Debates of May 26th, 1999

Competition Act

[The Acting Speaker (Ms. Thibeault)]

Motions Nos. 1 to 3 will be grouped for debate and voted on as follows: a vote on Motion No. 1 applies to Motions Nos. 2 and 3.

I shall now propose Motions Nos. 1 to 3 to the House.

[Dan McTeague, Liberal, Pickering—Ajax—Uxbridge, ON]

moved:

Motion No. 1

That Bill C-235 be amended by restoring the title thereof as follows:

“An Act to amend the Competition Act (protection of those who purchase products from vertically integrated suppliers who compete with them at retail)”

Motion No. 2

That Bill C-235, in Clause 1, be amended be restoring Clause 1 thereof as follows:

1. The Competition Act is amended by adding the following after section 50:

50.1 (1) In this section,

“affiliate” has the meaning given to it in subsection 77(5);

“market area” means an area in which a seller customarily sells a product at retail or offers it for sale at retail.

(2) Every vertically integrated supplier who manufactures and sells a product at retail, either directly or through an affiliate, and also sells the product or a similar product to a purchaser who is not an affiliate but who is in the business of selling the product at retail, and who charges the purchaser a price that exceeds a ) the supplier's own retail price in the same market area as that in which the purchaser customarily sells the product or offers it for sale, less

(i) the supplier's own cost of marketing at retail, and

(ii) the supplier's reasonable return on the retail sale in the case of a direct sale, or b ) the price charged to the affiliate, in the case of a sale through an affiliate, is guilty of an indictable offence and liable to a fine not exceeding ten thousand dollars for every day on which the offence is committed, in the case of a first offence, and twenty-five thousand dollars for every day on which the offence is committed, in the case of a second or subsequent offence, or to a term of imprisonment not exceeding two years, or to both fine and imprisonment.

(3) Notwithstanding subsection (2), a vertically integrated supplier is not required to sell a product to a retailer at a price that results in the supplier receiving a lower return on the retail sale of the product when sold by the supplier or its affiliate than the customer's return on the retail sale of the same product supplied by the supplier, in the same market area.

Motion No. 3

That Bill C-235, in Clause 2, be amended by restoring Clause 2 thereof as follows:

“2. Section 78 of the Act is amended by deleting the word “and” at the end of paragraph ( h ), by adding the word “and” at the end of paragraph ( i ) and by adding the following after paragraph ( i ): j ) by a vertically integrated supplier, coercing or attempting to coerce a customer who competes with the supplier at the retail level in the same market area, in relation to the establishment of the customer's retail price or pricing policy.”

Madam Speaker, I remind the House that the rumours of the death of this bill have been greatly exaggerated. Many people probably know the bill has been returned as a blank sheet of paper. We are obviously entering new territory as it relates to private members' bills.

However, I want the House to understand that the bill is the product of many years of work. It is a recognition that in an era of globalization and megamergers in the place of productivity we are actually witnessing the need to have effective legislation, effective guidelines to protect the people who represent the backbone of our communities, small business persons.

The process that got us here was a very interesting one. I am pleased the House has seen fit to passing the bill at second reading. I thank the member for Cambridge and the member for Notre-Dame-de-Grâce for their support notwithstanding some of the objections by many who do not want to see a change to this important piece of legislation.

The competition bureau has pretty well demonstrated, as has the committee, that in five short days it could not possibly understand the complexities of our market, let alone the ambiguities and the shortcomings of our Competition Act, sufficiently to protect, most important, consumers and small businesses alike.

It is with that in mind that I argue why these motions are necessary. There will be a motion by Mr. Peric to make an amendment that would give wholesalers an opportunity to compete effectively.

[The Deputy Speaker]

Order, please. I am sure the hon. member meant to refer to the hon. member for Cambridge rather than his name. I know he will want to comply with the rules in that respect.

[Dan McTeague, Liberal, Pickering—Ajax—Uxbridge, ON]

Mr. Speaker, you are correct. It is a tough but very complex issue. I assure members that when we get down to it we will be telling more about what the bill really means.

It is clear those who opposed the bill—the Business Council on National Issues, the Chamber of Commerce, the CAA and others—were doing so because of the vested interest which exists in protecting the status quo.

We have come to that conclusion as 50 members on this side and many members on the other side went through the gas report on the shortcomings of the Competition Act. On page 156 of a very telling book by Peter C. Newman it was put very succinctly. The Competition Act, as it is currently written, was written by the very people it was meant to police. Canada is one of the few nations that has found itself in a position of self-interest with a document which is there to protect consumers and businesses alike from not doing that.

I can only say that against the weight of the telecommunications side of Industry Canada and against the weight of the Competition Bureau which surprisingly enough went out of its way to contact hundreds of businesses to study the implications of the bill.

It became very clear to me that short of an act of contempt of parliament, which I felt was not important enough to raise but was nevertheless the case, we are dealing with a David versus a Goliath. Against the chambers of commerce, against the large interests of the country that want to maintain the status quo, are the Canadian Federation of Independent Business and thousands of retailers that may be struggling to stay afloat simply because they are being pitted against the very suppliers that are trying to put them out of business.

