Finance Committee on Nov. 20th, 2023

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

You give me too much credit.

[Some hon. members]

Oh, oh!

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

We want that to come to fruition as quickly as possible, because we think it's a good way to bring more balance, I would say, to the negotiations.

One of the groups I've met and I am sure you know well is the independent grocery association, which represents about 6,500. They have been very adamant to me that this is a step in the right direction to better balance the power when one is a small producer trying to negotiate with some of the big brands in the country.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Thank you, MP Williams, and welcome to our committee.

We have MP Weiler, please, for six minutes.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Thank you, Mr. Chair.

It's always a pleasure to see Minister Champagne.

Thank you to Mr. Schaan for being here as well.

We are seeing inflation come down in Canada. We know it has been persistently high with grocery prices, and from one end of the riding that I represent to the other, people still have sticker shock when they go grocery shopping. It's so important that we work on measures that are going to improve affordability in this area.

Minister, I was hoping you could first speak to how the lack of competition is affecting the elevated grocery prices in Canada.

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

Thank you for your question and your introductory comments in French, Mr. Weiler. I will answer first in French and then in English.

The last serious attempt to reform the Competition Act was in 1986. That was nearly four decades ago, so I think a major reform of the law is long overdue.

We took the first step in that direction in February 2022, through the budget.

We then introduced in November this very broad consultation.

I must say to colleagues who are part of this committee that we should take pride in this being a government and a Parliament that listens to people. We conducted a market study or, let's say, consultation for almost two years looking at the different aspects. People would agree, particularly in the grocery sector.... That's why you see that these three key amendments are really focused. It's because it's a complex industry and an unregulated industry, but one, I would say, that affects Canadians in their daily lives. We have seen what types of things would make the most sense.

To me, it is shocking to think that, in 2023, in a G7 country, the competition authority would not have subpoena powers when it does market studies. Members of this committee should all be cheering when we receive royal assent, because it's pretty unique, if you think about it, that you would have a body there to look at competition that does not have subpoena powers. We are probably one of the very few countries in the world that I can think of that has an authority that cannot seek information or documents.

We've seen how this could be harmful, because in the last study that was done on the food sector, as I said in my opening remarks, we saw various degrees of co-operation with this entity. Think about that. This entity is there to inform Canadians, government and Parliament, so for it not to be able to have a full understanding of the market is pretty concerning to me.

Even that is going to help a lot, because in this industry or others.... Think about it. There are so many other industries for which we may want to do market studies to better understand what the competitive dynamic is, why we are where we are, why the prices are what they are and what the issues around competition are.

I'll give you a small example. One of the things I'm trying to do is bring another grocer into the country to disrupt the market. It's what they call a deep discounter. That's the term they use in the industry. When I talked to the U.S. grocers, one of the reasons they didn't come to Canada—believe it or not, it's not the market—was the restrictive covenant in leases. They said, “Minister, we looked at Canada but, believe it or not, even as big as we are, it was extremely difficult to find a place we could lease because of all these restrictive covenants in leases.” I got that from some of the big grocers in the U.S.

I said, “Wow. Imagine that.” If Canadians knew that.... Now potentially—I'm not saying it's a done deal—you have grocers that may want to come to Canada, and one of the problems they have is leasing premises because of what are called land control provisions basically preventing them from being able to rent premises so that they can offer an alternative to consumers.

These kinds of measures are really down-to-earth and are going to help Canadians, and they'll certainly bring more competition to our country.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Thank you for that. Certainly, you can get far by asking nicely, but having the power to actually compel that evidence is so important.

I want to pick up on that point. One of the aspects of this new legislation will allow the minister to be able to direct the Competition Bureau to undertake a market study. As part of this, I'll just mention that I see in parts of the region I represent, for instance, gas prices that are just as high in an area that has 15¢ less a litre in tax, as prices in another area that has that tax.

I'm curious. As part of this new power, would it be possible for the minister to direct a market study in a particular region, or would this new power just be for the nation as a whole?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

I would say that this is to investigate market dynamics. If the market dynamics are specific to a particular region, I don't see why it could not be done. Obviously, the power is national, but if you were to find some discrepancy in a particular market that warrants us to look into that.... As you know, there are a number of checks and balances in the system. We have to publish the mandate and the terms of reference. There is a discussion with the minister and the commissioner.

However, if the market dynamics warrant—because, as you suggested, there could be some regional aspect to it.... For example, we know that refining is normally and generally a regional market as opposed to a national one. You refine where you sell. If there were issues that were brought to the attention of either the minister or the commissioner, and there was a particular market dynamic that warranted our investigation, I think someone should be open to that.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Weiler.

Now we'll go to MP Ste-Marie, please.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

Good afternoon, Minister. Thank you for being here today.

