Madam Speaker, I am pleased to address the House on private member's Bill C-220, an act respecting the energy price commission, which was introduced by my colleague, the hon. member for Regina-Lumsden. I would like to thank my colleague for the research and effort that was put into Bill C-220, leading to its introduction on March 4 of this year. He is a sincere, hard-working member.
The bill, as drafted, would establish an energy price commission which would confer on the Government of Canada the right and mandate to regulate the price of gasoline throughout the country. As I understand it, the commission would approve wholesale and retail gasoline prices across the country. Indeed, no person could offer gasoline for sale at a price not approved by the commission.
At the outset, I would like to explain that competition in an unfettered market rather than regulation leads to the lowest possible prices, both for the consumers and industrial purchasers of gasoline. Competition is seen as a means rather than an end unto itself. It is only through the process of competition that resources are allocated impartially, with the consequence that the efficiencies derived therefrom lead to lower prices.
This is the current view of the government and the majority of our trading partners. At a time when Canadians are attempting to
improve their competitive position in international markets we must steer away from regulations which, by their very nature, lead to the kind of production and distribution inefficiencies that eventually cause an increase in the price of inputs and in distribution costs.
On the issue of regulation, it is worth noting that at the Toronto economic summit in June of 1988 the G-7 countries first explicitly enunciated the goal of intensifying both individual and collective efforts to remove unnecessary controls and barriers to the operation of competitive market forces and to rely on increased competition to achieve economic efficiency and adaptability.
Reform of the regulated sectors of our respective economies has been in the forefront of economic agendas over the past 10 years. It is widely understood that less rather than more regulation is desirable. Barriers are descending within industries, between markets and across national borders. Trade, directed both north and south and east and west, has thus been encouraged. The potential for increased wealth for Canadians has been augmented.
The purpose of Bill C-220 and the commission is said to avoid unreasonable gasoline price increases. In addition, it proposes to maintain consistent prices for gasoline from province to province, all the while allowing for production and distribution costs. My colleague in his bill would exempt purchasers who enter into supply contracts for the supply of gasoline to their vehicles or to a storage facility owned by these purchasers from the authority of the commission.
From my reading of the bill, the underlying suggestion is that we need to regulate the price of gasoline in Canada. There has been a great deal of attention in this House and in the media about the price of gas in some specific local markets in parts of Canada. Before we decide that federal regulation is the answer to these localized problems, should we not ask if the price of gas has risen significantly and whether or not increasing the regulatory burden on this industry would actually improve the current situation?
In fact, the price of gasoline, in real terms, excluding all taxes, has been on a downward trend since 1990. In addition, there exists no significant differences in the base price of gas, excluding taxes and exchange rates, between the United States and Canada. Given this situation, should we as legislators impose a structure on the industry which would deny to consumers and businesses alike the benefits derived from real competition and retail gasoline markets?
In addition, the introduction of such a bill appears somewhat premature. I am informed by officials of Industry Canada, Natural Resources Canada and the Canadian Petroleum Products Institute that they are nearing completion of a regional competitive analysis of petroleum products. This report will examine pricing issuesin various urban and regional markets in the context ofdetermining the key factors which derive competitiveness in specific Canadian markets.
I would now like to provide my colleagues with a number of examples of the benefits of competition. Consumers could no longer benefit from the price wars that presently occur in retail gasoline markets, nor could they enjoy the benefits of the entry of a new competitor who would lower their prices to gain a market share.
Prices set by markets rather than governments tend to be lower to the consumer. The decision in July of 1991 by the province of Nova Scotia to discontinue its gasoline pricing regime reflected in part a recognition that such decisions should be left to competitive market forces. When prices were no longer regulated and a new independent entered the market, gas prices fell in Nova Scotia from 58.9 cents to 52.9 cents a litre, a very significant decline.
As is well known, gasoline stations communicate what they charge by posting large signs on their properties. This informs motorists and competing gas stations. Because gasoline is essentially a homogeneous product, motorists see one brand as being more or less identical to another. Gas station operators fear that if they charge a higher price than a competing station they will lose business. For similar reasons, if they charge a lower price they know it will be matched. In the end they make less money selling the same volume of product.
Retailers that monitor their competitors and independently take action that best serves their interests are simply following rational economic logic.
On the larger stage, such a commission would remove the incentive for petroleum producers to be more efficient. Price controls weaken the stimulus for firms to either swiftly adapt themselves to changes in demand or to developing more efficient methods of distribution. It is easier for the firms that have experienced cost increases to ask the regulatory body to increase the controlled price than to attempt to lessen their operating costs.
When prices are controlled at the retail level, retailers in turn may avoid passing on any discounts that they have been successful in exacting from manufacturers to the ultimate consumers for fear of breaking the law. In this manner retailers are constrained in their attempt to aggressively compete.
Competitive markets incur no cost of administration to governments, nor do they impose on the firms involved the cost of compliance with more laws, both of which would be borne by consumers over time.
Turning now to another subject in relation to this bill, I have further concerns with respect to the wisdom of raising yet another issue which impacts on the Canadian Constitution at this stage in our country's history. The regulation of petroleum products falls within the jurisdiction of the provinces. The federal government
does not currently intervene on these matters. This could very well be a fatal flaw in this initiative of my colleague.
I would now like to discuss the Competition Act which is Canada's legislation governing trade and commerce affecting competition. The act is a framework law of general application. It applies, with some exceptions, to all sectors of the Canadian economy, namely manufacturing, resources and services. The law touches on the every day life of all Canadians by maintaining and encouraging competition in the marketplace with the objective of providing consumers with competitive prices and a variety of choices in the goods and services which they purchase.
As the hon. member is aware, in 1994 the Minister of Industry, in response to concerns raised about gasoline pricing, asked the director of investigation and research who heads the Competition Bureau to review the provisions of the Competition Act to determine their adequacy in dealing with anti-competitive behaviour in the petroleum industry.
In response, the director reported that he actively enforces the Competition Act by monitoring developments in the marketplace and reviewing complaints from consumers and those in the petroleum industry to determine whether there is evidence of anti-competitive activity.
While there will always be fluctuations in markets owing to competition and other factors, the director's view is that the provisions of the legislation are adequate to deal with anti-competitive behaviour in relation to gasoline prices.
The director regularly reviews the act and the minister will propose amendments whenever he deems it appropriate. The above mentioned report is public and I encourage concerned members to read it. I also encourage anyone who has information that anti-competitive activity is ongoing to bring it to the attention of the director.
The act is available to deal with any competition problems that develop in petroleum product markets. As a matter of fact, on January 26, Mr. Justice David Dempsey imposed a find of $50,000 against Mr. Gas Limited which was found guilty of having influenced upward, by threat, the prices charged by one of its competitors, Caltex Petroleum Incorporated in September 1992 in the Ottawa area.
It should be noted that contrary to the context suggested in Bill C-220, matters involving anti-competitive pricing are most often treated as criminal offences under the Competition Act and as such proceed through the criminal courts under the auspices of the Attorney General of Canada.
The competition tribunal has to date only adjudicated on matters of a civil nature. A select set of pricing matters which may be brought before the tribunal are usually the result of disciplinary or
punitive action taken by dominant firms in a market rather than those arising from a criminal agreement among competitors.
In conclusion, it remains my view that gasoline prices should be set in the competitive marketplace. Anti-competitive behaviour will be appropriately addressed under the Competition Act.