I am not talking through my hat. I am sure the hon. member for Markham will be interested in knowing that there has been study after study by provincial governments. The latest one by the Ontario government, ironically through the provincial member for Markham-Stouffville, shows that something is awry with the state of competition when there are 462 complaints and only three convictions and when the competition bureau has virtually been allowed to be correctly characterized as the bureau for monopoly enhancement.

In an era of globalization and mergerization, rather than dealing with the questions of productivity, with the questions of standards of living and with the questions of brain drain, we are consistently allowing our country to be sold by offshore interests whose interests are to maximize profits at the expense of competition at home.

There have been many criticisms levelled at the bill and the fact that it does not cover all the issues attendant within the Competition Act. One criticism levelled at the bill was the fact that it somehow had a very strong criminal sanction.

A bill that only narrowly attacks a certain part of the act cannot possibly deal with the entire question of sanctions. However, on the questions of sanctions it is very interesting that the competition bureau and many other organizations like the chambers of commerce have an interest in trying to bring down the penalty. It is obvious that civil sanctions are not the case at all. In fact they carry no general application and they carry no injunctive application.

The problem is that it virtually requires for someone to be knocked out of business and to be proven bankrupt before the competition bureau will assess and recommend to the tribunal that the particular activity against the person so ordered should cease and desist. This is contrasted to the legislation in the United States which has an intent to protect consumers. Protection of consumers comes in a number of ways but mostly through civil remedies.

I understand the committee after trashing the bill, after basically erasing it from existence, wants now to study the Competition Act. I am pleased that is the case. I am however concerned about the fact that it could very well be a whitewash. I say that because once again with the competition bureau we have police investigating, a judge, a jury and an executioner. If the bill is any indication of the direction of the competition bureau and those who support the status quo, it seems to me the outcome will be flawed.

During committee meetings a book by a man well known for his knowledge of competition law was bandied about. I encourage members to read it. It is the 1999 annotated notes. It very clearly states that it is not accurate to characterize reviewable trade practices as practices which are prohibited with civil sanctions. He suggests that the Clayton Act should be more appropriate.

On the other side of the equation it seems to me that there are those who have been gravely concerned about the application of the bill. The member for Pickering—Ajax—Uxbridge and many others studied the question of gasoline and looked a bit at the issue of groceries, but somehow it should not apply beyond that. That argument, which was posited by the Minister of Industry in his objections of October 19, is simply wrong in its direction.

There is no section of the Competition Act which applies uniformly to one industry. That would be laughed out of every court in the country as discriminatory. Therefore, we need, as the Americans did 100 years ago in 1890, the equivalent of a Sherman Act which was applied to the Rockefeller dynasty that was controlling oil at the time. It applies to every commercial line in the country.

Other objections that have come about were sort of picked out of thin air. There were issues such as how this might discriminate against farmers or might somehow hurt a supplier or a wholesaler.

The bill deals with the vertically integrated supplier, somebody who is in the business of supplying his or her competitor and competing in the same area. Let us put away the nonsense and all the aberrations which have been heaped on the bill for what it is not. The bill is not about regulating price.

It is very interesting to note that anybody in the business would have to ask why a vertically integrated supplier would charge its best wholesale customer more for a product than it is willing to charge the general public. Every person involved in the business knows that it costs less to sell a product at wholesale than at retail. The only reason that a vertically integrated supplier competitor wants to discipline the retail competitors and in some cases eliminate them entirely from the marketplace is simply because they are not prepared to compete with them.

This issue is not something that is confined strictly to one area of our economy. I implore parliamentarians to look at the examples of how small businesses are being undercut by their suppliers.

Legislation exists in other countries. The Americans and British have effective legislation to combat this particular problem. It is not acceptable for our competition police, the Competition Bureau, to act as lapdogs in the face of these watchdogs.

More important I believe in Canada, a Canada which is without its abilities to fight for the small person. I believe my country includes businesses that will compete on a level playing field. I believe that my country is a nation which above all is prepared at every turn to ensure that we do not have more than 10 players dominate the entire spectrum of the economy.

That is exactly what this bill is for. I urge the House to put aside its differences and support it.

[Rahim Jaffer, Reform, Edmonton Strathcona, AB]

Mr. Speaker, I am pleased to speak to Bill C-235.

I applaud the efforts of the hon. member for Pickering—Ajax—Uxbridge. He is a passionate and tireless champion for what he believes is right. He is rare among the members of the Liberal caucus in that he is prepared to stand on principle even when he stands alone. That takes both integrity and courage.

However, this legislation is not about the hon. member for Pickering—Ajax—Uxbridge. Despite the respect and admiration I have for the member and his commitment to his constituents, I cannot ignore that the legislation before us would shackle Canadian industries and punish Canadian consumers.

As members of this place know, this legislation would prevent a company that is both the producer and the retailer of a product or service from selling the product or service at a retail price that is below its own wholesale costs and the wholesale costs charged to its retail competitors.

The purpose of this bill is to prevent vertically integrated companies from using their corporate structure to compete against their non-vertically integrated competitors on price. It was intended to address the alleged problem in the gasoline retail industry where vertically integrated companies are accused of attempting to squeeze independent gasoline retailers out of business by offering consumers a retail price that is below the wholesale cost paid by independent gasoline retailers.

