Industry Committee on May 17th, 2022

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Thanks to the witnesses for being here.

Canada has a voluntary code of conduct for banks, and it's basically proved as useless as a glass hammer.

We see now the repercussions taking place with regard to the fees. When I questioned the BDC about this.... The BDC has been historically the bank of last investment when private banks have not provided the leverage or the borrowing rates for SMEs. I asked them about why they haven't looked at a credit card policy or credit card fee processing policy.

I'll start with Ms Kothawala.

Do you think that your members would take an uptake on the BDC if it provided a low-cost program for service fees similar to what's enjoyed from many other developed nations?

We are getting totally fleeced, and it's an inefficiency in the economy because the profit margins on transferring funds is not where the real work is being done. It's being done in your stores and the supply chain issue you're facing.

[Anne Kothawala]

I think it's a very interesting question, but not one that, frankly, I've really thought a lot about.

One challenge for us as convenience stores is that we're in the business of what we call choice and convenience, so we need to be able to offer that choice to our customers to be able to pay in the manner that they want to pay.

We recognize that there is value for them in their using their credit cards. Our challenge, as you said, is that the voluntary code of conduct has not achieved what it initially set out to achieve. We found that it's not just about the fee. It's about people finding other ways in part of the payment's ecosystem, if you will. They're just passing down the cost and, ultimately, it's on retailers' backs.

I'd be happy to explore that idea a little bit further, but just on first blush, we would still have to accept other credit cards because that's what our consumers want to use.

[Brian Masse, NDP, Windsor West, ON]

Sure, and we've seen the battles with Walmart and others that have gone front and centre on some of these things to address it.

What the BDC could do.... It was interesting because I had just thought up the idea on the spot when we were having committee, and it turned out that they don't even know when they canvassed their own users at the BDC about that issue. They couldn't even tell me a date for it.

What's amazing about this is, as we all started with higher prices for gas, supply chain issues, shortage of personnel and staff and so forth, the credit card industry and these fees have not been subjected to those costs. They have not been affected, but their profit margins are enormous on that, and they've even enjoyed government largesse through Mastercard, for example, getting a $50-million government grant to do security things that they could have done.

I guess what I'm getting at is that you'd think there would be a serious look at this, whether there was another product out there similar to credit unions getting into credit cards and lowering their interest rates, giving consumers a second choice.

Do you think that small and medium-sized businesses might look for a product that's a little bit better regulated?

[Anne Kothawala]

They well might. I'd obviously need to talk to my members. Like I said, it's certainly an idea that would be worth exploring.

[Brian Masse, NDP, Windsor West, ON]

I'll go to Mr. Iacobucci.

With your background, what's your perspective on competition in the banking sector and products like that? I'm really interested in what you feel about that. I find that our financial regulation industry has not been sufficient to deal with the competition or lack thereof. That the same as collusion—just don't have competition.

That's just my perspective but, please, yours would be appreciated.

[Edward Iacobucci]

Yes, I have a bunch of thoughts.

It's very difficult for me to feel confident about saying whether there is vigorous competition in the market, soft competition, collusion or something else going, so I am not going to comment on any particular industry, including the banking industry.

I do think there is a kind of modesty to competition law. I've been describing this already, but here is another way there is a kind of modesty to it.

Some markets are not going to be able to support many players. Let's suppose there are scale economies or regulatory barriers to entry, which may well be relating to financial services. There may be circumstances where there aren't a lot of players in a particular market. If that's true, then it's unsurprising that the firms take each other's conduct into account. They say things like, “If I'm really aggressive on price, what's my rival going to do? They will probably be aggressive on price back, and there is a small number of us, so why don't we just carry on quietly and not be that aggressive?”

That, I think, is a very real concern in oligopoly situations. It's something that competition law actually does not do a very good job of addressing.

Competition law looks for specific kinds of practices that exclude competition, but it doesn't look to the exploitation of what commerce would call market power. If you end up being in a position where you're somewhat insulated from competition because there aren't that many firms, you can charge a price that's a little higher than your costs. Competition law is not price regulation. Competition law tends to steer away from that.

I think if you find yourself in a position like that and there is an industry of public concern, competition law is probably not going to supply the right kinds of answers. It's not institutionally equipped to do things like price regulation. There may be other kinds of institutions that are better equipped or maybe these other institutions could be created.

I think the modesty that I am calling for in this one little space—competition law—need not extend to the law more generally. I think there are hard questions to be asked and answered, but my point is really just an institutional policy instrument choice.

[Brian Masse, NDP, Windsor West, ON]

Thank you very much.

Thank you, Mr. Chair. I know I'm out of time.

[The Chair, Liberal, Joël Lightbound]

Thank you very much.

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

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

Thank you very much, Mr. Chair.

I'm loving the discussion today. I'm going to jump right into it.

Mr. Iacobucci, we talked about Canada's competition laws and we're going to talk about the example of credit card fees. It seems the EU took on the credit card companies. It enacted legislation that allowed those credit card fees to be capped at 0.3% and 0.5%, including swipe cards.

Is Canada's competition law coming from our government able to enact the same kind of legislation to cap those fees here?

