Industry Committee on May 20th, 2022

[Dominic Thérien]

In the letter from the Canadian Bar Association, a footnote indicates what could be a similar case related to the Ontario securities legislation. In that other case, however, the maximum threshold is $1 million, and according to the information we have, that measure has never been invoked.

Before the government introduces the concept of “private sheriffs”, as someone called them I believe, debate is needed on what will happen in terms of this type of potentially strategic litigation. Is the money that goes to the Receiver General for Canada further to a private remedy the incentive that should be given to businesses, or should they instead be entitled to damages? The time must be taken for this type of debate.

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

I'd like to continue with you, Mr. Thérien, on the direct consequences for privacy. You spoke about it earlier, and other witnesses have as well.

Once the issue of privacy comes up, we're on very thin ice. I think you're the first to recognize that, particularly since privacy is at risk because of social media these days.

Given what is currently in the bill, how could privacy be negatively impacted?

[Dominic Thérien]

I believe, honourable member, that a criterion would need to be added to those used to determine whether anti-competitive effects exist. Without knowing whether our section has adopted a firm stance on the matter, I don't want to say any more on the topic. I'll just tell you that there is a problem and invite you to question the other witnesses.

[The Chair, Liberal, Joël Lightbound]

Unfortunately, Mr. Deltell, that was all the time you had.

Thank you, Mr. Thérien.

Mr. Erskine-Smith, you have the floor for six minutes.

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

Thank you very much.

Mr. Dachis, I think you said price-fixing and wage-fixing are economically similar. Why would the act treat them differently?

[Benjamin Dachis]

A good example here is the question of competitors. Right now, the legislation as it is currently enforced requires that price-fixing be among competitors. That is, per se, a leap. The legislation as proposed includes any employers, not necessarily competitors. This could have a much more wide-ranging application than the way it is—

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

Why would it ever...? Could you provide an example where employers in vastly different sectors that aren't competing with one another would enter into an arrangement to fix wages?

[Benjamin Dachis]

In no-poach, for example.... Take the example of a consulting company sending someone in-house to a client for a set term of three, four or five months, while the employee of the consulting firm is embedded in that client. Rather than that individual person having to float around on individual contracts, that person could be employed by that consulting company and go from client to client. In order for that consulting company to want to enter into that agreement, they are going to have to have certainty that they are not going to lose that employee to that company. That kind of arrangement can be beneficial for all parties, where these employees know they're not going to have go contract to contract, while—

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

You're talking about no-poach. Let's talk about fixing wages.

Let's take an example where the evidence around price-fixing is such that section 45 could be pursued beyond a reasonable doubt and, in a similar manner, wages of low-income workers in an oligopoly sector have been suppressed by way of an agreement between those employers. Don't you think that should be treated the same way price-fixing is treated under the act?

[Benjamin Dachis]

It comes down to the definition of “per se”. This is where I'll definitely defer to some of the lawyers—

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

Let's go to Mr. Thérien.

You mentioned some concerns. You said there is a civil standard and we could improve upon the civil standard.

My understanding.... This is from a public comment made by former Commissioner Pecman in relation to wage-fixing in particular. He said, “There’s just a gap in the legislation”. In his response to a letter that I sent, Commissioner Boswell wrote, “Proving a substantial lessening or prevention of competition is not a low threshold”.

Section 90.1 is not specific to wages, of course; it's buy-side agreements in general. Don't you think there should be something specific to wages, as there was previously and as there is in other jurisdictions? Should we not be treating wages specifically and separately?

[Dominic Thérien]

Let me answer that twofold.

In the past, we had this general criminal prohibition that could encompass any agreements that had an undue lessening of competition. We moved away from that. Those were the 2009 amendments. It was furthered through a very long process, if I may. Three expert reports were commanded by the commissioner at the time to get ideas of what exactly should be per se, with 14 years of jail term attached to that.

When we're saying let's compare to the U.S., the U.S. has been acting against no-poaching and non-solicitation since 2010 under civil actions. In 2016, they provided guidelines for professionals saying that the next time it's going to be criminal. They came up with their first criminal charge in 2020. This committee isn't aware of this, but it is in our letter: In the first trials in the U.S. for criminal no-poach and wage-fixing, they lost.

All we're saying is that it would be—

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

That's not necessarily a consequence of a poor approach. That could well be a consequence, in those particular instances, of not being able to prove the burden beyond a reasonable doubt.

I'm not suggesting that the criminal standard is the right one here. I'm just a bit confused about why we're articulating the need to address this problem of wage-fixing.

I know Mr. Wu has suggested that we should treat no-poach in particular—and I think Mr. Dachis suggested something similar—in an employment labour context, but the example before this committee previously was specifically around wage-fixing, suppressing low-income employees' wages and communication between employers in the same oligopoly sector. I don't really understand how low income and minimum wages are different from bread.

