Fisheries Committee on June 1st, 2023

[The Chair, Liberal, Ken McDonald]

I now call this meeting to order.

Welcome to meeting number 71 of the House of Commons Standing Committee on Fisheries and Oceans. This meeting is taking place in a hybrid format, pursuant to the House order of June 23, 2022.

Before we proceed, I would like to remind everyone to address all comments through the chair.

In accordance with the committee's routine motion concerning connection tests for witnesses, I'm informing the committee that all witnesses have completed the required connection tests in advance of the meeting.

Before we begin with witness testimony today, we have one quick committee business item to get out of the way, and I'd like to do it now versus later.

Two study budgets were distributed to members earlier today. Does the committee agree to adopt the proposed budget in the amount of $2,000 for the DFO briefing on Report 21 of the 42nd Parliament?

[Bobby Morrissey, Liberal, Egmont, PE]

I move, Mr. Chair, that we adopt it.

[The Chair, Liberal, Ken McDonald]

Is anyone opposed?

Hearing no opposition, that's adopted.

Next, does the committee agree to adopt the proposed budget in the amount of $26,000 for the study of the Great Lakes Fishery Commission?

[Bobby Morrissey, Liberal, Egmont, PE]

It is so moved, Mr. Chair.

[The Chair, Liberal, Ken McDonald]

It is moved by Mr. Morrissey. Is there anyone dissenting?

Okay, we'll consider that adopted, and we'll move on now to our witnesses.

Pursuant to Standing Order 108(2) and the motion adopted on January 20, 2022, the committee is resuming the study of foreign ownership and corporate concentration of fishing licences and quota.

I would like to welcome our first panel of witnesses. Representing the British Columbia Crab Fishermen's Association, we have Duncan Cameron, director.

Representing the Competition Bureau, we have Brad Callaghan, associate deputy commissioner, policy, planning and advocacy directorate; Anthony Durocher, deputy commissioner, competition promotion branch; and Pierre-Yves Guay, associate deputy commissioner, cartels directorate.

We will now go to our first witness for five minutes or less.

Go ahead, Mr. Cameron, please.

[Duncan Cameron, Director, British Columbia Crab Fishermen's Association]

Good afternoon, honourable members of Parliament and Chairperson.

My name is Duncan Cameron. I am a fourth-generation fisherman and I sit before you today as a representative of the B.C. Crab Fishermen's Association. Our board is made up of elected representatives from the different management areas on our coast. Our areas are lettered similar to how lobster districts are numbered on the east coast. However, every three years, we can select different areas. All our directors are active crab harvesters.

The Dungeness crab fishery is B.C.'s most valuable fishery and has some of the most advanced monitoring tools in the world. The crab fishery was the first in North America to introduce video monitoring in conjunction with RFID-scanned traps, a GPS speed algorithm and robust conditions for the licence to meet conservation objectives.

Unfortunately, we now find ourselves confronted with a pressing issue that threatens the very foundation of our industry. The ability of processors, foreign interests and large corporations to acquire fishing licences directly undermines the conservation of our species, reconciliation efforts and the landed value of our catch. Since 2018, we have been advocating that DFO restrict licence ownership solely to first nations fishery initiatives and individual fishermen, but unfortunately, our pleas have gone unanswered.

Our request for this crucial policy change was and is driven by ongoing reconciliation processes and court directives aimed at granting first nations access to the fishery. The Reconciliation Framework Agreement signed between coastal first nations and the Government of Canada, as well as the Ahousaht case affirming rights to fish, have indicated the use of the willing buyer, willing seller mechanism.

As Ahousaht First Nation realized their crab rights through their appeal decision, the Canadian government was ordered to buy back the equivalent access awarded to Ahousaht from active harvesters. However, because processors were able to compete in buying licences, only a few licences were brought back, and instead, many of the licences were repurchased by processors. The department did nothing to make licences available and failed to take action, leaving us to bear the consequences.

As a result of this inaction, we have witnessed adverse impacts on multiple fronts. Access has been reallocated without proper mitigation for existing harvesters, leading to tensions between indigenous and non-indigenous harvesters. Illegal sales fisheries have thrived, particularly during biologically sensitive crab seasons, and access for first nations outside of Ahousaht territory has been diluted as harvesters have moved to other areas upon three-year reselection.

It is crucial to recognize that processors can secure seafood through alternative means, such as developing new markets, offering competitive services and pricing or partnering with first nations for access. All these avenues lead to positive outcomes for the fishery and coastal communities. The processing facilities required for the crab fishery are much simpler and cost less than those for finfish and other species. That is why we have so many more processing facilities for crab than there are for other species.

