Agriculture Committee on March 6th, 2023

[Anthony Durocher]

I don't think we have a view, because we haven't studied the issue of a code of conduct in depth. Again, our role is really to administer and enforce the Competition Act. We are certainly familiar with the issues that have led to the code of conduct, but in terms of the debate as to whether it should be voluntary or formal, that's not a specific issue that we've studied.

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

Going back to some of the previous witnesses we've had from the grocery chains, it's very hard to get detailed financial data on specific sectors or even to look at the grocery sector versus other sectors within their chains, so it's hard to analyze what's happening. I noticed that this was one of the limitations of the study that you mentioned as well.

How do you think that can be addressed? I understand that most of the data you look at is confidential. Do you think that we need to have more teeth there so that we can actually get more granular data and see what's happening?

[Anthony Durocher]

Thank you for the question.

Yes, that is a limitation of the Competition Bureau's ability to conduct market studies. When we are enforcing the law and doing investigations, we are able to collect the information we need to make decisions. When we do a market study to try to inform government and policy, we do not have that ability to collect data and information. We're working with publicly available information or what people are giving us voluntarily. That clearly limits the depth of the work we can do and the quality of our recommendations.

The solution is the Competition Act. That is an issue that's been talked about for quite some time. I think it's live with the current consultation on the Competition Act. What type of power should the bureau have to do this work? Our respectful submission is that it is very important that we be able to compel information in order to do these types of studies properly and inform government of our findings.

[Leah Taylor Roy, Liberal, Aurora—Oak Ridges—Richmond Hill, ON]

I have one last question.

In the environment committee, we've been talking a lot about hot spots, vulnerable populations and how to address environmental concerns. When it comes to competition in the retail grocery sector in particular, is there any consideration for captive customers or vulnerable populations?

I'm talking about seniors, students or people who can't travel to other areas. Is that taken into account at all?

[Krista McWhinnie, Deputy Commissioner, Monopolistic Practices Directorate, Competition Bureau]

Thank you for the question.

Yes, exactly. When we do an analysis of, say, retail grocers merging, it is a local market analysis. We're looking at specific demand. If there are specific aspects of a population that make them captive or vulnerable, those would go to our determination of what a substitute is and where they can travel to buy their groceries.

[The Chair, Liberal, Kody Blois]

Thank you, Ms. Taylor Roy. Thank you, Ms. McWhinnie.

We'll now turn to Mr. Perron.

Mr. Perron, you have the floor for six minutes.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Thank you, Mr. Chair.

I would like to thank the witnesses for being here with us. We are very grateful.

I will start with you, Mr. Durocher. When you take a look at the various sectors in general, excluding the food sector, is there a threshold for competitiveness or competition that the Competition Bureau feels is optimal to ensure correct pricing? Is there any data? Does it depend on the sector?

[Anthony Durocher]

Thank you for the question.

It does indeed depend on the sector; there is no magic threshold.

We have guidelines for mergers, for example. A 35% threshold is an indicator that there might be competition problems. For example, there would be a problem if the market share was higher than 35% after a merger. The act, however, does not allow us to challenge a merger solely on the basis of concentration thresholds.

You really have to look at each sector individually. It depends on the facts and the data. Concentration is an important factor when we look at competition.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

If I understand you correctly, you're telling me that if there were five players that control 80% of the market in the food sector, for example, that would not be considered unusual or hamper price-setting, based on your criteria.

[Anthony Durocher]

It's obvious that that would be a highly concentrated market. In this type of market, we have to remain vigilant in terms of anti‑competitive behaviour, whereby a merger would lead to concentration or possible collusion. Obviously, you have to be more vigilant in this type of sector.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Thank you.

When you look at competition between five players that control 80% of the market, for example, do you take a look at the effect that this can have on the relationships between the small suppliers and the big ones? Earlier, we spoke of the practice that consists of making them pay the costs of loyalty points or penalties for unsold merchandise, for example.

Are those issues that you have raised?

[Anthony Durocher]

Absolutely.

We look at the situation through the lens of the consumer as well as the supplier in almost all sectors; that means examining the market from top to bottom. In the industry, we talk about monopsony. This is the purchasing power of the buyer with its suppliers. We can take this aspect into account when there is a merger, for example.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Let's say that these five big players are buying up independent suppliers, such as the case described by Ms. Rood earlier. Would that merger concern you? Could you block such a merger even if the players held less than 35% in terms of market share?

Do you have the authority to block such mergers?

Correct me if I'm wrong, but I am getting the impression that you undertake studies but that you don't actually have any real power.

[Anthony Durocher]

Market studies are rather separate from the work we do to enforce the act, for which we are authorized to collect information.