[William Wu]

Maybe I'll just jump in with one comment.

I disagree with the commissioner's concern that the need to prove substantial lessening and prevention of competition is a burden that he ought not need to discharge. This specific context of the grocery hero pay was a very unique situation in the labour market. That was a situation where basically every store other than grocery chains was closed. In that specific context, one can imagine that this type of wage-fixing agreement indeed had an anti-competitive effect on the labour market. Those workers would have nowhere else to turn for another job opportunity. They would not have had the opportunity to get another job with higher wages elsewhere.

In the hot labour market as it is right now, with an extremely low unemployment rate, the agreement between some employers to fix wages would, I suggest, have a limited impact on employees' actual welfare, especially for employees with generally transferrable employment skills. Those skills can be easily transferred to another position. The alternative employer doesn't need to be in the same industry. A grocery worker probably would be using a very similar skill set as someone in another retail context.

When we're thinking about competitors in the no-poaching or wage-fixing context, it is about who is competing for the same types of employment skills, rather than competitors in the supply market.

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

I'm out of time.

It seems to me that section 90.1 is insufficient. If you don't like the new proposed section 45, it would be very helpful for you to send something to the committee by way of what it should look like, because I want to address this issue. If the criminal law is not the way to do it, I don't think section 90.1 is sufficient.

It would be helpful if all of you smart people who work and think in this space send me what you think it ought to be. There's a gap in the current law. If you don't like the current proposal, I'd like to see what the alternative is.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Erskine-Smith.

Mr. Lemire, you have the floor for six minutes.

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

Thank you, Mr. Chair.

The Standing Committee on Industry and Technology has addressed anti-competitive practices on several occasions, particularly in relation to telecommunications technologies, large technology corporations and so forth. We also addressed this topic in our study of the labour shortage being experienced by small and medium-sized enterprises.

We have heard from many witnesses concerning the considerable decline in competition, which should be examined. This includes presentations by Ms. Vass Bednar, Ms. Jennifer Quaid and Mr. Edward Iacobucci, who all spoke about the merger of companies and the reduced number of players, situations that are increasingly common on the market. We have also heard from Ms. Robin Shaban and Ms. Yelena Larkin on this topic.

I'd like for us to take their comments into account in the analysis we'll submit to the Standing Committee on Finance. Their comments should also maybe be included in our recommendations.

In 2020‑21, our committee also conducted a study that shed light on the power of a small group of grocers who had agreed to reduce the COVID‑19 wage premium they were paying workers. The study showed how they could exercise greater power over the sale of a majority of foods. These examples are far from unique, and this raises more and more concerns because we are unaware of other situations out there.

The commissioner of competition, Mr. Matthew Boswell, chose not to pursue the matter because, under the Competition Act, as it exists today, fixing salaries is not considered to be a criminal act. Only agreements between competitors to fix the price of goods are seen as a criminal act.

My question is for Ms. Tiessen, from Unifor.

Ms. Tiessen, do you think the amendments made will serve as a deterrent for employers who might be tempted to use practices now defined as anti-competitive?

[Kaylie Tiessen]

That's a good question.

Let's see. I think we've seen this committee study this issue. We saw the commissioner and their response and their reasoning behind not studying the issue.

We know that we have a wage-fixing problem. Previously when we were here, our president stated that if this is something that's so obvious and these retail giants think they can get away with it, then what else is happening that we don't see, don't know about and can't investigate?

We're seeing that it's being thought of as a cost of doing business or that it's at risk of the cost of doing business, either because they can get away with it—it's not illegal and the threshold is too high—or because the penalties are too high. We need to make sure that we are dealing with that issue.

This committee made the recommendation last year, in your report in June 2021, to make this change to the Competition Act, and I think it's really important that we go forward with it.

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

My next question is for Ms. Quaid.

Ms. Quaid, we understand your questions about the inclusion of the first stage of the modernization of the Competition Act in a budget bill. We have also heard from others about this today. We heard from competition experts who told us that Canada's Competition Act was not in line with what was being done elsewhere in the world. According to the minister, Mr. Champagne, those changes stem from the urgent need to act in relation to digital giants.

In your opinion, are the provisions as they are worded in Bill C‑19 enough, and do they do justice to the minister's main objective?

[Dr. Jennifer Quaid]

I'll try to be as brief as possible. This is one of the reasons why my opening statement differed from the last time.

I'm setting aside the issue of fixing salaries, which merits a meeting of its own, in my opinion, at which I'd be pleased to make a lot more comments on the topic. I'm also setting aside the fact that I don't like the use of a budget bill. As for the other provisions, I'm of the view that they're not surprising amendments and are justifiable, given that we're trying to catch up.

I think that my perspective will differ somewhat from those of some of my colleagues on the fact that we'll be criticized or that our reputation will be tarnished. In the consent agreement with Facebook, the penalty that we imposed was $9.5 million, almost the maximum amount possible. The United States imposed a penalty of $5 billion.

