Evidence of meeting #127 for Industry, Science and Technology in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was merger.
A recording is available from Parliament.
Conservative
NDP
Jagmeet Singh NDP Burnaby South, BC
I'm attacking the CEO of Sobeys, but the Conservatives want to attack everyone else—even my family—rather than go after corporate greed.
That's very telling.
Conservative
Rick Perkins Conservative South Shore—St. Margarets, NS
No, I'm willing to go after you for your hypocrisy, your blatant hypocrisy.
Liberal
The Chair Liberal Joël Lightbound
Thank you, colleagues. That's all the time we have.
We'll now turn it over to MP Gaheer for five minutes.
Liberal
Iqwinder Gaheer Liberal Mississauga—Malton, ON
Great. Thank you, Chair, and thank you to Mr. Singh for appearing before the committee.
I want to cover the overlap between what the government has presented and this bill. Obviously, we passed major competition reforms with Bill C-56. It empowers regulators to hold the companies accountable, and it does stand up for Canadians. We gave more power to the Competition Bureau to conduct more effective investigations. We made it easier to block mergers that are not in the best interest of Canadians and took action against collaborators that stifle competition and reduce consumer choice.
If there were something lacking in Bill C-56, I think that was largely covered by Bill C-59, whose amendments have resulted in a more modern and effective competition law. Among other things, they help prevent harmful mergers and anti-competitive collaborations, and they hold the large firms accountable.
I want to talk about your testimony in response to Mr. Badawey's questioning. You talked about how, perhaps, what your bill brings is more of a focus on price-fixing and on penalties, but then I look at Bill C-19, which is from 2022 and says:
Division 15 of Part 5 amends the Competition Act to enhance the Commissioner of Competition's investigative powers, criminalize wage fixing and related agreements, increase maximum fines and administrative monetary penalties, clarify that incomplete price disclosure is a false or misleading representation, expand the definition of anti-competitive conduct, allow private access to the Competition Tribunal to remedy an abuse of dominance and improve the effectiveness of the merger notification requirements and other provisions.
When I look at all these bills in combination, it largely seems that what Bill C-352 is proposing is already covered.
What are your comments on that?
NDP
Jagmeet Singh NDP Burnaby South, BC
I would first point out that the changes in both Bill C-56 and Bill C-59 were amendments specifically brought in by the NDP to address higher penalties and anti-competitive behaviour. Those amendments were successful, and we're happy that we were able to push for those things.
The same approach to anti-competitive behaviour is not being mirrored by the approach to price-fixing. It is not the same approach. Even when you cited Bill C-19, it doesn't have the same rigour when approaching anti-competitive behaviour as when approaching price-fixing.
Specifically, when I talk about price-fixing, we're talking about the situation when corporations collude, work together or have a conspiracy to set prices higher together. Specifically what I'm referring to is the bread price-fixing. That matter, the bread price-fixing, has not been addressed. It is one of the most egregious recent examples of large corporations ripping off Canadians. That specific matter has yet to be addressed. What I'm calling for are clear penalties that address that matter. That is the area where we suggested amendments that the Liberals turned down.
The Liberals have not shown a willingness to go after what has been the most egregious recent example of corporations working together to rip off Canadians, which is when they colluded to rip off Canadians with the price of bread. That's what I'm going after, and that has not specifically been addressed.
We are setting a guideline for penalties to address the matter. The $50 million fine, which was the highest fine on one of the most egregious cases, was far too low. It was barely a slap on the wrist. The guidelines that we're providing would give judges serious remedies to put in place a penalty as severe as 10% of the revenue of the corporation, which, in the case of a company like Loblaws, would be $6 billion. That's what I'm talking about when I talk about remedies.
Liberal
Iqwinder Gaheer Liberal Mississauga—Malton, ON
I'm not a competition lawyer, but insofar as I have knowledge of this area, price-fixing is a type of anti-competitive behaviour.
We are both lawyers. From my read of these bills in collaboration, they largely do cover the same thing. There are some enhancements that Bill C-352 brings, but I think the government has really worked hard in this area over the years. These three bills speak to that.