It has been argued that vertically integrated fuel companies can incur a loss at the pump that non-vertically integrated companies do not because the vertically integrated companies can make a margin on their wholesale price that allows them to remain profitable.

It is often the case that gasoline retailers will lose money at the pumps during price wars where prices fall below wholesale costs. This situation has fuelled innovations like car washes, food services, mechanical services, and the list goes on. In other words, competition in the retail gas industry involves more than just gasoline.

In an attempt to address the alleged problem in the gasoline retail sector, the bill will unintentionally regulate all vertically integrated companies. The impact of this legislation therefore would extend the intended scope. It would place controls and regulations on vertically integrated companies that would not apply to non-vertically integrated companies. A non-vertically integrated company with deep pockets could use this legislation to compete with its vertically integrated competitors by selling its product or service below cost while its competitors would be prevented by law from doing the same.

On a practical level below cost selling, or the practice of offering a retail price that is below the wholesale price, occurs every day in the business community. When inventory is cleared or a new product is introduced to the market, this price is typically set below the wholesale cost.

Additionally, companies providing a charitable service may offer a product or service at a cost that is below the wholesale price. For instance the federal government is currently engaged in partnership with the private sector to provide Internet access to Canadian schools. This partnership would be deemed illegal if the proposed amendments to the Competition Act were adopted.

I would like to take the time to address the economic arguments upon which this entire bill rests. Predatory pricing, below cost selling, is an attempt to drive competitors out of business. It is an extremely rare and unsustainable practice.

Businesses that internalize the cost of manufacturing a product or delivering a service in order to provide consumers with a price discount incur a serious opportunity cost. While their competitors are spending capital on innovations, they are spending their capital on subsidizing the cost of their own product or service. This is an unwise business approach with no long term viability. Subsidizing the price of a product will mean that eventually a company will drain its resources and be left with a product or service that is outdated. Consequently it is rarely practised.

Additionally, competition laws in Canada and the U.S. punish those companies that attempt to compete aggressively on price while others may aggressively compete on innovation or superior service with impunity. Companies that invest their profits in innovations for instance are forced to incur a short term loss in order to attempt to capture a larger market share by providing a superior product or service in the future. Strictly speaking, this is a form of short term below cost predation but competition law does not preclude it. It is okay to spend money to make a product better but not to make a product cheaper.

The Competition Bureau has investigated the predatory pricing situation presented by the author of Bill C-235 and has determined that the impact on consumers will be detrimental. I was very impressed by the presentations made by the commissioner of competition and am now much more confident that the Competition Act will not be used as a tool to regulate Canadian business, strangle the Canadian economy and punish consumers.

The commissioner of competition stated succinctly that the Competition Act is intended to protect competition and not competitors. Those companies that are not vertically integrated may find themselves at a disadvantage to those companies with a superior corporate design. However, it is not the role of government to intervene in private sector decision making.

Small businesses have always struggled to survive against large businesses. They do so by providing a superior product or service, by finding niche markets not properly served by larger competitors, or by building a reputation for a certain service. It is not easy but the government should not be in the business of protecting competitors from competition. The Competition Act instead must serve consumers.

The creation and maintenance of competitive markets is of the highest priority for the Reform Party, make no mistake about it. However, we have a fundamental disagreement with the author of this bill and with big government solutions to market failures.

The key to competition is free trade. We must work to create contestable markets. Companies that succeed in driving their competitors out of business by providing consumers with a product they want at a price they find reasonable will not subsequently raise prices if a contestable market exists.

Yesterday at the Standing Committee on Industry I attempted to address the issue of creating contestable markets to ensure domestic competition but every Liberal member of the committee rejected my proposal. We are attempting to use the Competition Act to address problems in the market that should be solved through trade liberalization.

Let met give the House an example. It involves Norm Wallace of Wallace Construction Specialties Limited. As a result of a 1998 CITT decision, Mr. Wallace has not been able to get access to a supply of jacketed pipe insulation at a price that would allow him to be competitive because a punitive 70% anti-dumping duty has been levied against those companies that import this product from the U.S.

The vertically integrated Canadian producer-retailer of this product, Manson Insulation, now has an effective monopoly in this market and refuses to supply Wallace Construction Specialties Limited with this product. Manson Insulation is arguably in violation of the abuse of dominant position and the refusal to deal provisions of the Competition Act. The cause of the problem however is the CITT anti-dumping policy which falls outside the direct jurisdiction of the Competition Bureau.

Competition and free trade are interconnected. The threat of competition will force businesses to behave as if they have numerous competitors. The number of actual competitors in the market is a very poor indicator of the intensity of the competition. There are hundreds of farmers in Canada yet these farmers do not actively compete against each other. There may be only two cellular phone providers in an area but they compete vigorously for business. It is therefore wrong to suggest that if small business loses out to larger vertically integrated companies consumers will pay more.

The Reform Party is committed to small business. We have never moved from the resolve to lower taxes and remove the regulatory barriers that hinder the success of small businesses. Small business is the backbone of our economy but there may be products and services that are better provided by large companies, just as there are business ventures that can only be managed by small organizational structures. The Reform Party is therefore reluctant to give government the power to protect businesses from competition at the expense of the Canadian consumer.

I come from a small business background. I know firsthand how difficult it is to compete. Canadian small businesses only survive due to long hours and hard work. Instead of punishing small businesses with more government regulations, let us reward them with tax relief and deregulation.