We are very pleased with all the amendments to the Competition Act proposed in Bill C‑56. These are fundamental changes. People have been calling for them for some 20 years. The amendments will bring us more in line with practices in the United States and Europe, particularly when it comes to the bureau's analyses going forward. Up to now, any time a proposed acquisition promised economies of scale or efficiency gains, it was approved, regardless of the abuse of dominance that might ensue.

In that connection, the committee has begun looking at Royal Bank's acquisition of HSBC Bank. The Competition Bureau did a study, but under the old toothless regime. Do you agree with me that, once Bill C‑56 is implemented, the Competition Bureau should redo its study of the transaction under the new more binding rules, particularly from an abuse of dominance standpoint?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

First, Mr. Ste‑Marie, let me say how nice it is to see you. I thought I would get to see you in person, but I'm glad to have the chance to see and hear you. I know you have long been an actively contributing member of the committee.

I appreciate what you said about eliminating the efficiencies defence. You mentioned it as well. There seems to be a consensus on the issue—if not a consensus, at the very least, agreement among a wide range of experts that it is time for Canada to scrap the defence. I'm not so sure it has served Canada well. We now have a mature economy that is perfectly capable of functioning without it. For supporters of the Competition Act, the Investment Canada Act and other such laws, stability and predictability are key. Those are the things that matter to investors.

Obviously, these provisions aren't retroactive. I'm sure that, as an economist, you can appreciate why. The idea is to be able to take a forward-looking view. As you may have noticed, the vertical agreement provisions and other changes come into force a year after the bill receives royal assent. That is to give market participants time to make the necessary changes to contracts such as property leases.

Generally speaking, as you know, the law is forward-looking, not retroactive, in accordance with the principles of natural justice.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you for your answer. That was very clear. May I just point out that the minister who appeared earlier still hasn't signed off on the acquisition, since it would create an upheaval in the highly concentrated finance market? I do understand your answer, however. Thank you.

Let's turn to the grocery and food sector, since that is what the bill is meant to address, according to you. The level of market concentration we've seen in recent decades has been appalling. We've gone from a few dozen chains or grocers to three—five, if we add Walmart and Costco. Those five control 80% of the market.

Bill C‑56 is helpful because it would prevent that type of concentration going forward, putting an end to the phenomenon. However, it wouldn't automatically lead to new grocery entrants. I heard you tell Mr. Weiler that you would like to see a U.S. grocer enter the market.

After Bill C‑56, isn't it necessary to tackle the issue at a deeper level? If we want to see profits at a more acceptable level in the grocery and food sector, don't we need to rethink the abuse of dominance, to prevent big players from taking advantage of their disproportionate market share and passing on higher input costs to consumers, as the Governor of the Bank of Canada told us?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

As always, I think your assessment is spot‑on, Mr. Ste‑Marie.

Three players actually control over 50% of the market, Loblaw, Sobeys and Metro. Two U.S. companies, Costco and Walmart, also play a role in the industry. I have spoken to various grocers, specifically, in Europe and, of course, in the U.S.

I think Bill C‑56 can help us attract a new player, at the very least. Believe it or not, one of the reasons why a U.S. grocer didn't come to Canada has to do with the infamous covenants in leases. Currently, if there is a grocery store in a mall, the owner can stipulate in the lease that a competing store can't open within so many kilometres. Imagine what that's like for a new grocer trying to enter the market. The simple fact that these agreements will be reviewable changes the market dynamics. When I met with grocers, that's what they told me. They want to be able to look further ahead to see how they could set up shop in Canada.

I take your point about the abuse of dominance. Government business motion number 30 gives the committee the latitude to examine those very reforms. I think that's important, so I encourage you to pursue that. The bill introduced by Jagmeet Singh, Bill C‑352, contains some amendments. There are some things worth exploring in there as well.

We have a historic opportunity. The last time the act was reformed was 37 years ago. If we want to change the trajectory we've been on for the past 30 years, now is the time. Bill C‑56 will give us some excellent tools to do that.

That said, there is still a lot to do. We addressed that in the fall economic statement. I think Bill C‑56 moves us in the right direction. Having spoken to grocers interested in coming to Canada, I can tell you that they are watching all this closely. I think we have some good stuff here.

The reality of the market is this: three players control half the market in Canada. Today, as parliamentarians, we would do well to change that reality as quickly as possible. Ultimately, I want to see food prices stabilize, new players enter the market and—

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Ste-Marie.

Minister, you got wound up, and we couldn't stop you.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you.

[The Chair, Liberal, Peter Fonseca]

Now we're going to MP Blaikie for six minutes.

Go ahead, please.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you, Mr. Chair.

Something that really struck us when Rogers took over Shaw was that the Competition Bureau was apparently opposed to the deal. It had to challenge the deal in court because it didn't seem to have all the information it wanted. At the end of the day, the minister approved the takeover despite the objections of the Competition Bureau.

How do you think the reforms proposed in the bill would have changed things in that takeover?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

That's a very good question, Mr. Blaikie. Thank you for your contribution.