I want to ask about the efficiencies exemption. Your bill will repeal the efficiencies exemption, but then it places the efficiency and competition comparison as a factor that could be considered in the substantial lessening or prevention of a competition test.
Maybe an unintended consequence of this is that your bill would still allow anti-competitive mergers to withstand the challenge on the basis of efficiencies, but on a discretionary basis.
Was that the intent of your bill?
NDP
Jagmeet Singh NDP Burnaby South, BC
The intent is to get rid of a loophole that allows corporations to merge, even though it hurts Canadians.
If there is an amendment that would further strengthen the bill to protect Canadians against abuses, I'm always open to hearing that. As it stands, this is a matter that's not been addressed and needs to be addressed.
I do want to reiterate that, while there are three bills, and while New Democrats have forced this government to bring in strong amendments that would strengthen protection, it still does not address the specific nature of a conspiracy or a collusion. The anti-competitive behaviour matters that are addressed do not directly address what happened with the bread price-fixing. That is what I'm trying to get at in this bill, the most egregious case and one thing that Canadians can still recall. Canadians remember when the 2018 ruling found that these companies had colluded and had worked together to rip them off, the penalties were so minor that they were barely slaps on the wrist. That has to be remedied.
That's why this bill is very explicit and clear in addressing price-fixing, those collusion scenarios, those conspiracy scenarios, where large corporations rip off Canadians.
Liberal
The Chair Liberal Joël Lightbound
Thank you, Mr. Gaheer and Mr. Singh.
Congratulations on your bill, which has reached a crucial stage: consideration in committee. Thank you for taking part in this exercise.
Colleagues, in the second hour of the meeting we will be speaking with witnesses who are here to talk to us about Bill C‑352. We are going to suspend the meeting briefly to give people time to set up.
The meeting is suspended.
Liberal
The Chair Liberal Joël Lightbound
Colleagues, I would ask you to take your places so we do not lose too much of the scheduled time.
Colleagues, I'll ask you to take your seats. We're resuming the meeting.
Before we go to the witness testimony on Bill C-352, you've received a copy of the budget for the study of Bill C-352, which is $10,500. It was circulated. Do I have unanimous consent to adopt it?
(Motion agreed to)
Thank you very much.
Thank you for joining us for this first of the committee's meetings on Bill C‑352. With us is Pierre Larouche, professor of law and innovation in the faculty of law at the Université de Montréal.
Welcome, professor.
We also welcome, from the competition bureau of Canada, Matthew Boswell, commissioner of competition, and Anthony Durocher, deputy commissioner, competition promotion branch.
Last, we welcome, from the Canadian Bar Association, Antonio Di Domenico, secretary, Competition Law and Foreign Investment Section.
Thank you very much for joining us.
Without further ado, I'll yield the floor to Professor Larouche for five minutes.
The floor is yours.
Dr. Pierre Larouche Professor, Law and Innovation, Faculty of Law, Université de Montréal, As an Individual
Thank you, Mr. Chair.
Thank you for this invitation to appear before your committee.
Allow me to introduce myself briefly. I am a full professor of law and innovation in the law faculty at the Université de Montréal. I have 30 years' experience in competition law and economic governance, partly in private practice, but mainly as a professor of competition law in Europe. I taught in Europe for 15 years. At the College of Europe, I taught a number of European Commission officials who work on major competition cases. I taught American competition law during a sabbatical year at Northwestern University. For the last seven years I have been at the Université de Montréal, where I continue to work in this field. I am back in touch with Canadian law.
It is a pleasure to speak to you this morning. I would like to start with a slightly theoretical comment on all of this. There are a lot of good intentions behind the proposed amendments to the Competition Act, such as Bill C‑56, which has been passed, and Bill C‑59, which is under consideration. However, if we compare Canadian law to the law of other member countries of the Organization for Economic Cooperation and Development, the OECD, it stands out in two regards: first, the act is very long and very complex; second, the institutional framework is deficient. As a result, Canadian competition law is weak and difficult to enforce. The defendants, the corporations, will be easily able to defend themselves, and they will generally succeed in avoiding enforcement.
Since the act is long and complex, it is my opinion that we have to stop adding details to it. Instead, we need to go back to broad principles, take clear broad policy positions, and give the commissioner and the competition bureau more room to do their work.
