Industry Committee on May 17th, 2022

[Nathaniel Erskine-Smith, Liberal, Beaches—East York, ON]

You mentioned that we should examine each of these deals closely to see whether the efficiencies in actual fact did overcome the substantial lessening of competition. One unfortunate thing with Canada though, as far as I understand from speaking to lawyers in the space, is that their best advice to clients is to hold off on doing anything for a year. After a year, the bureau can't review the merger. Play nice for a year. The FTC can review six or eight years later.

Shouldn't we as policy-makers, if we want to get it right, make sure we get it right and say, “If this merger is actually problematic for competition, we'll make sure the bureau has the tools to undo it”?

[Edward Iacobucci]

I think there will always be a bias to ex ante review rather than to ex post examination. I think that's for good reason, which is that the costs ex post of breaking something up are pretty significant, whereas the costs of stopping something from happening are going to be much lower.

That said, I personally would be open to more kinds of ex post review. I'll give you an example of a really thorny kind of problem. It sounds as though you've been looking at these a lot. There is the nascent competitor problem, when you have the acquisition of a small competitor. One of the things that I like about the changes in the BIA—I'm not sure about that process, but I will say—is the idea that there could be an abuse that's good for a competitor but harmful to the competition. That can now be covered by abuse of dominance. I think something like serial acquisitions of nascent competitors might be something that we have to look at ex post, and I would look at it as an abuse. We've done that before in Laidlaw, and then case law kind of made that impossible, but that's an example.

I'm sorry. That's a long-winded answer, but yes.

[Nathaniel Erskine-Smith, Liberal, Beaches—East York, ON]

No, it's a good one though.

In a different context and at the intersection of privacy, data and competition, we saw the acquisition of, say, Instagram by Facebook. Facebook was privy to data that other competitors that could have potentially acquired Instagram did not have. There are challenges, from a competition perspective, to that kind of acquisition as well with nascent competitors.

When you talk about oligopolies and the need in some cases for consolidation in a country like Canada, depending upon the space—airlines are an example, potentially—when we look at other jurisdictions, we aren't alone in this challenge. We have evidence that Amazon is increasing the fees they're charging to small businesses on their platform. That's a problem. It's a problem of the dominance of the platform.

Similarly though in Canada we have grocery stores that are squeezing their suppliers. Other countries like the U.K., for example, impose codes of conduct. If competition law isn't going to be the answer, they find a different answer. In an oligopoly setting where we can't encourage greater competition by way of the law, do you think a codes of practice or a code of conduct is a ready solution?

[Edward Iacobucci]

I'm skeptical, but I'm not saying no.

There are two kinds of skepticism. One—and this goes back to something Mr. Masse said—is that voluntary codes of conduct may not have the force that you might want them to have.

[Nathaniel Erskine-Smith, Liberal, Beaches—East York, ON]

I don't mean voluntary.

[Edward Iacobucci]

Okay, so these are imposed. These would be imposed on them and enforced.

[Nathaniel Erskine-Smith, Liberal, Beaches—East York, ON]

Yes, because you said the bureau may not be the best place to talk about excessive pricing, but there may be a regulator that is enforcing a code of conduct that would have greater insight into that particular sector. Then they could talk about excessive pricing in a more serious way.

[Edward Iacobucci]

Fair enough. I have two hesitations. I'll get to my second one, which is that it's really hard to do it well. It's just really hard to do it well, but I wouldn't rule it out.

Again, think about the old utility model of energy generation, trying to figure out a fair rate of return regulation and what prices should be set for kilowatt-hours. This is not a straightforward exercise. For the government to take on doing this in more and more sectors where we see an absence of competition, it is going to be challenging. I'll just say that.

As always, will you do more good than harm? That, I think, would be a very open question. To me, it's the right question. Let's not have these competition law institutions trying to do something they weren't built for.

[Nathaniel Erskine-Smith, Liberal, Beaches—East York, ON]

Thanks very much.

[The Chair, Liberal, Joël Lightbound]

Thank you very much.

Over to you, Mr. Lemire, for two and a half minutes.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you, Mr. Chair.

Mr. Lee, in December, I attended a meeting in Washington having to do with issues related to the Build Back Better Act.

The American bill would have a wide range of repercussions on trade between Canada and the United States. The construction of electric vehicles and the softwood lumber dispute are two areas that would be affected.

I know that the National Association of Home Builders is an ally of Canadians. Are you working with your American counterparts to find solutions?

Can we expect that the battle will eventually be won?

[Kevin Lee]

Thank you. It's a tough question because there isn't really a good answer, in my view.