[Francine Lalonde, Bloc, Mercier, QC]

Mr. Speaker, I would like to begin by congratulating my hon. colleague on his private member's bill, and as well on all the work he has done to develop awareness, which I am sure will leave its mark.

It was hard work, especially since there has been a reform recently—I should say a so-called reform—of the Competition Act, which, in our opinion, weakened the powers and the influence of the commissioner.

Doubtless, arriving afterwards, with a measure that tightens the Competition Act is no easy job, but the member did not falter at the prospect and should be congratulated for it. We know that he fought a hard fight.

That said, our job here as parliamentarians is not to praise worthy intentions, intentions that we share, but rather to see whether this bill responds to the concerns and the problems giving rise to it.

Let me try to explain the bill simply. The member wants all integrated suppliers, that is, all companies producing and selling, to be prevented from selling directly or through an affiliate a product that is above the conditions set. That means that an integrated supplier cannot sell at a cost lower than the cost he charges someone who is not a company, a subsidiary or himself directly.

Originally, it was to prevent the major oil companies from selling gasoline at a price to retailers higher than the price they set for sales to their affiliate vendors or their own selling price. We can understand how unacceptable it is for small scale and larger retailers to be sold gasoline that has been refined—because the oil companies have factories to refine gasoline—at a price higher than the price at which it is sold to affiliates.

That is the problem what is the solution? It should be noted that the right to set prices is not under federal jurisdiction. The competition commissioner, through his representatives, has held that the federal government does not have the jurisdiction to set prices.

At this very moment there is legislation in Quebec aimed at solving the major problem in the petroleum sector which the hon. member wanted to address and there is a parliamentary commission which has been hearing witnesses for some time now. The outcome is still pending.

I recently saw some consumers on television who were concerned about the effects of having a base price to which would be added a specific minimum of operating costs so as to allow the small retailers to survive.

There is a debate between the retailers' right to survive—not just the small ones—and the consumers' right to pay a reasonable price. That debate is going on at this very moment, and I am anxious to see what the outcome will be.

For me, in particular, there is a question of the relationship between this bill and what is going on in Quebec at the present time. There are other questions as well, however. The main one is the extension of this model, which had been designed for the petroleum sector, to all other sectors, because it refers to every vertically integrated supplier. There is no reference to size, to how many billion dollars it has to earn annually, it merely refers to “every vertically integrated supplier who manufactures and sells a product”. It could be a co-operative, manufacturing and selling through affiliates.

A vertically integrated supplier could also be a smaller manufacturing and selling company, which this bill would prevent from selling in its store at lower prices than customers could get elsewhere. This bill would raise its prices simply because the products are available elsewhere.

It might be possible to change these provisions if we looked only at the issue of integrated suppliers. However, these provisions are necessary, because there are other sectors which, at some point, realized that they might be affected and that they should take a look at this issue. A lot more work should have been done, and it might also have been appropriate to find other solutions to settle the issue.

I congratulate the hon. member, because this is a first step. However, as regards the issue that I just mentioned, namely the expression “every vertically integrated supplier”, there is no mention of the size of the business involved. We should look at this aspect.

There is more. A large Quebec or Canadian company that invests because of deregulation, for example in the telecommunications sector, and pours money into research and development, would not benefit from a return on its investment in research and development.

We must question this, particularly since the expression “every vertically integrated supplier” would not apply to an American supplier. A product may come from the United States and be sold here. When it is sold here, it is not deemed to be sold by a vertically integrated supplier. We could therefore have competitive conditions that would adversely affect a vertically integrated Canadian producer. One can think of several sectors.

I am sure this is not what the hon. member had in mind. As the committee kept raising more issues, I became convinced that this bill could not be passed in its current form.

Again, I understand the hon. member's intention, which is primarily to strengthen the Competition Act. For starters, the Standing Committee on Industry, or another one, could have even arranged for the competition commissioner to have a larger operating budget. The commissioner has realized, from the testimony he has read and heard, that many small businesses in Canada and Quebec are worried because they do not think he is doing his job right.

He was so taken aback that he himself said there should be a review. It was this review, suggested by my Reform Party colleague, that members across the way would not go along with. Another way must be found.

In conclusion, I congratulate the member on his work, encourage him to continue, and tell him that the Bloc Quebecois and I will continue to agree with his intentions but, because of the act itself and the legislation that makes it necessary to extend his initial intention to all sectors, the bill cannot, in my opinion, be passed by this parliament.

[Peter Stoffer, NDP, Sackville—Eastern Shore, NS]

Mr. Speaker, I am going to do something I have not yet done in the House. I propose to share my 10 minutes with a Liberal backbencher, the member for Cambridge, so that he can also have a few moments.

[The Deputy Speaker]

Is there unanimous consent that the hon. member share his time as indicated, five minutes each?

[Some hon. members]

Agreed.

[Peter Stoffer, NDP, Sackville—Eastern Shore, NS]

Mr. Speaker, that is great co-operation. It is only too bad that the industry minister does not show that type of co-operation to the hon. member for Pickering—Ajax—Uxbridge.

I wish to thank the hon. member from our party for his efforts in helping to protect small industry in this country, especially when it comes to gas retail companies.

