Mr. Speaker, Bill C-235 proposes substantive amendments to the Competition Act. They are intended to address pricing practices in industries, particularly the petroleum industry which are characterized by vertical integration and dual distribution, that is, industries where firms carry on operations in wholesale and in retail markets and compete in retail markets with firms to whom they supply at the wholesale level.
I would like to take a moment initially to commend the hon. member for Pickering—Ajax—Uxbridge and his colleagues for their work on the Liberal committee report on gasoline pricing in Canada. The committee report deals with wide ranging, significant issues in a professional and constructive manner. It provides all stakeholders with a solid foundation on which to move forward.
The thrust of Bill C-235 as I understand it is to prevent the vertically integrated suppliers from squeezing the margins of their unintegrated customers' competitors in a manner which threatens the competitive viability of the unintegrated firms, generally referred to in the petroleum industry as independents.
I would also congratulate the member for Pickering—Ajax—Uxbridge for his work in preparing the bill as well as his laudable efforts to find solutions to the problems facing many of our independent petroleum firms today. His efforts are very well intentioned.
The proposed means to resolve these issues quite unhappily will not bring about the results he seeks. They will most certainly have serious adverse consequences on the Canadian economy in general and on a number of specific industries and consumers. I doubt very much that these negative effects which I will try to explain were intended by my colleague and others when the bill was drafted.
Bill C-235 contains two proposed amendments to the Competition Act. I will have to be very careful as I read this because it is complicated.
First, it would create a new criminal offence which would prohibit a vertically integrated supplier who both manufactures a product and sells it at retail from selling to a retailer who competes with it at a price that is higher than the vertically integrated supplier's own retail price, less its marketing costs and a reasonable return. The objective of the amendment would be to preclude conduct which would have the effect of decreasing or eliminating the profit margin available to an unintegrated retailer.
Second, the bill would insert an additional anti-competitive act into the Competition Act's abuse of dominant position provisions, prohibiting a vertically integrated supplier from coercing or attempting to coerce a customer who competes with the supplier at the retail level in the same market area into adhering to prices dictated by the supplier rather than allowing the customer to remain free to set his or her own retail price.
Before discussing the means by which the bill proposes to achieve these commendable goals, I feel it should be brought to the attention of my colleagues that provisions addressing both of these potentially anti-competitive behaviours are already embodied in the Competition Act and are vigorously enforced by the Competition Bureau.
Price maintenance cases, as they are known, brought before the courts involving charges of the specific coercive behaviour targeted by this bill have proven highly successful for the crown. They have led to many hundreds of thousands of dollars in fines and have deterred the repetition of the conduct in question.
Similarly, conduct by firms that have abused their dominant position in a market and which has been reviewed by the Competition Tribunal has led the tribunal to issue orders prohibiting them from repeating the anti-competitive acts, thereby restoring the level of competition in the market affected.
These provisions already exist and are vigorously enforced. I must ask why we are contemplating redundant legislation.
In order to ensure that vertically integrated suppliers are not squeezing competing retailers, the bill proposes that the government or the courts establish what acceptable marketing costs and a reasonable rate of return would be for all manufacturers in Canada. Further, for every price change in a market, no matter how often the prices may change, a manufacturer would be obliged to ensure that a competing retailer's margin has not been affected.
Prices in many markets in Canada change daily or even several times a day, depending on the level of competition and the nature of the product being sold.
I also remind my colleagues that this bill as drafted is not restricted to the petroleum sector for which it is specifically designed, but proposes amendments to an act which affects the entire Canadian economy.
I believe it will be found that many of our companies rather than cease to function under the burden of this kind of regulation will adopt a long term policy of constant prices with no opportunity for offering the various forms of discounts normally available.
This kind of price rigidity will negatively affect the ability of Canadian firms to compete against foreign competitors, will dissuade foreign investors from locating in Canada and will have a profound effect on the cost of any downstream users of the product, including of course consumers. I do not believe the proposed bill intended to lead to less rather than more competition and inhibit rather than encourage competitive pricing.
The amendments could also provide an umbrella for independents, shielding them from competition from integrated firms who are likely to refrain from retail price competition in order to escape criminal liability under the Competition Act.
In the extreme, such amendments could create a whole new set of problems by inducing integrated firms not to supply independents as a means of preserving their ability to set their own prices and limit their exposure to criminal investigation and prosecution under the Competition Act.
In either case, competition is likely to be reduced, leading to higher prices for end users, including consumers.
I refer to the words of the hon. member for Huron—Bruce who spoke in this House on May 27 of this year expressing the following concerns:
When independents are gone they will be gone forever.
Then what we will have is an uncontrollable monopoly that has the ability to unilaterally dictate price and availability to one of the country's most essential commodities. In short, there will be higher prices and fewer competitors.
Before I close I must also say that in order to properly address this very complex issue we must realize that the matter of directing legislation toward a specific industry under our Constitution is the purview of the provinces. Therefore it would behove all of us concerned about this issue to direct the effort to the provinces.