I mean, the softwood lumber dispute has been going on for 30 years. It's the same deal every time. The international tribunals always agree that Canada is in the right. The American lumber lobby is superpowerful and convinces the government to uphold and delay. It's a ridiculous situation. Yes, we work closely with our American colleagues and the home builders who are adamantly opposed to the tariffs.

I wish I could tell you I saw a future where that wasn't going to happen. It's something that both governments should really be working on.

I think the Canadian governments, of all stripes, have worked very hard over the years to try to come to terms with it, but it never goes away. I don't know how it ever will, but hopefully this current one will get settled soon.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

As I see it, producing wood products that fall outside the World Trade Organization framework is one possible solution. That could benefit members of your association. Say the federal government were to invest in small mills based in forestry regions, which would obviously have kilns on site to manufacture two-by-fours and other equipment used to build homes and infrastructure.

Might that help bring down the price of materials and, by extension, help your membership overcome supply issues?

[Kevin Lee]

It's such a tricky situation. I think those types of ideas and looking at different alternatives are important.

Canada has a tremendous lumber resource, and there's more we can do. There are more structural elements that can be made with wood, and we're starting to go there. We were going to go there in faster fashion before lumber prices went up. Now it becomes questionable as to whether they can even be class-competitive with some of the more basic materials they would compete with, like steel.

I think some out-of-the-box thinking in that industry to support Canadian lumber—and the entire industry that could be wrapped around that—would be very beneficial.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you.

[The Chair, Liberal, Joël Lightbound]

Thank you.

We now go to Mr. Masse for two and a half minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Mr. Iacobucci, I'm sorry if this is redundant. I got dumped off the system and just got back on in time here.

In talking about voluntary agreements versus mandatory agreements and so forth, on the right-to-repair issue, the automotive aftermarket, right now we have a CASIS agreement, which is voluntary. The new EV vehicle entrants are not actually prescribing to it right now.

Do you have any suggestions on how to deal with that and whether or not enforcement should be the policy? It shows the weakness, because for vehicle repairs, Tesla, for example is opting out, whereas other OEMs are opting in. It becomes a complication.

[Edward Iacobucci]

I'm sorry. I don't think I can say anything knowledgeable or insightful about that, other than it is problematic when regulation applies to one part of the market and not another. That is not something that promotes healthy competition if one has an advantage over the others because they just ignore or otherwise are regulated differently.

[Brian Masse, NDP, Windsor West, ON]

Could that be used, then, as a competitive advantage by those opting out? I think that's maybe why you saw some of the increase in the AMPs, perhaps as the response.

Can companies use that as a wedge for dominance in the market if they opt out of these practices?

[Edward Iacobucci]

I don't know if there'd be enough to give them a sufficient advantage to establish dominance. I don't know nearly enough about the particulars.

However, there is something problematic when some players bear a cost that others don't and that's the result of either faulty regulation or people ignoring regulation. I can't speak to the particulars, but I share your instinct that there's a relationship with competition there.

[Brian Masse, NDP, Windsor West, ON]

Thank you very much.

Thank you, Mr. Chair.

[The Chair, Liberal, Joël Lightbound]

Thank you.

We'll move to Mr. Kram for five minutes.

[Michael Kram, Conservative, Regina—Wascana, SK]

Thank you very much, Mr. Chair.

Thank you to all the witnesses for joining us today.

Mr. Lee, from the Home Builders' Association, you identified municipalities as the number one challenge facing your industry. Could you identify what some of the challenges are that municipalities bring to the building of houses? Are some municipalities more challenging than others?

[Kevin Lee]

Yes. Definitely, some municipalities are more challenging than others. There is a lot of process. Accessibility to developable land is a big challenge. Development taxes are another huge challenge.

We've actually done a municipal benchmarking study assessing different cities across the country for all of these different barriers or opportunities and looking at who has best practices that others could follow to help get more supply online. Certainly, when I was talking about the number one challenge when we're talking about getting more supply online, it ends up being that the bottleneck most of the time is around the municipal processes and getting access to land.

Also, I think, to be fair, too, we have to talk about what the communities of the future are going to look like in terms of intensification. Any kind of development that's building up or in within city limits and neighbourhoods faces a ton of Nimbyism. Making sure that we have smart ways to deal with that, where the community concerns can be heard but also that it doesn't derail or completely stop projects, is really important. That's municipal process as well, but it's also tricky local municipal politics.

[Michael Kram, Conservative, Regina—Wascana, SK]

Okay—understood.

In your opening statement, you also mentioned a drywall duty. I will admit that this is the first I've heard of that one. Could you elaborate on what the drywall duty is and how it is a challenge to your business?