I also wish to thank Mr. Dave Collins who is the Director of Eastern Canada for the Independent Retail Gasoline Marketers Association of Canada and the vice-president of Wilson Fuel Co. Limited. I must say that the number of Wilson Fuel stations in my riding do an outstanding job in terms of customer service to the small communities. He is a great example of what small business can do for community services.

I also wish to thank the hon. member for Regina—Lumsden—Lake Centre for his efforts in promoting Bill C-235, as well as John Holm, the MLA for Sackville—Cobequid, Nova Scotia, who we call the gas man, for his efforts in telling the Competition Bureau to become a watchdog on competition in gas sales and vertical integration instead of being a lap dog.

It is unfortunate that the government, especially the industry minister, has a tendency to eat its young when it comes to backbenchers. It is just an example of the government not allowing independent, free thinking backbenchers who have terrific ideas which would benefit the majority of Canadians from coast to coast to coast to put forward those ideas in a manner which does not stifle them and attack their integrity. We find that deplorable and wish that the government, the cabinet and the industry minister would start to listen to their backbenchers, especially the member for Pickering—Ajax—Uxbridge, and do the right thing.

It is quite natural for the Reform Party to say what it keeps saying because, as with the banks, the bigger the banks the better everything will be; the bigger the gas companies the better everything will be. That is just not going to benefit Canadians.

The member for Pickering—Ajax—Uxbridge is absolutely correct when he says that the vision of Canada is one in which legislators protect small entrepreneurial businesses and people who have aggressive attitudes in terms of protecting and working in small communities, especially when it comes to small gas stations.

It reminds me of the old days when the small gas station, for example, was the focal point of the community, along with the post office. People would get together and fill up their tanks. I always think of Andy of Mayberry with Goober and Gomer and the sort of camaraderie they had. It reminds me of a small town in Nova Scotia, Goshen, where the guys gather at the gas station around the hot stove to reminisce about the day and what is happening on the weekend. They would not be able to do that if we did not have laws like Bill C-235 to protect them from the gouging practices of the larger companies.

I will end my remarks by saying that it was a pleasure to discuss this very serious and important initiative.

[Janko Peric, Liberal, Cambridge, ON]

Mr. Speaker, I strongly support Bill C-235. Those who oppose the bill argue that it will lead to higher prices for consumers. That is completely false and misleading.

Under this bill vertically integrated suppliers can still charge whatever retail price they want for a product. The bill only seeks to create a level playing field by providing wholesale consumers with an opportunity to purchase product from a supplier at a price that allows them to compete at the retail level.

This bill is not an attack on big business. It comes out of the clear evidence that predator pricing does occur, which lessens competition and costs consumers.

Bill C-235 seeks to protect free, open and true competition. Without a level playing field in which to conduct business Canada will have only a few large companies controlling an entire market with no true competition.

On that note, I move:

That Motion No. 2 be amended

(a) by replacing paragraph 50.1(2)(a) with the following:

“(a) the vertically integrated supplier's own retail price in the same market area or”

(b) by deleting subsection 50.1(3).

[The Deputy Speaker]

The question is on the amendment.

[Jim Jones, Progressive Conservative, Markham, ON]

Mr. Speaker, I am pleased to speak on behalf of the PC Party of Canada to Bill C-235.

Before I comment on the legislation itself I would like to commend the many years of research and hard work on this subject done by the member for Pickering—Ajax—Uxbridge. While I do not necessarily share his belief in the need for this legislation, I do applaud the initiative, energy and passion he has brought to this debate.

As mentioned by other members, the intent of this legislation would provide a basis for the enforcement of fair pricing between a manufacturer who sells a product at retail either directly or through an affiliate and also supplies the product to a customer who competes with the supplier at the retail level.

This bill would presumably give the customer a fair opportunity to make a similar profit. It would also provide that a supplier who attempts to coerce a customer in the establishment of a retail price or a retail marketing policy may be dealt with as having committed an anti-competitive action under the Competition Act.

While the majority of the PC caucus supported Bill C-235 at second reading, most members did so out of the spirit of fair play to allow this bill to be given broad study and scrutiny at the industry committee. During committee proceedings, having heard many reasonable objections to Bill C-235 from a variety of credible organizations, which I will outline, I opted to support the government's motion to report Bill C-235 to the House with every clause deleted.

Mr. McTeague subsequently tabled amendments at report stage to essentially restore—

[The Deputy Speaker]

Order, please. The hon. member for Markham knows that he must refer to other hon. members by their titles or constituency names. To refer to somebody by some other name, he knows, is contrary to the rules. As with another member earlier in this debate I have to admonish the hon. member and urge him to use the name Pickering—Ajax—Uxbridge or whatever combination thereof he wishes to describe the hon. member whose bill we are now discussing.

[Jim Jones, Progressive Conservative, Markham, ON]

Mr. Speaker, I am sorry about that. The bill's proponents, which include independent gas stations, independent grocers and the Canadian Federation of Independent Businesses, cite the following reasons to support Bill C-235: to give the Federal Competition Bureau of Canada the tools to fight predatory pricing; to ensure the continuing existence of small businesses, thus ensuring a competitive marketplace and lowering retail prices; and to follow the example of the United States which has strong predatory pricing laws at the state level.