Similarly, investors can invest in the seafood industry by investing in infrastructure or other sectors of the marine industry in search of a return on investment from our ocean economy. However, fishermen depend on fishing licences to access and exercise their livelihoods.

A fallacy that has been communicated from the Pacific region by DFO and others is that different conservation objectives in B.C. have shaped licensing policy. This could not be further from the truth. Ownership of fishing licences in a majority of fisheries has nothing to do with conservation, and it is not a tool to manage the conservation effort. We manage conservation through spatial closures, haul restrictions, trap limits, trap size, bait restrictions, crab size, biological sampling and many other tools. We do not use licence ownership or transferability to achieve conservation objectives.

Another common argument presented against this change is that access concerns, such as marine protected areas, are much more concerning to harvesters than licence ownership. While MPAs may be a serious concern and are certainly one we share, two things can be true at once: We need to have access to fishing grounds and we need to see the benefits of the fishery.

A more disingenuous part of this argument is ignoring the fact that licence ownership is directly linked to access decisions. In the MPA example, we can see that where first nations own access and the surrounding communities benefit from the fishery, the proposed protected areas have significantly fewer areas proposed to be closed to our crab fishery. The simple logic is that when a community member sees benefits from sustainable fisheries, they are not as likely to restrict us.

In closing, we recommend the following:

One, immediately restrict the sale of licences to fishermen and first nations. Two, commit more capacity in the Pacific region to this issue to realize the socio-economic benefits of the fisheries, specifically human capacity. Three, increase regulatory oversight for commercial fishing boat and licence brokerages, as outside of the commercial crab fishery, there is essentially only one brokerage.

Thank you for your time.

[The Chair, Liberal, Ken McDonald]

Thank you for that, Mr. Cameron. You are a little under time, which is always good to see.

We'll now go to Mr. Callaghan for an opening statement of five minutes or less.

[Brad Callaghan, Associate Deputy Commissioner, Policy, Planning and Advocacy Directorate, Competition Bureau]

Good afternoon, Mr. Chair and members of the committee.

Thank you for the invitation to appear before you today.

My name is Brad Callaghan and I'm the associate deputy commissioner of the Competition Bureau's policy, planning and advocacy directorate. I am joined today by my colleagues, Pierre‑Yves Guay, associate deputy commissioner of the cartels directorate; and Anthony Durocher, deputy commissioner of the competition promotion branch.

The bureau is an independent law enforcement agency that protects and promotes competition for the benefit of Canadian consumers and businesses. We administer and enforce Canada's Competition Act, a law of general application that applies to every sector of the economy. We investigate and address abuses of market power, anti-competitive mergers, price fixing and deceptive marketing practices. The bureau also advocates for pro-competitive government rules and regulations.

Evidence-based enforcement is at the heart of what the bureau does and this requires that our actions be based on credible evidence that can withstand judicial scrutiny.

It's important to recognize that we are enforcers, not adjudicators. The Competition Act requires us to meet several thresholds and standards, such as proving that there has been a significant harm to competition. Regardless of if we want to bring a case forward, we are guided by the decisions of the Competition Tribunal and the courts.

I would like to make two short comments in relation to the focus of the committee’s study on foreign ownership and corporate concentration of fishing licences and quota, just to help situate the Competition Bureau within it.

First, on the foreign ownership aspect, it’s important to understand that our analysis is focused on protecting and promoting the intensity of competition overall. The nationality of the companies bringing that competition is not part of our framework. Those considerations would typically fall under other mandates, including the consideration of ISED's investment review division under the Investment Canada Act.

With respect to corporate concentration, the bureau does not regularly evaluate overall levels of concentration or the state of competition in particular markets. In our enforcement work, the bureau looks at specific conduct or allegations on a case-by-case basis. For example, we would examine whether a specific merger between two companies would substantially lessen or prevent competition in a particular market.

Before fielding your questions, I would just note that the law requires us to conduct the bureau's investigations in private and keep the information that we have confidential. That obligation may prevent us from discussing some of our past or current investigations.

I would like to thank the committee for the opportunity to appear today, and we look forward to your questions

[The Chair, Liberal, Ken McDonald]

Thank you for being another person a little bit under the five-minute mark, which we don't see very often.

We'll now go to our first round of questioning. Mr. Arnold, you have six minutes or less, please.