I want members to keep in mind that I blocked the Rogers-Shaw takeover because I was adamant that we needed a fourth player nationally. Why did I do that? It was clear that with Videotron, in Quebec, prices were 20% to 30% lower, on average, than in the rest of Canada. I wanted to block the transaction in its original form, to have a fourth strong player and put downward pressure on prices.

According to Statistics Canada figures, things are moving in the right direction. Prices are coming down. It's tough to predict what would have been different had Bill C‑56 been in place at the time. I can speculate, although I shouldn't. With the Competition Bureau's new market study powers, certain aspects of the transaction may have been available before it was referred. The bureau may have been able to gain a better understanding of the market dynamics, something that will be possible under Bill C‑56.

It's important to look under the hood, if you will. When you're examining a specific market, understanding all the dynamics isn't exactly easy when you don't have access to witnesses and documentation. I'll go back to the example Mr. Weiler brought up. If refiners in a region adopt a particular practice, you really need the powers to find that out.

Today, it doesn't make any sense to have a regulator that doesn't legally have the power to compel information or evidence, so it can understand what's going on and bring it to the attention of the government and Parliament. I think this is a step in the right direction. It definitely can't hurt. I believe these provisions are going to make a difference.

It's unrealistic to think that some big companies can be counted on to co‑operate voluntarily. Doing the work that needs to be done requires judicial powers.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

One of the other things that Canadians found kind of shocking in the Rogers-Shaw process was that, at the end of it all, the companies were awarded costs by the court, and the Competition Bureau had to pay that out.

Is changing that, when the Competition Bureau is acting in the interests of Canadians, something that your government is open to doing?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

As I said, we're always open. Bill C-56 is doing a number of important things, but I think you will see in the fall economic statement.... It was kind of a three act type of thing. First, we started in budget 2022 with a number of things, because we saw low hanging fruit that would help competition. Second, Bill C-56 was really targeted at specific measures that we could pass quickly to help in the grocery sector. The third act was what we put in the fall economic statement, which was another set of reforms.

I would certainly be open, and I know the NDP has been looking at this issue in particular. The committee should do a bit of study around that. I know that different jurisdictions are dealing differently with that particular issue. We want to make sure we're in line with international best practices.

If your question is, should we have an open mind on that? I'd say yes, and I would invite committee members to look at that particular piece of legislation. Maybe there's some expert testimony that could be brought to the committee that could inform what Canada should do in order to address the issue you mentioned.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Certainly, some of our thinking is that it doesn't make sense to have the burden of proof on the Competition Bureau to prove that a merger is anti-competitive. To your point about industry players having a better sense of how things work and having access to data that would help make that assessment, it makes more sense to require industry players to prove that a merger is not anti-competitive.

I would welcome your feedback on the question of that onus and whether it really properly lies with the Competition Bureau, which, as you said, historically hasn't had access to all the information it would need to make that determination. Instead, put the onus on the people who have the information to prove that their merger won't have negative impacts for Canadian consumers.

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

I think Bill C-56 is sending a very clear signal that we take competition seriously in this country. It's going to be a game-changer in the relations between the Competition Bureau and the market players, because today—imagine—you have the Competition Bureau, which, if it wants to understand the dynamic of a market, has to rely on the goodwill of the participants in order to understand. I would say that probably you have some that are very forthcoming, but we've seen, for example, when we did the last analysis on the grocery sector, that some others were much less willing to share.

In terms of the market dynamic, it's going to change the balance of power, if you see what I mean. Market participants will now know and say, “Hey, if I'm not willing, they can subpoena and get the information.” Therefore, I think we're strengthening the Competition Bureau and the enforcement tools.

The NDP was also with us with respect to penalties, making sure the efficiencies defence is gone or will be gone, and making sure that we look at vertical agreements. Those are all signals that, if you're sitting there as a market participant who engages in anti-competitive behaviour, you would look at that and say, “Okay, now the tide is changing.”

We're going to be in a world where competition is going to be a cornerstone of the Canadian economy. We're a mature economy. We should be able to allow pro-competitive mergers to go forward, but certainly not those that harm consumers, as we have seen.

Ultimately, we need less consolidation and more competition in this country. This is really sending a very clear signal to industry that we're going to get serious about competition.

[The Chair, Liberal, Peter Fonseca]

Thank you, Minister and MP Blaikie.

We're now moving into our second round. As we have done as a committee, we do share this time among all parties when there's not enough time for a full round. We've done this in an amicable way, and I hope we'll continue. Each party will get five minutes.

We are starting with MP Perkins for five minutes.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Thank you, Mr. Chair.

Minister, I assume you read the Stellantis contract.

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

Mr. Perkins, I'm happy because you seem to be at every committee at which I appear. I'm so lucky to have you. Somehow I feel that you're following me, whether you like me or not.

Certainly, I'm very familiar with the Stellantis contract, yes.