Witnesses before the industry committee in March and April clearly showed a lack of real hard evidence to support these assertions. Although Bill C-235 proponents have used the fluctuation in retail gas prices to substantiate their causes, the bill would impact negatively on large segments of the Canadian economy.

Organizations that have spoken out against the bill include the Canadian Chamber of Commerce, the Canadian Federation of Agriculture, the Canadian Bar Association, the Canadian Automobile Association, the Information Technology Association of Canada, Bell Canada, the CRTC, the Canadian Petroleum Products Institute, IBM Canada Limited, Sun Microsystems and Hewlett- Packard Canada Limited. I note the importance of IBM Canada and Sun Microsystems to the GTA economy. Both companies have their head offices in Markham.

From a nationwide perspective the Canadian Chamber of Commerce, which represents 170,000 small, medium and large businesses throughout Canada, noted that the regulatory amendments in Bill C-235 would lead to higher prices for both consumers and businesses in the following industries: computer white goods, for example, refrigerators, stoves, washing machines, dryers, et cetera; electronic appliances, for example, stereo equipment, microwave ovens, video recorders; computer products, including a broad range of accessories; office equipment; telecommunications products; furniture; clothing; grocery wholesaling; meat processing, for example, poultry, pork, beef, fish; transportation; petroleum products; paint, wallpaper and other home improvement products; a broad range of petrochemical products; and a broad range of industrial products.

The bill is not just about gasoline pricing. It is about how our private companies maximize their legitimate marketing channels.

What about the statement that predatory pricing laws in the United States similar to Bill C-235 have kept prices down. Credible studies conclude that legislation in numerous U.S. states has proven to be counterproductive. A study prepared by Terry Calvani, a former commissioner of the United States Trade Commission, concluded that such gasoline pricing laws have increased costs to consumers and appear not to have provided independent dealers either higher profits or greater stability.

Let us never forget that the Competition Act already contains provisions to deal with any competitive conduct as highlighted by Bill C-235.

The predatory pricing and abuse of dominance provisions in sections 50(1)(c) and 79 of the act sufficiently address incidences of true predatory pricing. Furthermore, the conduct proposed by Bill C-235's proposed addition to section 78(1) of the Competition Act is already prohibited under section 61 of the act.

I am not saying that the heartfelt pleas for action the industry committee heard should be dismissed out of hand. There may be a need for amendments to the Competition Act. That is why the industry committee has decided to review the Competition Act to evaluate whether it sufficiently reflects the demands of the current marketplace. If the committee finds there is credible independent evidence that amendments like the ones proposed in Bill C-235 are needed, that is the time we should consider amendments.

At present Bill C-235 is premature. With the negative effects of our economy as a result of Bill C-235 presently appearing to far outweigh any positive effect, we should not rush into passing this law without careful review.

I recognize that my Conservative friends in the Ontario government support Bill C-235. To me this demonstrates one of the clear differences between a Conservative and a Liberal. While Conservatives respect and allow for differences of opinion, Liberals let loose the lash of the government whip to try to keep members singing from the same song sheet.

While I have kind words for my Ontario Conservative friends, I must object for the record to some of the tactics used by Bill C-235 supporters in Ottawa, including some members of the House.

While witnesses supporting Bill C-235 were treated with the utmost respect by members representing all points of view on the bill, witnesses opposing Bill C-235 had their motives questioned, were interrupted and sometimes abused by committee members, and were attacked as being pawns of large oil companies and big corporations. This type of behaviour in promoting a cause smacks of McCarthyism, Canadian style, and does little to enhance either the image of parliament or the concerns which Bill C-235 attempts to address.

To reiterate, the potential economic costs of Bill C-235 are too high to enact new provisions to the Competition Act dealing with topics already covered by existing sections. On behalf of the PC Party of Canada I urge all members to oppose amendments to Bill C-235 at report stage and to oppose the bill at third reading.

[Walt Lastewka, Liberal, Parliamentary Secretary to Minister of Industry]

Mr. Speaker, I am pleased to have the opportunity to speak to this initiative on the part of the hon. member for Pickering—Ajax—Uxbridge, Bill C-235, an act to amend the Competition Act.

The bill is a well intentioned attempt to protect Canadian consumers and small businesses from abusive power by large and vertically integrated firms. The bill assumes, though, that the current provisions in the Competition Act are insufficient to deal with the practices.

The report of the Liberal committee on gasoline pricing, chaired by the same hon. member who is sponsoring Bill C-235, included a number of recommendations for further study on these very questions.

Does the oil industry majors exert the degree of power over prices that is commonly suspected? Are the current criminal and civil provisions of the Competition Act adequate to prevent the big companies from eliminating competition from the independents or from disciplining them in order to maintain high prices at the gas pump?

The government is anxious to determine what is happening in the retail gas industry. We have heard independents complaining that the integrated suppliers are intent on driving them out of the market or on using price competition coercively to keep retail prices artificially high. We have heard the distress of independents caught in price wars between the majors. We understand the frustration and anger of people who have invested years, perhaps a lifetime, in a business that becomes an incidental casualty, collateral damage in a price war.

On the other hand, we have heard that the integrated firms value the independent distributors. The independents provide a useful alternative distribution channel for excess production. They provide coverage in markets where lower sales volumes make it less attractive for major firms.

