Evidence of meeting #129 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.
12:25 p.m.
Conservative
The Vice-Chair Conservative Rick Perkins
Thank you very much, MP Masse.
We will go to MP Vis for five minutes.
12:25 p.m.
Conservative
Brad Vis Conservative Mission—Matsqui—Fraser Canyon, BC
Thank you, Mr. Chair.
Thank you for a great panel today.
I'd like to reiterate MP Généreux's comments about the staff today. It's been a really long year at the industry committee, but we've done a lot of great work for Canadians. I want to thank all the staff for their extended efforts, especially on Bill C-27.
I'll pose an open-ended question to the witnesses today.
There has been great discussion on Bill C-56, Bill C-352 and Bill C-59, but when we bring this to our communities and our constituencies, the number one thing I'm asked—and that I'm sure pretty much every politician in Canada is asked—is when we are going to see lower grocery prices.
With Bill C-56, Bill C-352 and Bill C-59, have we done enough to lower prices for Canadians so their paycheques will take them a bit further every month?
June 10th, 2024 / 12:25 p.m.
Executive Director, Canadian Anti-Monopoly Project
I'll just jump in quickly.
Bill C-59, Bill C-56, Bill C-352 and Bill C-19 are all very sound investments in the future of competition law in Canada. They're not a silver bullet. We're not going to turn the tap on and have competition increase tomorrow. However, in grocery and markets well beyond it—and I'll reference again the bureau's investigation into property controls in the grocery sector and the market study on airlines—these are foundational improvements that are going to pay off for generations to come.
12:25 p.m.
Prof. Thomas Ross
Yes, thank you.
I'm supportive of the last comments. I think we've taken some very good steps. There are challenges in knowing what the source of high grocery prices is. You've heard all the stories about supply chain disruptions and people pointing to the fact that prices are higher around the world. It's not really clear what the source of high prices is in Canada. However, one of the great contributions—one thing I like about Bill C-352, in fact—was the enhanced market studies power, something that I think a lot of us have been arguing for for some time. That will go a long way in opening our eyes towards certain industries and practices that might be counterproductive.
Using that, I'll mention a point that came up earlier. These kinds of studies can also be retrospective in the sense that they can be used to look back at past decisions of mergers that went through and at what the implications may have been of mergers that were allowed either by the bureau or by the tribunal if contested. You can use the expanded market studies power to bring a lot of new information to bear on which markets are and aren't competitive in Canada and, for the uncompetitive ones, on what's getting in the way.
12:25 p.m.
Conservative
Brad Vis Conservative Mission—Matsqui—Fraser Canyon, BC
I'll just follow up on that. In October, the Competition Bureau published a report examining the general state of competition across Canada, and it concluded that competitive intensity decreased substantially from 2000 to 2020.
In your opinion, with your expertise—just so that my constituents are aware—what sectors of the Canadian economy do you believe experienced the largest decline in competitive intensity in that period of time?
12:25 p.m.
Prof. Thomas Ross
That's a tough question. You noticed that the bureau itself in the report didn't really segment out industries.
12:30 p.m.
Prof. Thomas Ross
That was a deliberate decision on their part. I don't have any kind of inside information on that. I haven't really studied it.
A lot of us are still trying to digest that report. It was an amazingly informative and useful document they produced, but it's just the start of a discussion about concentration and market performance in Canada. It showed some effects of increasing concentration and maybe some margins going up, but there's other research in other countries now suggesting that when you see higher margins, it's often because costs have fallen, not because prices have risen.
We still have a lot of work to do in Canada to know where the real problems are. The ones that always jump out to us are the ones in regulated, protected industries.
12:30 p.m.
Conservative
12:30 p.m.
Conservative
The Vice-Chair Conservative Rick Perkins
Mr. Vis, just a moment. I see Mr. Hatfield has his hand up, so I'm wondering if he could chime in.
12:30 p.m.
Conservative
12:30 p.m.
Conservative
12:30 p.m.
Executive Director, OpenMedia
I want to plus-one Professor Ross's comment that market studies powers for the bureau are very important. It's unclear to me how far what they have now is going to take them. They're shifting from an agency that sometimes prevented some lessening of competition to one leaning further into their promoting and intensifying competition mandate.
The ability to do a market study and then recommend changes and ban certain practices that are anti-competitive and anti-consumer is really important. This commission should look at it again in a couple of years and see how far they've gotten and if more changes are needed. Especially for global tech firms, Canada is not in a position to change their size. We need a much faster study and response for what they're doing than the five or seven years it's taking currently.
12:30 p.m.
Conservative
Brad Vis Conservative Mission—Matsqui—Fraser Canyon, BC
Thank you.
I think I'm good, Mr. Chair. Thank you.
12:30 p.m.
Conservative
12:30 p.m.
Liberal
Tony Van Bynen Liberal Newmarket—Aurora, ON
Thank you, Mr. Chair.
I certainly appreciate the breadth and depth of knowledge we have from our witnesses today. I'm finding very interesting the concepts you're bringing forward.
My first question will go to Professor Iacobucci.