I think that the possibility of increasing the amount is not a problem in itself. We are well below the fines imposed by European countries and the United States. Should we go as high as them? No. That was just an example.

I was thinking this week, and you'll acknowledge that things are changing. I think our gradual recognition is an interim step. However, I really wouldn't want that interim step to become permanent, because that would be a mistake.

While we cannot do it all at once, we want to send a message to market players, consumers, Canadians, businesses of all kinds and our international partners. I think it's a good idea to at least take these small steps.

However, I have a reservation. Indeed, I find that the Competition Bureau should quickly publish clear guidelines on how it intends to enforce some of these elements. I am not convinced that we need to suspend the enforcement of the provisions. Setting aside the offence of fixing salaries, I think we could move ahead. However, it would be very important for the bureau to step up and oversee these changes.

It is very important to understand that the amendments to the act are not a silver bullet. It doesn't change a culture or an application. It doesn't change things. That's why we need guidance from the agency responsible for enforcing the law to adjust and support these amendments. The bureau is very good at consulting. It will propose guidelines to which people will react, including my friends who are attending this meeting virtually.

We are working to ensure that this is well done. I therefore think that it's a mistake to believe that passing legislation is a magic answer. My reservation is related more to that, and the fact that I still don't like using a budget bill. On those conditions, I'm prepared to accept that we may need to take strict measures.

[The Chair, Liberal, Joël Lightbound]

Your comments are duly noted, Ms. Quaid.

Thank you, Mr. Lemire.

Mr. Masse, you have the floor for six minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair, and apologies for being a bit late to the meeting. I had to do a panel show.

Ms. Quaid, with regard to the statement that AMPs here are not similar to those in the United States and Europe, what was the reasoning behind that? AMPs won't be set at the maximum and be automatic. Those go up to what they can go to, so what's the detraction for us having some consistency there, especially when we have quite a bit of integration on products and manufacturing with the United States and other types of standards?

When it comes to consumers and consumer protection, we're particularly poor. I'll give the auto example, just as a background. We aren't afforded the same protections as U.S. consumers. If you look at the Toyota Prius example, emissions from Volkswagens and all kinds of different things, Americans enjoy way greater consumer protection, yet companies treat Canada as a colony.

Why not at least have in our back pocket AMPs that are significant in case we need to protect consumers?

[Dr. Jennifer Quaid]

You may have missed my opening remarks, but I've become practical.

The AMPs change is a change. I'm not going to pretend it's not a change. I do think that, on the whole, it's a good change. I understand the concerns of my friends at the Canadian Bar Association and in private practice. There is an uncertainty now where there wasn't an uncertainty before.

I think we need to remember a couple of things. The first is that these extra calculations are for amounts that exceed the current maximums. There will be circumstances where we do not need to exceed the current maximums. In fact, I would like to see scalable penalties across the board, rather than saying under $9 million, because that's a huge amount for SMEs. I think I said that last week. I think we have to keep in mind that for some enterprises, scalable penalties are really the only way you're going to be able to come up with the correct amount. Canadian courts do not have a good track record of picking a number out of the air and making it high enough. I think that tying it to a metric is important.

Yes, there's going to be a transition period, but I don't see the downside in allowing penalties to go up. Do we have to reach the levels of the U.S. and Europe? Not necessarily. I would highlight two things. We have a list of aggravating and mitigating factors that must be taken into account when you determine the amount. Those are relevant. This is not a random, arbitrary amount, contrary to the impression you might be left with. The other thing I would underscore is that, for misleading advertising—it's not the case for abuse of dominance—AMPs are only available if the defendant has not been able to establish that they were diligent. You're already in a zone where you could say the conduct is less justifiable.

I don't know if there's anything else you need, but I'm going to stop there.

[Brian Masse, NDP, Windsor West, ON]

No, that helps.

I see Mr. Dachis wants to get in. Anybody else who wants to can answer that. I am curious about it.

To be fair, your criticism of its being part of the budget bill is a fair one. It was Paul Martin who brought in the first non-budgetary legislative changes with immigration and a few other things back in 2006. Since then, unfortunately, we've had budget bills that have these elements in them, and it has become similar to the American system.

Does anybody else wish to comment on the AMPs and where we sit?

[Benjamin Dachis]

Senator Wetston's commentary on the [Inaudible—Editor] is a really useful touchstone of asking where the boundaries of debate are. One thing that was very clear in his commentary was a request to increase AMPs. There was consensus on that. There was no consensus, though, on the amount.

We're spending a lot of our time focused on the 3% of global revenues, and rightly so, but there is a provision in there that would allow scalable AMPs for three times the value of the benefit derived from the anti-competitive practice. That's the sort of thing that does make some sense in the spirit of Senator Wetston's consensus statement. Going beyond that is where things get a little more problematic.