Industry Committee on Dec. 9th, 2010

[The Chair, Conservative, David Sweet]

Good morning, ladies and gentlemen. Bonjour à tous. Welcome to the 51st meeting of the Standing Committee on Industry, Science and Technology.

Today we're going to be examining Bill C-452, a private member's bill.

Mr. Vincent is here. We are supposed to have two other witnesses--from the Industry department, Mr. Bilodeau and Ms. Einbinder-Miller. Please come forward. Have a seat.

I'll start with Mr. Vincent for ten minutes, then Mr. Bilodeau for up to ten minutes for opening remarks. Then we'll go into our regular question period, and members can ask questions either to the mover of the bill or to the department officials.

Without any further ado, Mr. Vincent.

Mr. Vincent, welcome! You have 10 minutes, sir.

[Robert Vincent, Bloc, Shefford, QC]

Thank you, Mr. Chair.

Ladies and gentlemen of the committee, Bill C-452, An Act to amend the Competition Act (inquiry into industry sector), would give the Commissioner of the Competition Bureau the authority to make an inquiry into an entire industry sector if the commissioner believes grounds exist. Bill C-452 aims to fill an important gap in the Competition Act, giving the Competition Bureau more teeth. The objective of this bill is to give the Competition Bureau the authority to start inquiries without having to wait for complaints from citizens in order to act. Bill C-452 would give the Competition Bureau the authority it needs to take action against corporations and people who are trying to take advantage of Canadian consumers.

A brief look at past legislative reform of the Competition Act shows us that the MacQuarrie Committee review, in 1952, brought about several amendments to the Combines Investigation Act, including a provision that provided for research inquiries. At that time, the Restrictive Trade Practices Commission, the RTPC, acted as an adjudicative body that also conducted investigations and research inquiries.

After minor amendments were made in 1976, the research inquiry section provided that the director upon his own initiative may, and upon direction from the minister [...] carry out an inquiry.

Officially, the goal was to ensure that the new Competition Tribunal (the tribunal) would be a strictly adjudicative body.

A Competition Bureau of Canada publication titled Market Studies: A Contextual Overview states that "There have been no inquiries related to competition issues starting under the Inquiries Act since section 47 was repealed in 1986." The reason is simple: the Competition Bureau had lost its authority to make inquiries.

How then, can the Competition Bureau make inquiries? The commissioner cannot begin to investigate until a judge is satisfied by information on oath or solemn affirmation that an inquiry is being made under section 10 of the Competition Act, and that a person has or is likely to have information that is relevant to the inquiry.

The Competition Bureau would be much more effective and credible if it had real investigative powers. It is difficult for all of the current conditions to be met.

Mr. Konrad von Finckenstein, former commissioner of competition and current chairman of the CRTC, made the following statement: "While the Bureau's mandate includes the very important role of being an investigator and advocate for competition, the current legislation does not provide the bureau with the authority to conduct an industry study."

The Competition Bureau certainly does not hesitate to intervene when it discovers proof of price fixing. In 2008, the bureau uncovered a price-fixing agreement between gas retailers in four Quebec municipalities. In mid-April 2009, several individuals and companies pled guilty. The investigation is still ongoing.

However, the bureau needs a sworn statement before it can begin an inquiry. Furthermore, the commissioner has access only to information that is available to the public or that is provided voluntarily by the industry.

During our committee meetings, the key question that came up was how this issue was approached in other countries. Here are my findings. In the United States, these studies can be started in three ways: when Congress exercises its legislative authority and calls on the Federal Trade Commission to do a specific report; when members of Congress or Congressional Committees, without using legislative authority, ask the FTC to conduct a study; and when the FTC decides to launch an investigation on its own.

In the United Kingdom, the Office of Fair Trading carries out market studies in various sectors of the economy, including the liability insurance market, new car warranties, private dentistry, taxi services, store cards and pharmacies.

The OFT is also able to make a market investigation reference when it suspects that a feature, or combination of features, of a market prevents, restricts or distorts competition.

The European Commission may conduct its inquiry into a particular sector of the economy "where the trend of trade between member states, the rigidity of crisis or other circumstances suggest that competition may be restricted or distorted within the common market". This authority, while used in a limited extent in the past, has been used more frequently since 2005.

In January 2005, two sector inquiries were launched, one into competition in the energy sector, specifically gas and electricity markets, and another into the financial services sector.