I believe you defined the issue of market share such that it's not so much that you can define it; it's about market power. What are the challenges in trying to define market power as better than trying to define market share?
12:30 p.m.
Professor and Toronto Stock Exchange Chair in Capital Markets, Faculty of Law, University of Toronto, As an Individual
There might be different ways of answering that depending on something Professor Quaid raised: What are we concerned about under the Competition Act? It's something I've expressed concern about as well. We're not entirely clear on that. Let me start there.
Market power, as most economists would think about it, is the ability to act independently of competitors to a significant extent. It's being able to raise your prices above marginal cost in a way that is harmful to consumers, because consumers who would be willing to buy something at a competitive price are priced out of the market and there's a loss to them as a consequence. That, to me, at least if you're thinking about it economically, is the concern that lies at the heart of the Competition Act. We're worried about people not being able to participate in markets because some firms have control and can act independently of competitors. Competitors aren't driving down prices in a way that disciplines them, so they can act independently.
Market power may not be present even with significant market share if there's a significant threat of entry, for example. If entry is really easy and you raise your prices, you'll attract entry. There's a kind of discipline there, even if in the moment you have a significant market share. That's just one example.
Another would be that you have a significant market share but have a product that's not as good as one that was just innovated. Your market share is good now, but it's going to decline over time because you're facing discipline from competitors that prevents you from exploiting your customers.
Market share can be an indicator of market power, to be sure, but as I think Professor Ross put it, it's a very weak indicator. There are other things going on that matter too.
12:30 p.m.
Liberal
12:30 p.m.
Associate Professor and Vice-Dean Research, Civil Law Section, Faculty of Law, University of Ottawa, As an Individual
Dr. Iacobucci provided an excellent explanation of how economists understand market power. I will just add a bit of colour to that.
The economy we have now, which has been transformed forever not just by digitization but by the adoption of technology and data-driven practices in the way business is conducted, does present some challenges for those of us who want to understand where market power is and how it's exercised. It's coming up in different guises than it used to.
One thing others have come up with—it's not my idea, but I'm going to put it out there—is that now we see sectors of the economy characterized by the presence of economic ecosystems dominated by perhaps one or two firms. Often it's one firm. Because they control adjacent sectors, they're able to dictate the terms of participation. We call it an ecosystem. We call them gatekeepers or platform operators. It doesn't necessarily have to be the billion-dollar ones that we all know the names of.
One of the interesting cases in the United States involves Live Nation and Ticketmaster. It shows that the way the economy is evolving may present challenges for us when using these concepts. It doesn't mean they're not relevant. It just means that we have to be attentive to the new ways they may present themselves. New tools might be needed to understand and make sure that we're targeting things where market power is a problem, not stifling things that should happen or that might radically change the economy for the better.
We don't have a crystal ball. There's always room for error. That's the other thing that's important to keep in mind. The economy is evolving and changing quite rapidly, and we need to keep on top of that.
12:35 p.m.
Liberal
Tony Van Bynen Liberal Newmarket—Aurora, ON
During his appearance at the committee on June 3, Jagmeet Singh, the sponsor of the bill, mentioned that the bill draws inspiration from competition practices in international jurisdictions such as the European Union and Australia.
The competition policy ratified by the European Parliament bans all anti-competitive agreements under article 101 of the Treaty on the Functioning of the European Union. What are the similarities between Bill C-352 and the European competition policy? Are the measures taken by other jurisdictions considered as stringent as those in Bill C-352?
I'll start with Mr. Bester.
12:35 p.m.
Executive Director, Canadian Anti-Monopoly Project
I'm admittedly more familiar with the Canadian and American bodies of law than the European one.
One lesson to take away is that the European approach, certainly for abuses of dominance, which includes excessive and unfair pricing, is much stricter than how Canada has approached it in the past. Perhaps there's a spiritual alignment, but the details and the structure of European law are different. It's much more pared back and less directive. It relies on nations such as Germany to pursue their own competition law policies.
It's very difficult to compare these approaches directly. If there's a connection in philosophy, that tighter approach to the abuse of dominance is in line.
12:35 p.m.
Conservative
The Vice-Chair Conservative Rick Perkins
Thank you, Mr. Van Bynen.
The next round is for Mr. Williams, for five minutes, please.
12:35 p.m.
Conservative
Ryan Williams Conservative Bay of Quinte, ON
Thank you, Mr. Chair.
I want to swing back to some changes that have already happened and some that we're looking at in this bill. Bill C-56 gave new powers to the minister to do market studies. Mr. Bester, I'm not sure if you're aware, but a letter went out. The Competition Bureau was going to study airline competition, which was great news for everyone. Then a letter went out from the industry minister saying that, while this was great, it should focus on domestic competition and stay away from the airports. We had concerns in this committee that maybe giving all of this power to the minister was a bad idea, and we're seeing that.
The Competition Bureau was here the other day, and I asked them a question. I didn't get a direct answer online, but off-line they said that yes, the terms of reference have to be made with the industry minister. Should the minister be involved in directing where the bureau should be looking with an important piece like airline competition?