Industry Committee on May 17th, 2022

[Edward Iacobucci]

I'm not going to comment on Rogers-Shaw at all, but I'll speak about the efficiencies defence in the abstract.

My view of it is that there's an economic basis for the Competition Act. It is attempting to grow the size of the pie for Canadians. It's not concerned, and this is what I've said in different ways at different times already today, as much about the distribution of that pie. The concern about the efficiencies defence, which it sounds like you're quite familiar with, is that maybe you'll grow the size of the pie, but in terms of distribution it looks unattractive because maybe jobs—

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

No. Pause. That's not my challenge to the efficiencies defence.

My challenge is with the prospect of economies of scale and the prospect that you'll see efficiencies that will not only increase profits but also potentially reduce prices, because you're producing those efficiencies. What we've seen in practice.... This is what I have in front of me. John Kwoka, a competition policy expert, analyzed over 3,000 mergers and found that in mergers that led to six or fewer significant competitors, prices rose in nearly 95% of cases.

It's strikes me that, in a country of oligopolies like Canada, we have to be especially concerned about further consolidation and that the efficiencies ultimately don't, in practice, translate to lower costs for consumers.

[Edward Iacobucci]

There are two things. Ours is also a medium-sized country where scale economies are going to be more difficult to come by in domestic markets, so that's a consideration.

The other consideration is that I think those big studies are the wrong studies to look at when it comes to evaluating the efficiencies defence. I have some problems with the way the law has been interpreted. I won't get into those, but I would say that the right question is this: When efficiencies have been proven in a tribunal proceeding or to the satisfaction of the Competition Bureau, are they realized?

That's separate from these broad-scope studies that look at the efficiencies, where they haven't gone through any kind of legal vetting. It's an announcement by a firm saying that one of the reasons they're merging is that they think they'll realize efficiencies, and somebody ex post facto says, “No, you didn't.”

This is a very narrow subset where you're putting their feet to the fire. I think the law could be clearer that it's up to the firms to prove that the efficiencies are likely to come about. That would be a different sample, I think, from the sample that you're quoting—

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

How do you square that with someone like Professor Larkin, who came before our committee and said that Canada is increasingly seeing consolidation? We're seeing fewer IPOs and we're increasingly seeing mergers. With that consolidation, the broad effects mean higher prices, worse innovation and less burden in terms of research and development and business expenditure.

In the broad context of Canada's economy, isn't that kind of consolidation something we should want to avoid?

[Edward Iacobucci]

Again, there are two things. First, I want to know those studies. I want to get into the weeds of those studies, because they often rely on things like industry codes, which are not the same thing as markets. I'm not denying it, but I'm not sure. From what I've seen, I think there are competing views on that. That's point A.

Point B, if we're thinking about competition law, I take your point. There are lots of ways in which we can influence competition outside of competition law. However, if we're looking at competition law's impact, I think that, even if there were a trend toward more concentration, I'd want to interrogate whether or not competition law and its enforcement had anything to do with that.

I worry sometimes that people go down a chain of reasoning too quickly from, first of all, there are increasing concentration and profit margins, to this is the result of a failure of competition law enforcement. I think both of those steps are contestable. I'm not saying they're not there, but they're contestable.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Professor Iacobucci.

We'll move to Mr. Lemire.

You have two and a half minutes.

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

Thank you, Mr. Chair.

I was in Alma, in the Lac‑Saint‑Jean region, yesterday. My fellow members Mr. Mario Simard and Mr. Alexis Brunelle‑Duceppe were hosting a major gathering on the labour shortage. The participants in my panel included civil society representatives, elected officials and farmers.

Everyone was focused on what to do about the regional labour shortage. It's a challenge particular unto itself. In many cases, support programs are not suited to the realities in regions. Obviously, the issue of temporary foreign workers in the farming sector was discussed, as was the need for flexibility.

Another challenge that came up had to do with experienced workers. How do we bring young retirees back into the workforce? These are people who already have the knowledge certain sectors need.

Mr. Lee, you said earlier that you expected 22% of the workforce to retire in the next 10 years.

Couldn't we introduce tax or other incentives to encourage those workers to return to the workforce, incentives they don't currently have?

Having access to that pool of workers would help the construction industry, for example, alleviate the labour shortage it is facing. Don't you think so?

[Kevin Lee]

I believe we're going to have to have all kinds of solutions. We're going to need to have workers who can move around, for sure. I think in most cases, we end up with people wanting to stay in places permanently though, and that's an important part of the process.

