Thank you very much, Mr. Chairman and members of the committee, for inviting us here today to participate in your study into gasoline prices and refining margins.
As you mentioned, Mr. Chair, I'm accompanied today by Richard Taylor, who's deputy commissioner for the civil matters branch.
As do all of you, I understand the importance of gasoline to Canadians in our everyday lives, as well as to the economy in general. None of us wants to pay high prices, whether for gasoline or any other product, and I think it would be fair to say that we as Canadians are all particularly sensitive to gasoline prices, as we see them displayed on the street corner every day.
Before I address some of the specifics of this topic, I think it's important that there be a clear understanding of what the bureau's overall mandate is. We seek to ensure an efficient and competitive marketplace by enforcing the Competition Act and by advocating that regulators rely on market forces to the greatest extent possible.
We don't advocate competition for its own sake. We advocate competition because the market and the robust competition that supports it, rather than government regulation, are the most effective means by which to enhance consumer welfare.
On the enforcement side, the bureau receives a large number of complaints every year. We look at whether a complaint raises any issue under the Competition Act and at the severity of the violation. Where there is sufficient evidence of a violation of the act, the bureau routinely investigates and takes enforcement action.
The act includes criminal provisions against price fixing and price maintenance, and non-criminal or ''civil'' provisions dealing with mergers and abuse of dominant position, among others.
In the course of our enforcement work, when authorized by the courts, we routinely use the investigative tools available to us, including: the power to subpoena documents and require oral testimony; the power to search and seize evidence; and the ability to wiretap.
But often, our work does not require these particular powers. Instead, we use research and other investigative tools to explore issues and factors that may be inhibiting market competitiveness. These tools are the basis for our outreach work to inform market participants about the Competition Act, competition issues and competition generally. And they provide the foundation for our efforts to fulfil our mandate to act as an informed advocate for competition.
I'd like to very briefly deal with the issue of refineries.
As with anything else within our mandate, the bureau is concerned with potential violations of the Competition Act. High prices, or in this case high refining margins, are not of themselves indications that there has been a violation of the act. There has already been much discussion in Parliament, in the media, and elsewhere as to the various factors, whether in other parts of the world or in North America, that might have contributed to the current situation. I would defer to my colleagues at Natural Resources Canada who are appearing after us. They are probably better placed to have that discussion on the specifics of the factors.
What the bureau is concerned about with respect to the gasoline refining industry over any other industry or sector of the economy is one thing: has there been a violation of the Competition Act?
From our perspective, the issue would be whether refiners come together to constrain capacity. We would take very seriously any reduction in refining capacity that was due to anti-competitive behaviour. To date, we have seen no evidence of this, and there are also some reports that a number of companies are proposing to build new refineries in the near future.
I would also like to point to the work of the US Federal Trade Commission, which has concluded that the amount of refinery capacity is not the result of anti-competitive conduct. In its post-Katrina report, it states, and I quote, that:
The evidence suggested that the rate of capacity growth was a response to competitive market forces that made further investment in refining capacity unprofitable.
This in no way means that, in the future, the bureau may not reach a different conclusion. As I said earlier, we are continuously monitoring this industry for evidence of violations of the act. I would stress however, that in order for the bureau to act, we need evidence to demonstrate that there has been abuse of dominance or price fixing. Members of the public can bring us evidence and we also have an immunity program which has proved quite successful.
Let me repeat that should the bureau find evidence of anti-competitive behaviour, whether in the gasoline or in any other sector, it will take appropriate action.
High prices are a concern to the bureau when they are the result of violations of the Competition Act. When we find evidence that firms have conspired to increase prices, we take appropriate action. Let me now turn to what the Competition Bureau does with respect to the gasoline sector. The Competition Bureau actively follows wholesale and retail gasoline prices to determine whether they are the result of market forces or anti-competitive acts. When there are price spikes, we will look even more closely. In fact, historically this has been the market the bureau has followed most closely. We have put more resources toward monitoring this market for anti-competitive acts than any other. We will continue to do so and we will take further action under the Competition Act when appropriate.
As I'm sure you're aware, the bureau has investigated the gasoline sector over the years, and in six major investigations has found no evidence to indicate that periodic price increases were the result of a national conspiracy or abuse of dominant position by firms in the market. On the other hand, bureau investigations have led to 13 criminal trials related to gasoline or heating oil prices; eight of these trials resulted in convictions. As I said, where evidence exists, we act.
I should note that the Competition Bureau receives complaints from consumers about price gouging. While price increases are not easy for consumers, high prices in and of themselves do not constitute a violation of the act any more than low prices do.
In a market economy, it is generally accepted that under most circumstances government should not determine what is an appropriate profit margin: it is certainly not within our power under the Competition Act to do so. In a market economy, businesses are generally free to set their own prices at whatever levels the market will bear. Simply because prices go up does not mean that there has been a violation of the Competition Act or that we should regulate.
Individual gasoline suppliers taking advantage of tight supply to increase their prices would not raise issues, because charging high prices at times of actual or anticipated excess demand is not contrary to the act.
This can include entering into a consent prohibition order with the parties in question or, when appropriate, by pursuing criminal charges under the conspiracy provisions of the Competition Act. When we find evidence that prices are high because of an abuse of dominance, we likewise have a range of options, which can include entering into a consent agreement with the parties in question or applying to the Competition Tribunal for an order to stop the conduct.
It should be noted that the federal government has no jurisdiction over the direct regulation of retail gasoline prices. Except in the event of a national emergency, only the provinces have the authority to regulate gasoline prices.
As you know, four provinces have opted to set maximum gasoline prices—and the evidence in all four cases demonstrates that market forces, not regulation, lead to lower prices.
I reviewed all this because I believe it is important that there be a clear understanding of the role of the Competition Bureau. We do not set prices, nor do we have an opinion on appropriate profit margins, regardless of the industry. Our role is to ensure that all industries follow the rules of the game as set out in the Competition Act. Where we find evidence of violations of our act, we respond with vigour.
That said, I want to touch on another related topic. I am a firm believer that an informed consumer is an empowered consumer. In the gasoline context, there's information out there to help consumers. The Competition Bureau has some information on its website to assist consumers in understanding this market. For more details, I would recommend the fuel-focused website maintained by Natural Resources Canada. It provides clear and timely information on fuel prices and markets, as well as ways to manage energy costs. Current and factual information on price changes will help Canadians understand how the global petroleum markets affect their lives.
In addition, industry could and should do more to help consumers understand and take advantage of pricing patterns. Consumers could benefit from additional information documenting local retail price cycles, information that consumers could use to plan purchases. A good example of this is Shell Australia's website, which provides tips for consumers to find the best time to purchase gasoline.
I would now be pleased to answer any questions you may have.
Thank you very much, Mr. Chairman.