In Australia, the Australian Competition and Consumer Commission can conduct general inquiries in all sectors of the economy. The inquiry can be opened by the commissioner.

Some people would tell me that Bill C-10 gives the Commissioner of the Competition Bureau more authority. I would have to disagree.

These are the key elements of Bill C-10: increasing applicable sanctions; redacting certain criminal provisions on price-fixing practices; creating a more effective mechanism for criminal cases; introducing a mechanism to investigate mergers; giving the Competition Tribunal the ability to impose administrative fines on companies that abuse their dominant market position.

Based on the history of the Competition Bureau, particularly as regards the repeal of section 47 in 1986, and the minimal efforts made by the current government to improve the legislation, and based on what goes on in other countries, I believe that we must pass Bill C-452 and reinstate the Competition Bureau's authority to make an inquiry into an entire industry sector. To close, I still question how gas stations can all have similar prices without consulting each other. I'm now ready to answer questions.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Vincent.

Mr. Bilodeau.

[Richard Bilodeau, Acting Assistant Deputy Commissioner, Competition Bureau, Civil Matters Branch Division B, Department of Industry]

Good morning, my name is Richard Bilodeau, and I am the Acting Assistant Deputy Commissioner of Competition for the Competition Bureau's Civil Matters Branch. With me today is Rhona Einbinder-Miller, Acting Executive Director and Senior General Counsel with Competition Bureau Legal Services.

I would like to begin by thanking the committee for the invitation to appear on Bill C-452, An Act to amend the Competition Act (inquiry into industry sector). I would like to focus on two aspects that have an important bearing on the bill that you are considering today. To begin, I will briefly explain the importance of some of the specific amendments to the Competition Act that were made in 2009 as they relate to the issues before the committee today. Second, I will provide you with a short assessment of some of the implications of this bill, should it be enacted.

The Competition Act and Canada's competition regime changed significantly as a result of the amendments passed by Parliament in March 2009. These amendments, which represent the most significant changes to the act in over 20 years, were aimed at modernizing the legislation and bringing it more closely in line with the competition laws of Canada's major trading partners.

With respect to the issue before the committee today, probably the most important amendments were those that affected the criminal conspiracy provision, more generally referred to as the anti-cartel provision. Those amendments created a significantly more effective criminal enforcement regime for the most harmful form of cartel agreements. These changes now make it illegal to engage in agreements to fix prices, allocate markets between competitors, or to restrict output, regardless of factors such as the impact of the agreement on competition in that market.

Penalties for criminal cartel behaviour were also increased. The maximum term of imprisonment for individuals was increased to 14 years, while the maximum fine per violation was increased to $25 million.

The changes to the anti-cartel provision came into force on March 12, 2010, a year after the other amendments, thereby allowing businesses time to adjust their practices to ensure that they were in compliance with the new law. At the same time, the amendments created a new provision that allows other forms of potentially anti-competitive competitor collaborations to be reviewed by the Competition Tribunal under a companion civil provision.

With all of the amendments to the act now in force, a top priority for the bureau is to ensure their efficient and effective implementation. Equally important for the bureau is to bring cases forward in a responsible manner to fulfil the enforcement mandate given to us by Parliament.

As well, in this new legal environment, it is important to clarify the bounds of lawful and unlawful conduct, while ensuring Canadian business and consumers are confident the law will be enforced with vigour. This brings me to the bill under consideration today.

I would like to take this opportunity to set out some of the issues we see arising from this bill regarding both the workings of our legislation and the nature and extent of the powers that will be conferred on the bureau, should the bill be adopted. As we understand the intent of this bill, a primary concern underlying its introduction is that the commissioner does not have the proper tools to successfully investigate and prosecute price-fixing in the petroleum sector.

However, the bill before you today was introduced before the new anti-cartel provisions of the act came into force. These amendments now make it clear and unequivocal that it is illegal to agree with your competitor on price, market allocation or restrictions on output. The previous provision did not provide this clarity. The new law establishes easily understood boundaries for all businesses regarding what is lawful behaviour. The commissioner no longer has to prove that these arrangements have a negative effect on competition, which will improve our ability to hold accountable those individuals and businesses who engage in these harmful practices.

In effect, the commissioner now has access, through the legislation, to new and powerful provisions that clearly strike at the issue at the heart of this legislative initiative. Moreover, it is premature for the bureau to measure the success of these new and clear provisions, having only had them in place for eight months. We are confident that the true effectiveness of this new and clear provision will become apparent in the years to come.