Regarding the institutional framework in Canada, the bureau should have decision-making powers the way it is done everywhere in Europe, even in the United Kingdom, and, in part, for the powers of the American authorities. I think that if we look at what has happened recently in Canadian law, especially with the merger between Rogers and Shaw, the tribunal was the main problem. It should have acted only as an appeal body or, even better, should do judicial review on the basis of a decision of the bureau.
I am now going to talk about the two more specific questions that concern you today regarding Bill C‑352, which Mr. Singh referred to earlier. Increasing penalties under section 45 is a good idea in itself, but again, this shows how complex the Canadian law is, forcing a choice between sections 45 and 90. Obviously, the penalties need to be high under section 45, but that is criminal law and it is not as easy. An appropriate penalty, as mentioned here, would be 10% of worldwide revenues. Ideally, if we look at the practice of the European Commission and the American authorities, the level of the penalty should be about the same as the level of the corporation's profit for it to really hurt; it is generally about 5% to 6% of revenues. By adopting a maximum penalty of 10%, Canada is in the right league, and that means that the penalties should easily amount to hundreds of millions of dollars.
However, regarding the second proposal, the market share thresholds for controlling concentrations, I think that is a reference point that is a bit outdated. It is preferable to have a good general test and let the bureau do its work. Market shares may cause errors in both directions. First, there may be the exceptional case of a merger with high market shares where it would still be possible to prove that it is good for consumers. Second, and most importantly, there are also mergers with lower market shares that may be harmful to consumers, for example where the two merging parties are close competitors in the market.
These are factors that are definitely part of the contemporary analysis of competition law and that cannot be addressed in terms of market share thresholds, which obviously create the illusion that the only problem arises out of horizontal mergers, when vertical mergers, or conglomerate mergers, can be just as problematic.
Those are my introductory comments.
Thank you again for hearing me today.
Liberal
The Chair Liberal Joël Lightbound
Thank you, Professor Larouche.
I now give the floor to Mr. Boswell from the competition bureau of Canada.
Matthew Boswell Commissioner of Competition, Competition Bureau Canada
Good afternoon, Mr. Chair. Thank you for the invitation to appear before you today.
My name is Matthew Boswell and I am the commissioner of competition. With me is my colleague Anthony Durocher, who is the deputy director of the competition promotion branch.
We are pleased to be here today to discuss Bill C‑352. As a result of several pieces of legislation, competition policy in Canada is undergoing a generational upgrade. We are grateful to the members of this committee and other people who have particularly stressed the need to strengthen competition in the Canadian economy.
As you undoubtedly know, most of the important points in Bill C‑352 have been incorporated into past and future legislation: Bills C‑19, C‑56and C‑59. Those amendments give effect to a large number of recommendations by the bureau and better harmonize our competition framework with the best international practices.
Just as competition in the marketplace forces firms to offer products and services that better meet consumer needs, competition in the marketplace for ideas leads to better public policies. In my view, the sponsors of Bill C-352 and other private members' bills introduced this session deserve credit for prompting substantial improvements to the Competition Act. These improvements include, among other things, a significant revamp of our abuse of dominance provisions, including stronger penalties, the addition of rebuttable structural presumptions in merger reviews and stronger remedies for anti-competitive mergers, the possibility for formal market studies to be initiated by the commissioner, and insulating the commissioner of competition from adverse cost awards at the Competition Tribunal.
By my count, there are only a few outstanding elements of Bill C-352 that have not been taken forward already in other legislation. In the grand scheme of competition law modernization that has taken place, the remaining issues are not of pressing concern, but certainly, some of them could further enhance the Competition Act. We would be happy to discuss those few elements.
There are also some aspects of the bill that would, in my view, represent a step backward, given prior reforms, such as the reintroduction of a cap on cartel fines. We would be happy, of course, to discuss those as well.
During our time today, or perhaps in a future appearance before this committee, it might also be productive to discuss what I often refer to as the elephant in the room in Canada. That is regulatory barriers to competition in this country.