We were also told that price predation is rare or rarely successful because it is seldom that a single firm will have sufficient marketing power to lower prices long enough to drive competitors out of the market, then raise prices and sustain them long enough to recoup the losses while keeping new competitors out.

Because there are conflicting messages the government agrees that there is a need to find out what is really happening in the retail gasoline industry. Acting on the recommendations of the Liberal committee on gasoline pricing, the Minister of Industry has established a steering committee to oversee a major study of the retail gasoline sector. This steering committee has representations from all sides of the debate.

Co-chaired by Industry Canada and by Natural Resources Canada, it includes representatives from all provinces and territories, the Independent Retail Gasoline Marketers' Association, l'Association québécoise des indépendents du pétrole, the Ontario Fuel Dealers Association, the Canadian Petroleum Products Institute, the Consumers' Association of Canada, the Canadian Automobile Association, the Canadian Federation of Independent Business, and the Retail Gasoline Dealers' Association of Nova Scotia and Prince Edward Island.

The government supports the objective of ensuring a level playing field for independent gasoline retailers that compete with the retail affiliates of the major oil companies. We trust the study will give us a clear and comprehensive understanding and allow us to legislate intelligently if changes to the law are necessary.

Before leaving the report of the Liberal committee on gasoline pricing, I would note that the government has already responded to a number of other recommendations by ensuring that protection for whistleblowers was incorporated into Bill C-20 which came into force on March 18, 1999.

Those provisions, which were the initiative of the hon. member for Ottawa Centre, respond directly to the committee's recommendation for provisions to protect the identity of employees who report anti-competitive offences.

The enforcement of the Competition Act is not solely the responsibility of the bureau. Unless parties are willing to come forward to co-operate with the bureau and provide the information they have relating to possible offences, the bureau will in many cases simply not be in a position to take a case forward. It is to be hoped that the whistleblower protection will serve the purpose of encouraging people with evidence of a possible offence to come forward.

Bill C-235 does not deal just with gasoline retailers. It would apply broadly to any sector of the economy where vertically integrated manufacturers use dual distribution channels. For this and other reasons, when Bill C-235 came before the Standing Committee on Industry, and after considerable deliberations, the committee concluded that it would not support this initiative.

Bill C-235 as originally proposed would make it a criminal offence for manufacturers with retail operations to sell to independent retailers at a price higher than its own retail price less its marketing costs and a reasonable profit. An alternative bill would have made it an offence for manufacturers to sell to independent retailers at a higher price than the price they charge their own affiliates.

As the Minister of Industry noted in a letter to the bill's sponsor on October 19, 1998, the bill would require the government to involve itself in monitoring and evaluating pricing strategies. As we know, when the bill came to the industry committee, the hon. member for Pickering—Ajax—Uxbridge offered an amendment to deal with these concerns in part.

If Bill C-235 were to become law in either of the forms in which it has been proposed, it would be illegal for a manufacturer to charge an independent retail price higher than its own retail price. This may look like a reasonable proposition at first, but it has some odd ramifications. Here are some examples.

If an independent customer decided to drop its retail price to stir up a little business and take a shot at a vertically integrated supplier's market share, by law under Bill C-235 the supplier would be prevented from lowering its own retail price to match the independent's price unless it also lowered its wholesale price and in effect subsidized the independent. In fact, suppliers would be unable to lower retail prices to meet any competitor's price unless they also lowered the wholesale price they charge their independent customers and effectively subsidize independents for the duration of the price competition.

Another concern is that Bill C-235 makes no exception for price discounting for legitimate business reasons. Under Bill C-235 a vertically integrated manufacturer selling off discounted goods or deteriorating inventory could be charged with a criminal offence. Moreover, as was pointed out by witnesses before the industry committee, it is not uncommon to introduce new products, particularly in high technology sectors, at below cost prices in order to persuade consumers to switch and to build market share. Under Bill C-235 it could be a crime for vertically integrated firms to engage in such a marketing strategy.

Bill C-235 sets out to protect independent retailers, but there is a potential for it to have disastrous effects on the people it seeks to protect. The broad and sweeping application of Bill C-235 was a consideration that caused the industry committee at the end of the day to vote it down. The primary impetus behind Bill C-235 is the situation of independent gasoline retailers. They build their businesses on the premise that product will be available to them at wholesale prices that give them enough room to pay the bills, pay the staff and make a living.

The Competition Act protects independents from margin squeezing and other abuses by dominant parties where the practice has the purpose of impeding or preventing competition and where the practice results in a substantial lessening of competition.

We have heard from representatives of Canadian businesses across the country. We have heard voices on both sides of the question. The Canadian Chamber of Commerce and many others made submissions to the industry committee which members of the opposition have so eloquently spelled out in this debate.

With respect, for the reasons I have outlined, independent business should be concerned with the consequences should this bill become law.

In summary, the government agrees that the concerns of the independent gas retailers deserve further study. We have taken steps to ensure that an open, far reaching and broadly representative investigation occurs.

