Mr. Speaker, I just want to make mention of a point for my hon. colleague from Markham. Unless I am wrong or unless he wants to prove me wrong, absolutely no part of the Competition Act addresses the definition or standard of what constitutes predation or predatory activity. Therefore the act is deficient. That is what we are trying to address in the debate and with the bill.
I also want to congratulate the member for Pickering—Ajax—Uxbridge. I suggest again to the member for Markham that he is not known for fighting oil companies. He is known for fighting for consumers. I think his track record in that regard is extremely admirable.
During the last sitting I had the very informative experience of participating in the Liberal caucus committee on gasoline pricing. Members will notice a lot of the speakers from this side shared that experience. Many of the opinions that I have in support of the bill were developed through that process. It was a long and laborious process.
In fact the focus of the bill would seem to be the petroleum industry. I must say that one of the most emotional components of the gasoline pricing committee was the testimonials from independents who were at the brink of collapse or who had collapsed because of declining margins.
In all fairness we are seeing the downside of consolidation in a number of retail sectors. The corner hardware store comes to mind. I honestly felt at the time, as I do now, that something was not working in the case of gasoline retailing. Although this bill has its roots in the petroleum industry, it is a timely debate to have as the forces of globalization and centralization begin to impact virtually any economic sector with high levels of vertical integration combined with oligopolistic market structure, which what we have in the gasoline-petroleum industry in Canada. We are not only talking about the petroleum industry because deregulation will cause us to have similar concerns and similar debates in the telecommunications industry, the information technology industry, the travel industry, utilities and the financial services sector, just to name a few.
My hon. colleagues talk about the role that taxes have in reducing margins. Taxes in this country are based on per litre, not price. They are a fixed cost. The debate over taxes may be valid but it is not a reason or it is not a contributing factor to forcing independents out of business.
On the surface this discussion obviously seems to be a classic debate between those who advocate free market and those who advocate government regulation. There are larger issues here that need to be examined.
As hon. members across the way point out, the current federal Competition Act provides for criminal sanctions against persons involved in agreements or actions that unduly lessen competition. The burden of proof in the Competition Act is that predatory pricing and price discrimination must be proven beyond a reasonable doubt. In large part because of this burden of proof, very few cases make it through the courts.
The paradox is that although we recognize the seriousness of anti-competitive behaviour by enshrining the offence in the Criminal Code, that high standard as opposed to, as was suggested, a civil code standard make enforcement of the regulations very difficult. It is not always easy to distinguish competitive from anti-competitive practices. There is nothing wrong with tough competition even from a dominant firm, but when its intention is to eliminate competition or prevent entry into or expansion in a market, there could be an abuse of that dominant position.
Why is this bill necessary? Traditional approaches to defining predatory pricing use costs as a measure of intent. In most cases pricing above total average costs results in non-predatory practices. Pricing below average variable cost is likely to be treated as predatory in the absence of some clear justification. If a company is selling off inventory that is perishable, then it is justified in doing that. But it is prices between average variable and average total costs that are the grey area. They do not even get looked at because of the high standard in the Competition Act.
The problem with vertically integrated companies is that the seamless nature of their operations, the womb to tomb continuum that they enjoy makes it very difficult to clearly define and allocate costs at specific points.
What this amendment does is it takes the focus away from the allusive and historically futile endeavour of trying to prove predation based on costs and puts it on price, the wholesale and retail prices of the supplier in relation to an independent that purchases product from that supplier. What could be clearer? My hon. colleague says that would be impossible. It is hanging on the street. Price we know; price is public.
Why the focus on the petroleum industry? First of all gasoline is not a discretionary purchase for most Canadians. It is a cost of living. We all know that. When the price spikes up, we get the calls. There are few substitutes for gasoline powered automobiles in the market today. Putting my environmental sentiments aside for a moment, the price of gas is an economic issue to most Canadians.
Apart from octane level and a few product variations such as ethanol, there is little if any opportunity for independent retailers to differentiate the product once they purchase it wholesale. They are at the mercy of low brand loyalty. And there are significant barriers to entry.
The notion that the loss of an independent gas retailer is only a slight temporary adjustment and that any attempts by the dominant firms to increase margins will be offset by new entrants, classical economic theory, goes out the window here. The classic self-policing concept of competition does not apply. The current players are simply too big. We need to recognize this concentration and ensure that we protect fair competition at the retail level.
Other countries are also trying to come to grips with these changing market forces. The French government amended its law in 1996 to make predatory pricing an infringement on its own regardless of any issue of dominance. The Americans, the keepers of the capitalist faith, have recognized this risk and have put in place statutory variations of divorce legislation that limit the percentage of retail operations a vertically integrated supplier can own. It is not because they see this as an intervention of the government into a free and competitive market, but as a necessary action to ensure the long term viability of a free and competitive market.
As the pressures of globalization put pressure on companies to grow through mergers, the accompanying concentration makes vertical integration a viable and sensible strategy. In order to protect consumers and promote effective competition, federal legislation must not simply prevent companies from pursuing growth strategies. That growth must come from the effective implementation of a solid marketing strategy and not simply disadvantaging competitors by exploiting proprietary control over essential components of the distribution channel.
In conclusion, this bill will allow the intent of the Competition Act to be enforced by setting a benchmark for predatory practices that is both public and workable.