[Mel Arnold, Conservative, North Okanagan—Shuswap, BC]

Thank you, Mr. Chair, and thank you to the witnesses for being here.

I will start out with Mr. Cameron.

You talked about conservation and sustainability. Will there come a point in time when you believe that licence ownership will be more of an issue in managing for conservation and sustainability?

[Duncan Cameron]

No, that won't be the case in our fishery. You have a crab licence, and we use many other tools to realize conservation.

[Mel Arnold, Conservative, North Okanagan—Shuswap, BC]

Thank you.

I want to turn my questioning now to the representatives from the Competition Bureau.

On May 11, a witness told the committee, “The Competition Bureau uses the four-firm concentration ratio: If the top four firms have less than 65% of the relevant market, the bureau is generally not concerned.” Is that a correct statement?

[Anthony Durocher, Deputy Commissioner, Competition Promotion Branch, Competition Bureau]

We have two of what we call “safe harbour thresholds” that basically give indications to stakeholders as to when a merger, for instance, can raise competition issues. One is if a single firm holds more than 35% in a given market, and the other is if the top four firms hold 65%.

I would just say that these are only safe harbour thresholds, and we look at every case on the basis of the evidence. Therefore, we can take cases when those thresholds are not exceeded as well as when they are exceeded.

[Mel Arnold, Conservative, North Okanagan—Shuswap, BC]

Thank you.

In assessing corporate concentration, does the Competition Bureau consider how much the biggest firms purchase, or only what they sell to their share of the relevant market?

[Anthony Durocher]

It would be both. It depends on the circumstances, but if we look at a processor, for instance, we would look at both the purchase dimension and at a potential lessening of competition for how much people are paying for their input and whether they can actually decrease the price paid for inputs.

Conversely, on the supply side, the sale side, we would look at whether there's a lessening or a prevention of competition in terms of how much is charged to people down the supply chain, be it distributors or retailers, and their ability to increase the price.

[Mel Arnold, Conservative, North Okanagan—Shuswap, BC]

Thank you.

In assessing the concentration level of firms in a sector, does the Competition Bureau consider how much of a specific species of fish is bought by a firm or firms within a relevant market?

[Anthony Durocher]

Every merger analysis would be different in terms of looking at the particular facts at play. We would aim generally to define a market and look at the relevant metrics of concentration for a potential exercise of market power. If we were looking at upstream issues and the potential for exercise of market power over the purchase of an input, we would look at all relevant metrics to assess concentration and remaining competitors in that market for the purchase of an input.

[Mel Arnold, Conservative, North Okanagan—Shuswap, BC]

Okay. In assessing those metrics in corporate concentration, does the Competition Bureau identify and include all subsidiaries of a corporation?

[Anthony Durocher]

Yes. Generally, as part of our analysis, when we identify merging parties, we would look at affiliates. An affiliate is defined under the Competition Act as generally being a company in which another entity has over 50% interest or what we call “control”, but there can be instances when the other company is below that, with a minority interest, but it still affords them the ability to control the economic behaviour of that affiliate company. Those are things that we would take into account.

We look at not just de facto but de jure control of companies.

[Mel Arnold, Conservative, North Okanagan—Shuswap, BC]

How does the Competition Bureau determine that they're assessing all subsidiaries of a corporation and not just the corporation itself?

[Anthony Durocher]

When a transaction exceeds certain financial thresholds, companies must notify the Competition Bureau before they can consummate their transaction.

[Mel Arnold, Conservative, North Okanagan—Shuswap, BC]

What would that threshold be?

[Anthony Durocher]

There are two thresholds, and both must be exceeded. The first one is that all parties to a merger must have more than $400 million in assets or revenues generated from those assets. The second threshold—and again, both must be met—is that the assets being acquired must generate more than $93 million in sales, or the value of those assets themselves is $93 million.

When a merger exceeds those thresholds, it is notifiable. Companies must provide us with prescribed information to enable us to do a review.

[Mel Arnold, Conservative, North Okanagan—Shuswap, BC]

How would you define the “relevant market” of Canadian fish and seafood?

[Anthony Durocher]

Every case would be looked at on its own merits, so we would have to look at the specific set of facts for a given merger in the fisheries space to determine the appropriate product dimension of the market and the appropriate geographic dimension of the market.

In answering these questions, we're largely informed by gathering facts from the marketplace. We would typically interview suppliers, competitors, customers and industry association experts. We would also review company documents to make sure that we're making an informed determination of the relevant scope of the markets at play and, more importantly, the competitive dynamics at play.