We need harmonization of skilled trade credentials, so that you can move throughout the country. We saw that as a problem at various times when we had low employment rates in Atlantic Canada, but a real need in Alberta during the boom, and in every area. Not being able to move around the country was really important.

The ability to assess not only the current situation, but future situations in terms of the labour market information is really important. We were talking about it a bit before we started. Statistics Canada is very good at measuring what's currently going on, but less good at looking at the future. That takes a regional perspective, talking to industry participants, predicting what will come and what is seen as needs, and putting all of that together to talk about labour market information that's a little bit more predictive and looks down the road.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Lemire and Mr. Lee.

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

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

With apologies to my committee colleagues, I'll ask another border question.

This is for you, Ms. Hamm, with regard to the challenges you're facing.

Can you provide a little more detail about what's taking place? Even before COVID-19, there were ongoing issues with the border. Trying to get a safe border task force going was an idea of the Canada-U.S. border alliance and others. Can you highlight what's happening at the border, with respect to you and your members?

[Eleonore Hamm]

Sure. In the RV industry, our dealers, obviously, sell RVs, which are primarily manufactured in the United States. There need to be more Canadian manufacturers, but unfortunately, most of the manufacturing has moved to the U.S. I think 96% or 97% of the product sold in Canada is manufactured primarily in Indiana.

It's a huge issue, right now, because there are no drivers. Most of the drivers bringing product into Canada.... If they're Canadian drivers, they tend to be vaccinated, but these tend to be one truck bringing one RV. The multi-drivers, who have flatbeds with several units, tend to be from the U.S. side. Indiana has a very high population of Amish people and, for reasons, they currently choose not to get vaccinated. That's been an issue.

Just trying to find people to bring product, even before COVID-19.... We just had a board meeting where I asked about 10 of our board members.... Ten dealers have 450 units sitting in fields in Indiana, right now, which they cannot get delivered into Canada. That's only 10 of them. We have about 400 dealers across the country, so you can imagine. These units have been built. They're sitting in fields and they've been invoiced. The dealers are spending.... They're already being charged interest on them.

Unfortunately, because the season is short, people want their units now. If, when September comes, the units are still sitting in the U.S., it's going to be detrimental to the industry.

[Brian Masse, NDP, Windsor West, ON]

Hopefully, part of the solution can be a domestic manufacturing policy, because those microtrailers are taking off like there's no tomorrow. The innovation is incredible.

Thank you to the witness.

Thank you, Mr. Chair.

[The Chair, Liberal, Joël Lightbound]

Thank you.

We now go to Mr. Deltell for five minutes.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Thank you, Mr. Chair.

Good afternoon, ladies and gentlemen, and welcome to your House of Commons.

I want to discuss the labour issue with Mr. Lee first.

You talked about provincial harmonization, which, of course, leads to labour mobility, where workers can move from one province to another. The national building code is paramount to your industry, housing construction, and each province has its own responsibilities in that area. That means that, on top of interprovincial barriers to the flow of goods and worker mobility, you have to deal with different rules at the provincial level.

What do you recommend to make it easier for workers to move between provinces and to harmonize the various codes?

[Kevin Lee]

I think, with respect to the....

Thank you for your question.

The building code is headed in a decent direction right now, with different provinces looking to harmonize around the national building code. There are more efforts in that direction.

Honestly, I think the bigger problem, right now, in terms of code harmonization—because the provinces are headed in the right direction—is municipalities doing what we call “code by other means”, trying to implement things that are actually building code measures through local requirements. That becomes very difficult to handle. It's very difficult to work in different municipalities. Frankly, it can become dangerous, as well, because municipalities aren't well set up to look at all the unintended consequences of doing one thing.

I'll give you an example. In Alberta, right now, we have issues around something that was done for fire safety, which resulted in moisture in attics and moisture coming through ceilings. I won't go into the details, but that's what happens when you're not going through a proper code process.

To your question about how to harmonize to make it easier, the provinces are headed in the right direction. I think we need municipalities to follow provincial building codes that are, in turn, based on the national building code. That will help a lot in terms of productivity and standardization.