[Edward Iacobucci]

I think that's not a natural for competition law. Competition law doesn't regulate prices. Other kinds of laws, regulation and institutions look to price caps and the like. That's the first point.

The second point is what I said earlier to Mr. Masse. I have no expertise on whether the price-cost relationship is out of whack in the credit card companies. That's not something I would speak to.

The third—

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

Just to go deeper into that, the European Union talked about antitrust laws. Would antitrust and competition laws be separate?

[Edward Iacobucci]

No. I was going to get to that as my third point. Those are the same thing.

Their approach to competition or antitrust—which are usually used synonymously—is much more aggressive on a variety of fronts. That is not, I think, a good path for Canada to follow.

Let me just give one example. It may well relate to what you're talking about. In Europe, a high price in and of itself is potentially understood to be abusive of a dominant position. That's not true in Canada. A high price in and of itself is not treated as an abuse of dominance.

The reason we don't treat it as an abuse of dominance in Canada is not that we like high prices, but that it's really difficult for competition authorities to know what the optimal price should be. At the limit, we're going to have competition authorities trying to set prices in a range of markets where there might be some market power. That's a difficult enterprise for an institution that's not that well equipped to address it.

What we've done historically—and I think it's the right approach—is if there are sectors where we think there ought to be price regulation, then we regulate prices. Energy production is a historical example. However, we don't do it in an across-the-board manner. Europe does and I think it's questionable. It would not be something I would recommend for Canada because I just don't think the institutions are well suited for it.

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

There are a lot of lawsuits from that. It seems when you're talking about competition law you are protecting the rights of consumers because they benefit the most from competition. It would seem that might be a way to look at it, but it will be up to further conversation.

Thank you very much. I'll move on to Mr. Bonen.

Right now you talked about some stats. Do you know right now roughly what the participation rate in Canada is, how many workers who can work are working? We know that you've talked about how between 25 and 54 it was almost at capacity or maximum. Is that right?

[Dr. Tony Bonen]

Yes, for core-age workers, which is 25 to 54-year-olds, the ratio of people employed to population of that age group is roughly around 82%, which is about the highest we've ever seen.

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

Okay. Do you know approximately how many people are still on employment assistance in Canada at this point? Are you getting that data from the government?

[Dr. Tony Bonen]

It's accessible to us. I haven't looked at it closely, but like I said before, there are about one and a half unemployed people for every job vacancy right now.

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

When you talked about gaps in data, can you make recommendations? I might ask you to submit them in writing. What data gaps are you seeing from Statistics Canada, from the government, and what recommendations would you make to change that?

[Dr. Tony Bonen]

There are a number that we would identify. One we're working on with them and ESDC is information on the demand for bilingual workers, especially outside of Quebec. We're thinking about the francophone populations in official language minority communities and how we can leverage potentially online job postings or maybe update some of the job vacancy surveys to capture that information, but there are a number of others.

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

Thank you very much.

My last question is for Mr. Lee. If I don't have time to get these from you, can you please submit them in writing to us afterwards?

What is your industry worth, so GDP and number of jobs? How many skilled positions are Canadian home builders short, and what are those positions exactly?

[Kevin Lee]

The industry is worth about $180 billion. We're about 1.2 million jobs direct and indirect. About half of those are directly on site. About 22% of those are set to retire. In terms of what we're missing and the gap, it's across the board. It's a demographic issue as much as anything, so pretty much every age category is aging out and we need more young people coming into the system.

Did that capture all of them?

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

That's pretty good. Thank you very much, sir.

Thank you, Mr. Chair.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Lee and Mr. Williams.

We'll move to Nathaniel Erskine-Smith for five minutes.

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

Thanks very much. I'm going to try to share a bit of time with Iqwinder, so we'll see how it goes.

I want to start with Mr. Iacobucci.

This Friday we are going to hear from some experts in relation to the BIA amendments as they relate to Competition Act reform. I wonder if you have any thoughts on those amendments and the process today.

[Edward Iacobucci]

I do. To be concise I think I would put it this way. I think some of the changes directionally make sense. I think some of the changes I was quite surprised by. I'll give you one example. I was surprised by the AMPs, the maximum AMPS, for an abuse of dominance going up to quite high levels in a way that surprised me.

There's lots and I find it hard to answer that without getting into the weeds.

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

In the interest of time it would make sense, given your expertise in this space, and I know you were involved with not only C.D. Howe but with the senators' consultation process, as well, if you could share in writing some thoughts that you have on the proposal. It would be appreciated.

You mentioned competition law a lot, in terms of that competition law can't do everything. Of course, it can't do everything. Competition policy is different from competition law, of course. You see President Biden have a competition policy be an executive order. It doesn't just touch on competition law.

If I think of the telecommunications sector, for example, here in Canada we would have the MVNO policy, which is about competition, but competition law doesn't inform it per se, whereas right now we have Rogers and Shaw merging or potentially merging and that is competition law, specifically.

One challenge to competition law in respect to that merger is the efficiencies defence. My understanding is that you've been a bit more of a defender of that defence as far as it goes, but it strikes me that, if the Rogers and Shaw merger is approved on the basis of the efficiencies defence, that efficiencies defence should die a fairly speedy death.

Walk me through why you think it's a good idea to have this defence and why it's sustainable today.