Because Bill C-235 would prevent businesses from engaging in legitimate price discounting, because Bill C-235 would discourage vertically integrated suppliers, including even the smallest manufacturer-retailer from using dual distribution channels, and because legislation like Bill C-235 has the effect of raising consumer prices, reducing the incentive to innovate and maximize efficiencies, it is for these reasons I urge the House to follow the lead of the Standing Committee on Industry and defeat this motion.

[The Deputy Speaker]

The time provided for the consideration of Private Members' Business has now expired. Accordingly, the order is dropped to the bottom of the order of precedence on the order paper.

A motion to adjourn the House under Standing Order 38 deemed to have been moved.

[Gordon Earle, NDP, Halifax West, NS]

Mr. Speaker, military personnel who live on bases in single quarters or in permanent married quarters must contend with old and deteriorating accommodations that are among the worst to be found in this country. Those are not my words but those of the report of the Standing Committee on National Defence and Veterans Affairs.

The quarters in some regions were called dilapidated by the committee and that was being very generous. From leaking roofs to cramped, old deteriorating spaces, Canada's forces personnel deserve much better from the country that they so admirably serve, and in particular from the Liberal government responsible for these decisions.

In one letter written to the forces publication The Maple Leaf we find the words “In the last 40-plus years some things never change. Morale seems to be every bit as low as it was then, and housing hasn't changed since the 1950s”.

Just listen to the Ottawa jargon with which the minister responded to these Canadians in need, “developing long range plans” and “we have long term plans”. The Liberal government's response to the report is equally unclear and noncommittal. It said “Over time, access to accommodation that meets these requirements will be realized”. Over time anything is possible but what is impossible is accepting this so-called response.

Canadian forces accommodation policy cites the need for well maintained quarters respecting dignity, privacy, safety and security. The Liberal government's policy is tough luck, you lose.

The Minister of National Defence announced last October that his Liberal government had cash on hand to spend $15 million building a brand spanking new armoury in Shawinigan which by great coincidence happens to be in the Prime Minister's own riding. A brand new armoury when Canadian forces troops live in unacceptable conditions.

I wonder if there is any money whatsoever in the $4 billion the government plans to spend on equipment over the next four years. This is money which may be better suited to meet the immediate needs of Canadian forces personnel condemned by the Liberal government to unsafe and rundown housing. The government has responded to a real crisis in Canada's forces with the words “long term plans”, “accepts the intent of their recommendations” and “over time, access to accommodation that meets these requirements will be realized”. Fancy words but empty words. Jargon at a bargain.

For married troops quarters, $40 million will be used to repair and maintain existing rundown housing. The Liberal government has decided to say to the families of Canadian troops, “Yes, we heard how bad it is. We even spent taxpayers' dollars to tour the country and find out just how bad it is, but we will not build one single new residence for you as a result, not one”.

I expect the government will respond to my comments touting this $40 billion band-aid and once again spouting jargon about how it supports in principle the needs and is working toward a long term plan.

I would like the government to respond to these comments with a step by step plan as to what quarters will be replaced this year, next year and the year after. By what month, in what year, will all forces personnel be able to live in acceptable conditions? I await the response to this challenge. The issue has been studied to death. Now is the time for action.

An annual report of the Canadian Forces Housing Agency from years ago said, “Without access to capital funding, little real progress can be made toward improving the quality of the crown housing portfolio”. Capital funding, not empty promises and more studies.

[Walt Lastewka, Liberal, Parliamentary Secretary to Minister of Industry]

Mr. Speaker, it is my pleasure to speak to this question.

The Canadian forces are an important national organization. Canadian forces members do a great deal for their country and they deserve both fair and reasonable compensation and a fair and reasonable standard of living. The quality of life of Canadian forces personnel has therefore been one of the minister's top priorities.

To pay for all of our quality of life initiatives we will spend approximately $538 million per year, $175 million in new money and $363 million from within our existing budget. Our level of spending will allow us to follow through on our commitment to improve the quality of life of Canadian forces members, including measures to improve housing.

We accepted all of the Standing Committee on National Defence and Veterans Affairs 89 recommendations. We are already moving on most of them, including spending $40 million this fiscal year alone on immediate action for housing. This $40 million in new funding is in addition to the approximately $83 million the Canadian Forces Housing Agency currently collects in rents and invests back into repairs.

Most of Canada's military housing was built in the 1950s. We started repairs to military married quarters in fiscal year 1996-97. By the end of this fiscal year we anticipate that we will have replaced 5,000 furnaces, reinsulated 4,500 homes and improved drains and sewer systems for 6,000 homes. In addition, 9,000 homes will have received new doors, 6,500 will have received new windows and more than 4,000 will have had new roofs installed. The $40 million in new funding this fiscal year will allow the Canadian forces to accelerate these repairs to military married quarters.

We recognize that additional measures need to be taken with respect to housing. That is why we intend to give the Canadian Forces Housing Agency an expanded mandate to provide housing and housing services on military bases.

The Canadian forces also recognize there is no comprehensive accommodation policy on providing or managing accommodations. That is why we are developing a comprehensive policy this year.

All these measures show the government's firm commitment to improving the quality of life for our Canadian forces members wherever they serve Canada.

[The Deputy Speaker]

The motion to adjourn the House is now deemed to have been adopted. Accordingly this House stands adjourned until tomorrow at 10 a.m., pursuant to Standing Order 24(1).

(The House adjourned at 6.37 p.m.)