One question that came up during debate on this bill was whether the commissioner has the authority to commence an inquiry on her own initiative, or whether she must receive a complaint before she can begin a formal investigation.

Let me be clear that the commissioner does not have to wait for the filing of a complaint with her office before starting an inquiry. Whenever the commissioner has information that indicates that one of the enforcement provisions of the act has been or is about to be violated, regardless of the source of that information, section 10 of the act provides the commissioner with the authority to commence an inquiry into any matters she considers necessary. Of the formal inquiries that are currently being conducted by the bureau, approximately 30% were initiated without complaints.

To conclude, I would like to emphasize that when Parliament amended the Competition Act 21 months ago it provided the bureau with effective means to enforce Canada's criminal conspiracy laws against those serious offenders who agree to fix prices, allocate markets, and restrict output. These amendments, which came into effect in March 2010, combined with our existing powers to collect evidence and protect those who come forward to disclose anti-competitive activity, allow the bureau to act more effectively in the best interests of Canadian businesses and consumers.

Without question, the debate around Bill C-452, and the bills that preceded it, highlight issues in certain industry sectors that are important to many consumers, and to the bureau. We have, particularly since the March 2009 amendments, effectively legal means, and corresponding evidence-gathering tools, to respond vigorously when issues are raised under the Competition Act.

The Competition Bureau is pleased to have the opportunity to contribute to the committee's deliberations. We remain confident that under the new rules passed by Parliament, we can continue to ensure that Canadian businesses and consumers prosper in a competitive and innovative marketplace.

I will now turn to any questions that you might have. Thank you.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Bilodeau.

Members, we've been used to having an overabundance of witnesses, so it will seem rather luxurious to you to have full seven-minute rounds. However, you know what happens: time still flies, so mind yourselves accordingly.

Mr. Rota is next, for seven minutes.

[Anthony Rota, Liberal, Nipissing—Timiskaming, ON]

Thank you, Mr. Chair.

I may be giving a few questions over to Mr. McTeague.

Thank you very much, Mr. Vincent, for being here. Welcome, welcome back. It is nice to see you again.

We have heard that as a result of changes to the act a few months ago, Bill C-452 may not be necessary. The bill was introduced into the House before those changes came into effect. We think it is very important to protect consumers.

What are the gaps in the legislation that was passed—Bill C-10, I believe—that your bill will fill in or make up for?

[Robert Vincent, Bloc, Shefford, QC]

Thank you for your question.

[Anthony Rota, Liberal, Nipissing—Timiskaming, ON]

It is a rather general question; if you would like to address anything specific—

[Robert Vincent, Bloc, Shefford, QC]

Yes. Bill C-452 creates an investigative power. The Competition Bureau does not have that power.

If you look at Bill C-10, it creates a power to prosecute and to impose fines, but not to investigate. If you want to prosecute and impose fines, you first have to be able to prove that the companies formed some kind of cartel. If you cannot investigate, then even with all the power in the world to impose fines, you will not be able to exercise that power.

[Anthony Rota, Liberal, Nipissing—Timiskaming, ON]

Thank you very much.

Mr. Bilodeau, did you say that you did have the power to investigate or that you did not? Could you clarify that, please?

[Richard Bilodeau]

We do have the power to investigate. We had it before the Bill C-10 amendments came into effect in March 2010.

Whenever the commissioner has reasons to believe that an offence under the act has been committed or that there are grounds for a court order, she has the power to cause an inquiry to be made under section 10.

The amendments that came into effect in March 2010 simplified the circumstances in which we can investigate cartels. Before, when there were allegations of price-fixing by a cartel, for example, we had to prove not only that there was a price-fixing agreement, but also that the agreement had a significant effect on competition.

Parliament, with Bill C-10, has made us responsible for establishing that there was a price- fixing agreement among competitors, but without having to show that there was any effect on competition. It is sufficient to prove that the agreement among competitors fixes prices, allocates markets or lessens production.

We no longer have to prove any effect on competition.

[Anthony Rota, Liberal, Nipissing—Timiskaming, ON]

I am hearing two different things. You are both saying the same thing can be done under two different acts. Have I missed something?

[Robert Vincent, Bloc, Shefford, QC]

You have not missed a thing.