The Competition Act is a foundational tool to protect and promote greater competition in Canada, but it is not the only tool. To build on the incredible progress made in modernizing the Competition Act, all of us in the public sector, at all levels of government, need to examine what more can be done to address the regulations and policies that hold back competition in Canada, often unintentionally. We know that Canada’s competitive intensity has decreased over the last two decades. It will take a whole-of-government approach to turn the tide, with the federal government working alongside municipal, provincial and territorial governments.
Increased competitiveness is key to tackling affordability challenges, improving consumer choice and fostering stronger, more inclusive growth over the long term and, importantly, addressing Canada’s pressing need for more productivity.
Competition policy in Canada is clearly having a moment. We need to seize that moment. There has never been a stronger consensus that Canada needs more competition. Now is the time for governments across Canada to work together to make competition a national economic priority.
In conclusion, the competition bureau is determined to apply the law in a transparent and evidence-based way. We have been unwavering in our efforts to implement the new and improved tools that Parliament has given us, and we will stay on this course.
Thank you for giving us the opportunity to appear before you today.
It will be our pleasure to answer your questions.
Thank you. We look forward to your questions.
Liberal
Antonio Di Domenico Secretary, Competition Law and Foreign Investment Review Section, The Canadian Bar Association
Thank you, Mr. Chair.
I want to express appreciation on behalf of the CBA section for the invitation to appear today. Our members have significant experience advising a wide range of clients in competition matters. We appreciate the opportunity to be heard, so thank you for that.
By way of overview, many of the issues addressed in Bill C-352 have either been addressed in Bill C-56, which received royal assent in December 2023, or contained in Bill C-59, which is currently before the Senate. I would like to speak today regarding two proposals in Bill C-352. namely, the merger prohibition and structural presumption provisions, at clauses 8 and 9 of the bill; and the inclusion of efficiencies as a factor when assessing competitive effects for mergers and civil competitor collaborations, at clauses 7 and 10 of the bill.
Beginning with the merger and prohibition provision, Bill C-352 would create an arbitrary bright line precluding Canada's Competition Bureau and the Competition Tribunal from evaluating the competitive effects of mergers with a combined market share at or above 60%. The proposal would not take into account or differentiate between any level of increased concentration, even if the acquired target had, for example, a share of 1%.
This would be unprecedented and would make Canada a global outlier. Competition and antitrust laws globally recognize that market share and concentration alone are not themselves determinative of market power and competitive effects. As the Competition Act already recognizes, a conclusion regarding the competitive impact of a merger must evaluate such important factors as the likelihood of entry and expansion, the role played in the market by the acquired entity, the presence of other vigorous and effective competition in a market, and the nature of change and innovation in a market, among other things. In our submission, it would be inappropriate to fetter the ability of the Competition Bureau and the Competition Tribunal to conduct an analysis of market power and competitive effects based on the facts and evidence before them.
Bill C-352's emphasis on market share and concentration to the exclusion of other factors also presents three further significant problems.
First, the approach would remove entirely the analysis of what matters most, which is competitive conditions pre- and post-merger, in favour of a focus on just market share statistics that are not themselves determinative of market effects.
Second, in many cases a factual conclusion regarding market share cannot be reliably drawn based on a company's current market share.
Third, merging parties frequently do not have the requisite data to determine what their market share is in any relevant antitrust market. The Competition Bureau collects such information as part of its review, but unless the bureau plans to share this information with merging parties or their counsel as part of the enforcement process, which they don't currently do unless required to in litigation, significant due process concerns arise for merging parties.
Turning to the structural presumption provisions, the CBA section does not support the inclusion of structural presumptions in the Competition Act. We agree that concentration and market share levels can provide a useful preliminary screening mechanism to identify potentially problematic mergers. However, we disagree that a merger should be presumed to cause anti-competitive effects on the basis of market share alone.
Further, including structural presumptions in the Competition Act, a statute, will not harmonize Canadian law with U.S. law. This is important. In the U.S., structural presumptions were introduced in non-statutory enforcement guidelines, which are flexible in nature and are preferable to a fixed statute. It's not part of any U.S. legislation. If structural presumptions are introduced, we would submit that the appropriate place to introduce them would be in the Competition Bureau's merger enforcement guidelines, similar to the approach that continues to be taken in the U.S.
