Industry Committee on July 20th, 2010

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

No, you've already said that. I want to ask you why a decline in the ability to provide supply to the market is not striking a concern by the bureau. Are you taking a stand-pat approach? You did not do that in the past, when there was a lot more supply, in the case of Texaco. You also did the same thing with respect to Petro-Canada's takeover of Gulf back in 1990.

[Richard Bilodeau]

What I can speak to is what we're doing today, and what we're doing today we have to do in the context of the Competition Act. What we're concerned about in any situation, and in this situation, is if there is conduct that is contrary to the act. In this particular situation, if Shell decided to sell their refinery and engage in a transaction with another party, as the Competition Bureau, the mergers branch would review the transaction to assess whether or not there is a lessening of competition in the markets that we would be looking at.

Right now, as we speak today, we've examined a variety of matters in the petroleum sector, but we're not engaged in any matter that involves Shell Canada's Montreal refinery.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Let me ask you this. If supply is no longer available in Toronto, Ontario, where Shell sells some of its product, and some of the independents, non-branded dealers, are told, “Buy your product elsewhere”, and Nunavut as a territory no longer has access to supply, are you going to sit back and just say, “Sorry, it's not a merger, therefore we have no business...”?

The competitive nature of this industry is changing rapidly, with fewer and fewer players. I don't care how much capacity we can talk about, 100% utilization is 100% utilization; there may be a temporary blip on that.

When can we expect the Competition Bureau to actually stand up and protect and preserve, and to ensure that there is a competitive process for Canadians? If this doesn't trigger it, what will?

[Richard Bilodeau]

What does trigger it are situations where the act is contravened. I can point to two recent examples. Number one is the gas price-fixing charges that were laid last week in Quebec, the second wave of charges that we laid in that matter--

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Which you stumbled upon, Mr. Bilodeau, I should point out. It's actually almost a point of order. You stumbled on it when someone came forward, thinking they'd been ripped off. That's how the bureau found it. You didn't do it because of any investigative prowess. You happened to stumble on something that turned out to be very important for you, obviously. You keep pounding your chest on it, but frankly, if the person hadn't made the mistake, you would never have gotten a conviction.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. McTeague.

Mr. Bilodeau, you can finish your comments and then we'll go to Monsieur Bouchard.

[Richard Bilodeau]

I was just going to finish by saying that we did review a merger last year of Suncor and Petro-Canada. We took action in that merger as well.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Bilodeau.

Monsieur Laframboise.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Thank you very much, Mr. Chairman.

Ladies and gentlemen, you are the experts. People who are following developments in this area are listening to us today.

Mr. Bilodeau, you say that this is not a sale, and that is what you have written. In your opinion, when a company stops operating a production plant, that raises no concerns under the Competition Act.

Is that simply because the definition in the Act provides that sales, acquisitions and mergers are reviewed, but there is no reference to closures?

[Richard Bilodeau]

The Act does define a merger. I will turn it over to Ms. Dagenais to explain what we do when we receive a merger file.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Ms. Dagenais, does the definition in the Act prevent you from looking at a closure? Is it because that is not included in the definition under the Act?

[Martine Dagenais, Assistant Deputy Commissioner of Competition, Mergers Branch Division B, Competition Bureau Canada]

In the case of a transaction or a sale, the Competition Bureau has the right, under the merger provisions, to review all transactions in Canada to ensure that there is no substantial lessening of competition.

Furthermore, if it were established that there had been a substantial lessening of competition, the Commissioner would have the right to apply to the Tribunal to secure an order. However, I should point out that in a transaction, the parties, either the buyer or the seller…

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

That was not my question, Ms. Dagenais.

In fact, the closure of a facility by an owner can affect competition just as much as a sale. If the Bureau doesn't analyze closures, I gather it's because of the definition under the Act. Is that correct?

[Martine Dagenais]

The factors we consider when we review a merger are…

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

We are not talking about a merger; we're talking about the closure of a refinery. That can do just as much damage. Closing a refinery can cause just as much damage as selling it to a competitor, for example, because it results in less supply, something which inevitably prevents competition.

So, the reason you don't review closures is that the definition under the Act does not give you the authority to do so. That was my question.

[Martine Dagenais]

As I just said, when a merger occurs and it reaches a certain threshold…

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

We're not talking about a merger.

[Martine Dagenais]

If assets were sold, that would be a merger and, in such a case…

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

As I understand it, if there is no sale, you don't review it.

As a legislator, if I want you to review that sort of thing, I would have to amend the Act. Is that correct?

[Martine Dagenais]

We are not currently analyzing the closure of the Montreal refinery. That is not something the Bureau routinely looks at.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

However, if there were a closure and someone complained about the prejudicial effect of that closure on competition, would you analyze it or would it be beyond your purview, from a legal standpoint?

[Richard Bilodeau]

According to our information, which the public has access to, there is no indication that this could give rise to concerns under the Competition Act.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

I would like to come back to Mr. Labonté. A number of stakeholders are telling us that closure of the Shell refinery will have a domino effect. They are saying that Suncor would also shut down, because of the pipeline, the costs, and so on. Is that possible? The people who have been telling us that seem to know what they're talking about. Is there a danger that this will have a domino effect on oil service in general in Montreal?

[Jeff Labonté]

Thank you for your question. I will answer you in English.

It's difficult to speculate as to whether or not any additional refineries in Montreal or the Quebec region or Atlantic Canada, or anywhere for that matter, will open or close. However, the refineries in the Quebec region generally operate with both domestic and predominantly imported crude oil. So the pipeline issue is how the oil is provided by a pipeline from Portland, Maine, as well as through ship passage. So there may or may not be... It's hard to speculate on this point.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

We are told that refineries in East Montreal share the costs. Is that correct? Are you aware of that? If you are not aware, please let us know and we will be sure to forward all the information to you.