[Anthony Rota, Liberal, Nipissing—Timiskaming, ON]

I am trying to clarify the differences between the two. I have read them and I see similarities.

I am concerned about the potential for an inquiry without any complaint having been made, without any—I do not want to say “without any reason”, but... I am concerned about the position becoming politicized. All of a sudden, there could be a witch hunt. For example, there could be a problem with an industry sector, and all of a sudden the commissioner could get involved and start looking for a problem that does not exist or invent one. In the past, we have seen governments with a tendency to politicize inquiries and situations.

What safeguards are there against this type of thing?

I would like to hear Mr. Bilodeau's answer first and then Mr. Vincent's.

[Richard Bilodeau]

You are right. Investigating an industry sector without any specific allegation of an offence under the act could affect the reputation of that sector. That is particularly worrisome in situations where there is no allegation of collusion or anti-competitive behaviour. There is always that concern.

That is one of the problems with Bill C-452. There are no specific grounds for initiating an inquiry. What is the trigger for launching an inquiry? What are the parameters of an inquiry? How long may it take? It also raises questions about confidentiality, because our inquiries are conducted confidentially.

[Anthony Rota, Liberal, Nipissing—Timiskaming, ON]

Is that included in the current act, with the new changes that have come into effect?

[Richard Bilodeau]

What is the question?

[Anthony Rota, Liberal, Nipissing—Timiskaming, ON]

Does the current act contain parameters?

[Richard Bilodeau]

The act creates the parameters. If there are price fixing allegations, the parameters are there. Under section 45, we can investigate those allegations. Under section 10, if there is reason to believe there is a cartel, the commissioner may, on her own initiative—with or without a complaint—launch an inquiry and use her official powers to determine the relevant facts, in order to determine whether there is indeed a cartel and whether she should refer the matter to the Attorney General.

[Anthony Rota, Liberal, Nipissing—Timiskaming, ON]

Thank you.

Mr. Vincent, do you have any comment on that? The act is there, and your bill would serve to change things. However, those changes are not clear to me.

[Robert Vincent, Bloc, Shefford, QC]

I think it is clear. There is also the way he answered. To initiate an inquiry, there has to be a complaint. They cannot just suddenly decide for themselves to investigate an industry sector. They cannot do that, it is impossible. Even if there were a complaint, they would have to go before a judge to initiate an inquiry. So there has to be a complaint. Someone has to tell them that there is something going on.

I will give you a concrete example: what happened in the four municipalities around Sherbrooke. Apparently, someone was periodically giving the order by phone to set the price at the pumps. There was a complaint, made under oath. With that kind of complaint, they were able to investigate.

Let's take another easy to understand example: price-fixing for the cost of oil refining. If it is true that every month, each company decides on the price of refining oil for that company, how is it that at the beginning of every month, prices at the pump do not vary? The refining is done at different refineries, but the prices at the pump are the same. If Shell decides that it is 22¢ and Petro-Canada decides that it is 10¢, how is it that the pump prices are the same every month?

[The Chair, Conservative, David Sweet]

Thank you, Mr. Vincent.

Mr. Rota, the time has expired now.

Mr. Bouchard, you have the floor for seven minutes.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Thank you, Mr. Chairman.

I thank all the witnesses for being here today.

Mr. Vincent, I thank you for sponsoring Bill C-452.

Mr. Bilodeau said that there had been some changes in March 2009. Mr. Vincent, I would like to know what Bill C-452 now has to offer with respect to what Mr. Bilodeau mentioned.

[Robert Vincent, Bloc, Shefford, QC]

Well, precisely, it's the power to investigate.

As I said earlier, if each refinery in Quebec and Canada were to decide each month on a price for refining oil and there were no disparity... You've got to understand these people are not talking to each other. They say there is no consultation between refineries to set prices each month. This price is set within refineries on a monthly basis. If these people are not discussing the matter, why is it that the price of gas at the pump, each month, is the same for everyone and equal everywhere, all the time?

If the Competition Bureau has all powers, as they say, if I were them, I would be asking myself this: why is it that with no consultation we see identical prices each month for all refineries, regardless of which oil company it is? It seems to me that this is a sign. And if I had investigative powers, I would immediately look into it. With the investigative powers these people say they have, I would launch an investigation to see why oil companies are price-fixing.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Mr. Bilodeau, based on what you are saying, the Competition Bureau commissioner has every power to proceed to an investigation, is that correct?