Finally, turning now to efficiencies, Bill C-352 proposes the inclusion of efficiencies as an explicit statutory factor in sections 93 and subsection 90.1(2) of the Competition Act when assessing whether a merger or a civil competitor collaboration would likely substantially lessen or prevent competition.
The CBA section agrees with this inclusion. It's well recognized in Canada and globally that efficiencies are a relevant factor when assessing competitive effects, because they can result in mergers or competitor collaborations being pro-competitive, enhancing productivity and benefiting consumers. The Competition Bureau has advocated for efficiencies to be among the list of factors that the Competition Tribunal can consider when assessing competitive effects. This change would also reinforce the bureau's current approach when assessing the competitive impact of mergers and civil competitor collaborations, in any event.
Thank you for the opportunity.
Liberal
The Chair Liberal Joël Lightbound
Thank you.
We will now start the discussion. Mr. Vis, the floor is yours for six minutes.
Conservative
Brad Vis Conservative Mission—Matsqui—Fraser Canyon, BC
Thank you to all the witnesses for being here today.
I think, no matter what part of the country you come from, Canadians are wondering, in the context of this legislation, why the heck do I have to pay so much for groceries?
I looked in great detail during the first hour of our meeting today at the Competition Bureau report entitled “Canada Needs More Grocery Competition”. Two key points were sort of addressed that I almost find right now are going to be hard to achieve, and may even be contradictory.
The report outlines, in addition to some other studies conducted by the Competition Bureau, that when the largest firms in an industry consolidate their position, their market share, they are less likely to be replaced or face significant challenges to their market share. The report also notes that we need to encourage growth in the entry of new competitors.
In the context of grocery stores, though, what I essentially read this morning was that the Competition Bureau outlines that it's going to be hard to see competition in our grocery story sector in Canada.
Would that be a fair assumption, Mr. Boswell?
Commissioner of Competition, Competition Bureau Canada
Thanks for the question.
My colleague Mr. Durocher will answer this.
Anthony Durocher Deputy Commissioner, Competition Promotion Branch, Competition Bureau Canada
What our report outlined were steps the government can take to increase competition in the grocery sector.
I'll give a few examples of addressing restrictive covenants and property controls, which can keep out new entrants across the country.
Another is to draw attention to the benefit of a foreign entrant coming into the Canadian marketplace, as informed by others.
We continue to work with governments to prioritize and get movement on these.
We have since launched an investigation into the use of property controls by the largest grocers as well. There are steps that can be taken to protect and promote competition in the industry, and this is a priority sector for the bureau.
Conservative
Brad Vis Conservative Mission—Matsqui—Fraser Canyon, BC
Agreed. More broadly, though, would you agree with my assumption that it will be difficult to achieve greater competition given the concentration of the large firms right now?
Deputy Commissioner, Competition Promotion Branch, Competition Bureau Canada
Competition takes time to manifest itself. Certainly, the sector is concentrated right now, but if a new entrant were to come into markets across the country, that would have an impact. I think there is no question that it is a concentrated market. That is why we are working with governments to take meaningful steps to try to make it more competitive.
Conservative
Brad Vis Conservative Mission—Matsqui—Fraser Canyon, BC
Would the Competition Bureau face the same types of challenges the federal government would face when seeking to encourage the municipal level of government to rezone property to allow for more grocery stores in our communities?
Deputy Commissioner, Competition Promotion Branch, Competition Bureau Canada
In that regard, one of our key recommendations was for governments to limit and consider banning the use of property controls. That is within provincial and municipal remit, so it's not clear that there's a role for the federal government. However, if they violate competition laws by virtue of being anti-competitive in nature, then there is a role for them to be addressed through the Competition Act, which is federal legislation.
Conservative
Brad Vis Conservative Mission—Matsqui—Fraser Canyon, BC
Thank you.
It's noted in this report that margins of our major grocery stores have increased by 1% to 2%. I don't believe that's insignificant when you factor in the more than $1,000 the average Canadian family is spending on a monthly basis at the grocery store.
Would you agree that prices have also increased because of supply chain issues, carbon taxes, labour costs and real estate as well?