Industry Committee on June 12th, 2024

[The Vice-Chair, Conservative, Rick Perkins]

Colleagues, we're ready to start the meeting.

Welcome to meeting number 130 of the House of Commons Standing Committee on Industry and Technology.

Today's meeting is taking place in a hybrid format pursuant to the Standing Orders.

Pursuant to the order of reference of Wednesday, February 7, 2024, the committee is resuming consideration of Bill C-352, an act to amend the Competition Act and the Competition Tribunal Act.

I sort of shorten this next part. Before everyone begins, we have these little earpieces. If you're not using them, please keep them away from the microphone and put them on the sticker, so that it doesn't harm the interpreters with feedback.

[Ryan Turnbull, Liberal, Whitby, ON]

On a point of order, Chair, I'm sorry to interrupt. I note that there are media still in the room. I don't think they're allowed to be in the room once the committee starts.

[The Clerk of the Committee, Ms. Miriam Burke]

They can be in the room.

[Ryan Turnbull, Liberal, Whitby, ON]

They can't be filming.

[The Vice-Chair, Conservative, Rick Perkins]

Until when?

[Ryan Turnbull, Liberal, Whitby, ON]

When the meeting starts, I don't think they're allowed to film.

[The Vice-Chair, Conservative, Rick Perkins]

I thought it wasn't allowed.

It's valid point of order. Thank you, MP Turnbull.

For all those watching, there are lots of ways to watch this through video, if you want to go to parlvu.ca.

Please keep the earpieces away from the mic if you're not using them in order to avoid the injuries that have happened to some of the wonderful interpreters we have here in the House of Commons.

Today, I'd like to welcome our witnesses.

From the Agri-Food Analytics Lab—from my part of the world—we have Sylvain Charlebois, the senior director of the agri-food analytics lab and professor at the wonderful Dalhousie University, by video conference. You may know him better in the media as the food professor.

From Quebecor media, we have Mr. Pierre Karl Péladeau, president and CEO, and Jean Péladeau, vice-president, operational convergence, Quebecor Media Inc. and Freedom Mobile.

From Videotron, we have Jean-François Lescadres, vice-president, finance.

With that, all of the sound tests have been done, I'm informed, for not only the witnesses online, but also the members who are online.

Each organization has up to five minutes for their opening statement.

Professor Charlebois, let's start with you.

[Dr. Sylvain Charlebois, Senior Director, Agri-Food Analytics Lab and Professor, Dalhousie University, Agri-Food Analytics Lab]

Honourable Chair and members of the committee, thank you for inviting us to testify today on Bill C-352, the lowering prices for Canadians act, which amends the Competition Act and the Competition Tribunal Act.

The proposed changes aim to increase penalties for anti-competitive acts, modify merger review processes and enhance market competition safeguards. These amendments are crucial for fostering a fair and competitive marketplace, particularly within the agri-food industry, which is integral to Canada's economy and food security. The agri-food sector is uniquely positioned at the intersection of agriculture and consumer markets, making it a vital component of our national interests. Effective competition policies are essential to ensure that this sector remains vibrant, innovative and capable of meeting the diverse needs of Canadian consumers. The proposed changes to the Competition Act are timely and necessary to address the evolving challenges within this industry.

We strongly support the increased penalties, proposed merger review enhancements and focus on market conditions. These measures collectively aim to prevent market dominance, ensure fair pricing and promote competitive practices. However, it is important to recognize the regional differences across the country.

Our first recommendation is to establish a dedicated agri-food market monitoring body within the Competition Bureau to conduct regular market studies and reports. This body should focus on identifying anti-competitive practices and market conditions specific to the agri-food sector. By providing transparent and detailed insights, this initiative can proactively address potential issues before they escalate into significant market disruptions.

Recommendation number two is to implement policy that specifically supports agri-food SMEs in navigating the complexities of the competitive landscape. This includes offering market data, legal and financial assistance for compliance with competition laws and fostering innovation through grants and subsidies. Ensuring that SMEs can compete effectively will promote diversity and resilience within the agri-food market.

Recommendation three is to encourage policies that support regional and local food distribution networks. This can include grants and subsidies for local food hubs, investment in regional distribution infrastructure and incentives for retailers to stock locally produced goods.

Recommendation number four is to establish and enforce a code of conduct for food retailers and distributors to ensure fair trading practices. This code should cover areas such as payment terms, contract fairness and dispute resolution mechanisms. By ensuring fair dealings between suppliers and retailers, the market can remain competitive, and smaller businesses can thrive.

Finally, recommendation number five is to incentivize the adoption of advanced technologies in food distribution, such as blockchain for traceability, AI for demand forecasting and the Internet of things for supply chain efficiency. Technological innovation can reduce costs, enhance transparency and improve the overall efficiency of food distribution networks.

In conclusion, Mr. Chair, Bill C-352 presents a robust framework for enhancing competition within Canada's agri-food industry. By implementing these recommendations, we can further strengthen our commitment to a fair, dynamic and sustainable market.