When it comes to mergers, it is the legal test that allows us to determine if a merger can reduce or considerably hinder competition. As to whether we have enough real powers, that is a question that the government is looking at right now. The Bureau is working on recommendations on ways to improve our framework in order to be able to block mergers that could be harmful to consumers or the economy.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

This is a most interesting exchange and I like the fact that you are anticipating some of my questions.

The Bureau recently published a market study notice stating that you have fewer powers than the American institutions, for example, when it comes to collecting data. Food supply chain representatives have provided testimony to us indicating that financial statements are very opaque. We are presented with profit margins that have been collated and someone tells us that it is the pharmaceutical sector that is responsible for growth and that the food sector is not really profitable. It is impossible for us to check if that is true. You are the ones that need to be able to do this.

If you had to make one single recommendation to our committee to improve the situation, what would it be?

[Anthony Durocher]

In that context, I would recommend that we look at market concentration as well as the concerns of Canadians. I would say that there are two concerns and that they deal with the Competition Act. We should be looking at the powers that we can wield in order to collect data for market studies. It is obvious that we are limited in this regard.

Secondly, we should look at our framework, the acts that deal with mergers, in order to be sure that we have the necessary means and adequate tests to prevent mergers that can hamper competition, especially in concentrated sectors.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

If I understand you correctly, and do set me straight if need be, the study that you are doing currently is not really about price‑setting mechanisms, but the situation.

You should know that witnesses have told us that it would be good if the Competition Bureau were to undertake a study on price‑setting mechanisms.

I would like to know what you think about this.

[Anthony Durocher]

I just want to clarify one thing. When you talk about price‑setting, you are not necessarily talking about collusion.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

No, I was talking about unfair negotiations, for example.

[Anthony Durocher]

We have looked at this issue in the past, especially during our study on Loblaw and its practices in dealing with its suppliers.

[The Chair, Liberal, Kody Blois]

I'm sorry to interrupt, Mr. Durocher, but the member's speaking time has run out.

Mr. Perron, you will have two more minutes later on to get back to this issue.

Mr. MacGregor, you have six minutes.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Thank you very much, Mr. Chair, and thank you to all of our witnesses for appearing before our committee today.

I'd like to start my line of questioning with the Competition Bureau and dig down into the differences between a study and an investigation.

Your release did state that “unlike many of its foreign counterparts, the Bureau does not have the power to compel businesses to provide such information for the Study.” In the annex, you listed some of the countries, including the United States, Mexico, New Zealand and the European Union.

Some of the information that you could glean from this exercise could potentially lead to an investigation. I guess a company, because they're not compelled to release this information, could withhold information that would be vital and might serve as the basis for you to launch an investigation.

How are we, as policy-makers, to address this problem that could potentially exist?

[Anthony Durocher]

If we're not able to compel information from certain parties, that does play a role in terms of what we can find out that could inform an investigation.

The key issue that I would come back to is that our market study is not really geared to look at any allegation of wrongdoing. We're not necessarily looking for something that could be an offence under the act. We're looking to make recommendations to government on how to improve competition.

That said, if we come upon information that's problematic, it could be grounds for further investigation. In those instances, we would have access to more powers, such as subpoena powers or search and seizure for potential criminal offences.

I think the key solution is looking at the Competition Act itself. The government's consultation right now is ripe for discussion as to whether it would be appropriate for Canada, like many of our peers across the world, to be able to have that information and to collect data and information to inform our studies.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Thank you.

I appreciate the recommendations you made, so I won't go over the same question. I think I get a sense of where your wants are legislatively. Of course, we do take note of the recent changes to the Competition Act. I guess I want to theme my question more on the resources of the Competition Bureau. I want to zero in on the bread price-fixing scandal.

It was in 2015 that Loblaw admitted to the Competition Bureau that it had conspired with other companies. It was two years later that you obtained and executed a search warrant from the Ontario Superior Court. A lot of time has passed, so I just want to know what the status of that investigation is. Is that a case study that we need to look at to gauge whether the Competition Bureau has enough resources?

I know your heart is in the right place and that you are going to work every day in service of Canadians, but you are up against companies worth billions of dollars that have an army of lawyers at their beck and call. I just want to get a sense from you. Paint a picture of what you really are up against here.

[Ann Salvatore, Deputy Commissioner, Cartels Directorate, Competition Bureau]

Thank you for the question.

I can understand where you're coming from in terms of the length of time this investigation has taken, but I can confirm that this is a very active investigation. We continue to investigate all aspects of this case. It is a very complex case. There are multiple parties involved. The time period of the alleged conspiracy was quite lengthy, and so these investigations do take time.

It is being investigated under criminal provisions, so we have to be vigilant and we have to be vigorous in our investigations. Hopefully, we'll come to a conclusion in a timely manner.

Again, I will just emphasize that this is a very complex case.