It's the same with products and materials. Some provinces have different requirements for different products—different standards. That's a big problem if you're a manufacturer in Canada. For example, we have some great window manufacturers that have to manufacture to different standards depending on what province they're going to. At the same time, if a window is staying within a province, it doesn't have to adhere to the Energy Efficiency Act. We could definitely clean all of that up. That would make for much better productivity.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Thank you so much, Mr. Lee. My conclusion from your comments is that I will not say that it will be a never-ending problem, but it looks like that.

[Kevin Lee]

I will say that I think we're headed in the right direction. There is a lot of talk around harmonization. It is not easy, especially when building codes are the jurisdiction of the provinces.

For everybody to now be looking to really truly lever the national building code is a step in the right direction. What we don't need is a bunch of differentiators now at the municipal level.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Thank you for your observations, Mr. Lee. I hope municipalities and provinces listen to us today.

I would like to address another issue with Madame Hamm from the RV industry.

Madame Hamm, we all know that your industry was very affected by the pandemic—the first to get out and the last to get in. Now things are going better, but RVs move by gas and now we see gas prices rising very high. How do you think it will affect your industry?

[Eleonore Hamm]

Thank you very much for the question. We do get asked that a lot.

There are a few different things. I think we've seen previously that people are concerned, obviously, about gas consumption and gas prices. Generally what happens when the prices rise is that the consumer utilizes their RV in a different manner. They tend to take shorter trips. They stay closer to home. They don't go quite as far. Campgrounds are getting full this summer. We anticipate that people will be utilizing their vehicles. You do have to keep in mind that when the price of gas rises, it affects every type of travel. RV vacations are still very affordable.

We are, as an industry, starting to look at electric vehicles. Obviously, most of the industry is towable, but for motorized, some of the large manufacturers actually do have some electric vehicles out on the market now. It's slow going, and it's a little bit behind the auto industry, but we hope that within the next 10 years we'll be seeing more of that and the industry will grow and expand in different ways and be less dependent on gas.

[The Chair, Liberal, Joël Lightbound]

Thank you, Ms. Hamm and Mr. Deltell.

We now go to Mr. Gaheer for five minutes.

[Iqwinder Gaheer, Liberal, Mississauga—Malton, ON]

Great. Thank you, Chair.

Thank you to the witnesses for making time.

Dean Iacobucci, it's a pleasure to see you. We actually met before, at the 2016 admitted students weekend at Victoria College. I do apologize, because I did end up going somewhere else.

For my first question, I'd like to very humbly push back against the premise of your statement. You said that the purpose of antitrust law is to protect “competition”, not to protect individual competitors. Couldn't one rhetorically argue that one of the best ways to protect competition is to protect individual competitors, and that one of the best ways to avoid the adverse effects of competition—price-fixing or the limitation or control of production, share markets or sources of supply applying to similar conditions and to equivalent transactions—would be to protect individual competitors?

[Edward Iacobucci]

First of all, I'm sorry about your decision about law school. I hope it had nothing to do with our encounter.

Thank you for your question.

I think at times they can be quite consistent—that is, that protecting a competitor from certain practices helps promote competition. The danger, though, is that you start protecting competitors from what is in fact vigorous competition. I should be clear that this line is not always super easy to draw. There's contestation over a practice that some people argue is competition on the merits and other people argue is just a way to exclude or prey on a competitor. I'm not saying the line is easily drawn, but I think the concepts are actually reasonably clear.

Competition on the merits—a better product, a lower price—can be really hard on a competitor. If your product isn't as good or if your costs are higher and you have to charge a higher price, then that better product and those lower prices are bad for you. This is what I mean by saying that competition law is not concerned about the competitor, per se. That is, if that competitor is just not able to compete on price or quality, that's not the kind of competitor that's going to thrive in this market. That is actually just a manifestation of competition. Competition can be quite harmful to competitors. That's the whole idea. They're all trying to outdo one another, so that can cause harm to one another.

That's the distinction. Competition policy is trying to protect the competitive process. It's trying to protect competition. That will, in some circumstances, limit certain practices that harm competitors, but it will allow and indeed promote and encourage other kinds of practices that may harm competitors but are vigorous competition on the merits.

[Iqwinder Gaheer, Liberal, Mississauga—Malton, ON]

Thank you for that explanation. I can think back to law school where all the professors would say that most of the law is a line drawing exercise.

[Edward Iacobucci]

It is. There is judgment at the margins, for sure.

[Iqwinder Gaheer, Liberal, Mississauga—Malton, ON]

You said that there are other legal tools that can protect SMEs, for example, tax law.

Can you expand on the tax law point? What are the other legal tools?