under our Guide to Food Labelling and Advertising. Changes to that guide would not require a change to legislation or regulation. However, we wouldn't want to preclude any result from a consultation and its outcome as to what the most appropriate tool to implement the result of that consultation would be.

[The Chair, Conservative, James Bezan]

I want to go back to Mr. Taylor. You talked about dominance of power; that's one of the main criteria you use in determining whether or not we have a problem. You say that the benchmark is 35%. We know that we have in the meat packing industry in this country, especially on the beef end and the pork side, companies that have well over 50% market dominance.

How do you remedy that situation, or did the Competition Bureau actually approve the expansion of these two major players, one in pork and one in the beef sector?

[Richard Taylor]

To answer your second question first, we would have approved those mergers under a review. While 35% is a set guideline and is what we call a safe harbour, in certain circumstances we'll allow a merger that attains a higher market share than that, particularly when the barriers to entry into the industry are not high. It's a technical area, but we would have allowed those particular mergers.

As for their ongoing operation, were they to do something that affected a smaller competitor such as Better Beef or some of the smaller Ontario packing houses, or some of the newer packing houses that are trying to open and get off the ground, were they to try to put them out of business, that would certainly raise an issue under the abuse provision. So once they get through 35%, we have a very close watch on them.

To answer the first part of your question, were those large packing houses with high market shares in pork or beef to do things like enter into exclusives that would tie up a large grocery chain or make it difficult for smaller packing houses to make sales, we would want to look at that.

[The Chair, Conservative, James Bezan]

What about tying up supply?

[Richard Taylor]

We would look at that too, if they looked at exclusive supply contracts with some of the larger producers of cattle, beef, and pork.

[The Chair, Conservative, James Bezan]

With that, we are going to go in camera, so we're going to suspend.

I thank the witnesses for coming in.

[Proceedings continue in camera]