Thank you for the opportunity to present our views. We look forward to your questions.

[The Vice-Chair, Conservative, Rick Perkins]

Thank you, Professor.

Mr. Péladeau, you have the floor for five minutes.

[Pierre Karl Péladeau, President and Chief Executive Officer, Quebecor Media Inc.]

Thank you, Mr. Chair.

Good afternoon, ladies and gentlemen of the committee.

Allow me to introduce Jean‑François Lescadres, who is vice-president of finance at Videotron, and Jean Péladeau, who is vice-president of operational convergence at Quebecor and also my 32-year-old younger brother. As Pierre Corneille said, “For souls nobly born, valour does not await the passing of years”.

I should note at the outset that retail sales account for a very significant portion of the revenue generated by the Canadian wireless industry. According to our estimates, in 2023, over 80% of wireless product sales in Canada took place in person and in stores.

Of course, the Big 3, as we like to call them, Bell, Rogers and Telus, undeniably have control over the wireless retail market. In addition to their respective stores, they rely on a network of third-party retailers, which they control in whole or in part, operating under generic names such as “La cabine t”, “Wave Wireless”, “Wow! Mobile boutique” to name only a few.

Right now, over half of third party retail wireless sales in Canada are made in locations controlled by one or more members of the big three. Those controlled locations include hundreds that are operated by the behemoth GLENTEL, which is a joint venture between Bell and Rogers that sells product and services from exclusively its owners and their flanker brands.

We've learned that Loblaws intends to withdraw the products and services of our subsidiary Freedom Mobile from its Mobile Shop stores as of June 30, by all indications in favour of an exclusive agreement with Glentel.

Until now, The Mobile Shop has been a neutral reseller offering its customers the products and services of all major Canadian wireless service providers. We therefore met this news with surprise and concern, as that neutrality is now being undermined. The loss of these important outlets for Freedom Mobile will slow the expansion of our brand in some markets.

If its agreement with Loblaws is confirmed, Glentel will expand its operational portfolio to 180 The Mobile Shop locations in Loblaws-owned grocery stores. It will also mean the loss of 180 potential points of sale for other competitive brands, such as Freedom Mobile. This will further entrench the oligopoly in the Canadian mobile phone market.

We have raised our concerns to the president of PC bank and Loblaw head office. However, they are standing by their decision, putting commercial interests ahead of the interests of consumers. We also asked the president and CEO of GLENTEL about the possibility of distributing Freedom Mobile in their retail locations and, unsurprisingly, our request was flatly and immediately denied.

This comes as we're expanding the Freedom Mobile service area by availing ourselves of the MVNO regime to offer our services to more Canadians in new markets, such as through our recent expansion in Manitoba. What Loblaw shrugs off as a simple decision regarding suppliers that, in their own words, “does absolutely nothing to competition” actually hampers our efforts to increase viable competition in more markets.

In Winnipeg, for example, after GLENTEL's potential takeover of The Mobile Shop, 73%—yes, 73%—of third party retailers will be controlled by the big three, leaving very little room for Freedom to expand. GLENTEL alone will operate over half of all third party wireless retail stores in this area.

It's clear to us that this agreement between Loblaws, Bell and Rogers represents a new attempt by the dominant players in the market to thwart wireless competition in Canada. This new pressure from Loblaws, a company that the Competition Bureau is currently investigating for anti-competitive tactics in the grocery sector, needs to be seriously considered.

Moreover, I must reinforce that the business model underpinning uncontrolled joint ventures like GLENTEL only serves market concentration. In no other oligopolies would two out of three major players be allowed to work hand in hand excluding competitors from such an essential retail channel and giving consumers a misleading sense of objectivity along the way.

As parliamentarians, you have the power to act to force Loblaws to reverse its decision and to dismantle joint ventures such as Glentel, whose business model goes against the public interest and impedes healthy competition by restricting the choices available to Canadians.

Thank you for your attention.

[The Vice-Chair, Conservative, Rick Perkins]

Thank you very much, Mr. Péladeau.

We will begin the first round of questions.

For six minutes, we'll begin with MP Ryan Williams.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Thank you, Chair.

Thank you to all our witnesses for coming in today on this important discussion of competition.

Mr. Péladeau, it's very interesting to hear that GLENTEL is working exclusively with Loblaw and shutting out Videotron.

My first really simple question is, have the ISED minister—the industry minister—and the Competition Bureau addressed this concern? Have you talked to each one of them? What did they say?

[Pierre Karl Péladeau]

Yes, we mentioned this. In fact, we sent a letter earlier today.

We also spoke with them during the last few days. This decision is recent. Obviously, we were given the date, June 30. We're looking to make sure that this will take place and we're not going to be exited from this very important retail—

[Ryan Williams, Conservative, Bay of Quinte, ON]

I'm sorry, but just in the interest of time, did you get an answer from either one of them? Did you get any sense that there's a response?

[Pierre Karl Péladeau]

Before going to the bureau, obviously, we addressed the issue with the principals, with the president and CEO of GLENTEL and the other different other players involved in this transaction. As of today, as we're talking now, I don't know if we've received any answers.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Thank you, sir.

Mr. Charlebois, we're talking a lot about food insecurity lately and we're looking at how much more expensive food will get. The basket of food for Canadians in April 2021, if they bought it for $100, is now at $121—a 21% increase—and at the same time, we've seen the carbon tax go up by 23% this year. Next year, it's supposed to go up another 19%.

How do you foresee the carbon tax impacting food manufacturers across Canada in particular and their ability to manage costs and maintain affordability for consumers?

[Dr. Sylvain Charlebois]

Thank you, Mr. Williams. I appreciate the question.

We've done some work on the carbon tax or the carbon pricing policy. We came to the conclusion that it was really difficult to know beyond a reasonable doubt how the carbon tax is impacting retail prices specifically, because a lot of different factors can impact retail prices. A retailer can decide to target one product as a loss leader, for example, or to promote certain products. It's very difficult.

However, we did find some discrepancies up the food chain with wholesale and industrial prices. There seems to be a growing gap between wholesale and industrial prices for food prices in Canada versus the U.S., since 2021. That's quite concerning. We're not suggesting the carbon tax is contributing solely on increasing that gap, but we do believe that it is a factor.

[Ryan Williams, Conservative, Bay of Quinte, ON]

You've mentioned that. You've said that manufacturing is the “forgotten child” of the food supply chain. We're certainly looking at the carbon tax being a policy that has increased compared to our neighbours to the south but also, now, at new changes that are coming to capital gains adjustments to revitalizing food manufacturing in Canada, and we're talking about food insecurity. Are those changes going to result in increased food costs from these manufacturers, especially in Atlantic Canada and B.C.?

[Dr. Sylvain Charlebois]

I mean, those signals aren't necessarily desirable if you want to grow an economy. For example, right now, the Cargill plant in Guelph is on strike. I have visited that plant in the past, many years ago, and I can tell you that food processing, using that plant as an example, is undercapitalized—severely undercapitalized. If you want to encourage investment, sending signals that you will increase taxes on capital gains, for example, and, of course, the carbon tax policy, are certainly not things that investors want to hear. It's discouraging investments overall, I would say.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Also, when we look at farming.... You've written about restaurant owners as well. This is affecting restaurant owners. When we look at food security, when we're taxing farmers more, or restaurant owners as a whole, or manufacturers, is Canada becoming more or less food secure?

[Dr. Sylvain Charlebois]

It's problematic. The one thing that I'm hoping parliamentarians will appreciate is that the food environment is all about low margins and high volume. The sector itself is often risk averse because of that nature, and it needs to be appreciated in terms of, how do you actually allow the sector to grow? In order to assess whether or not the country remains food secure, you have to look at the level of competitiveness of the sector from farm gate to store or restaurant. Right now, I'm not sure we're going in the right direction.

[Ryan Williams, Conservative, Bay of Quinte, ON]

If you've written on that or have some research on it, can you please submit it to the committee so we can have that as evidence for this study, sir? That would be appreciated.

You've written exclusively that Canadians can't even afford beer right now. The price of beer is going up. This is obviously affecting anyone who just wants to enjoy a beer in Canada, where we are often very proud that we make beer. Is this an example of how you overload Canadians and kill an industry with taxes?

[Dr. Sylvain Charlebois]

There's that, of course. Demand for beer has gone down 3.5% so far this year, and it went down 3.5% last year, in 2023. It's certainly not growing, and it is a very important sector.

On the other hand, you do have microbreweries. We've had generous grants given to microbreweries in the past, and I would say it was a great idea. The problem is that microbreweries aren't necessarily scaling up; a lot of them are closing down. My suggestion here would be to be more targeted and more strategic when it comes to supporting start-ups in Canada, especially when it comes to allowing SMEs or start-ups to scale up. This is something that we have not done a good job at in Canada over the last several years.

[The Vice-Chair, Conservative, Rick Perkins]

Thank you, MP Williams.

The next questioner, for six minutes, is MP Van Bynen.

[Tony Van Bynen, Liberal, Newmarket—Aurora, ON]

Thank you, Mr. Chair, and I appreciate the witnesses' coming forward on an issue that's been quite critical for this committee, and certainly for the Canadian population generally.

I'd like to reference the Competition Bureau report of October 2023, which concluded that “competitive intensity has decreased from 2000 to 2022”. In particular, it “found that the most concentrated industries” have become more concentrated and that “the number of industries that are highly concentrated has increased.” Moreover, “Top firms are less” likely to be “challenged” in their position. The numbers of new entrants have decreased and firms' profits and markups have all risen overall.

According to the bureau, these findings underline the need to "modernize the Canada's competition laws to respond to the realities of today's economy", which is really why we've undertaken some of the other amendments and are having a look at the bill today.

To Mr. Péladeau, what factors have led to a decrease in the level of competitive intensity in Canada since 2000?