Mr. Speaker, I am pleased to have this opportunity to address Bill C-248, an act to amend the Competition Act.
My colleague, the member for Pickering--Ajax--Uxbridge, has a long standing interest in competition law and he should be commended for raising its profile in this place.
Competition is important, not as an end in itself, but rather as a means to an end. Competition encourages firms to lower costs, reduce prices, improve services and develop new products. As consumers, this makes us all better off.
The Competition Act applies to virtually every industry and business in Canada. It seeks to maintain and enhance competitive market forces.
Bill C-248 would amend the act to limit the application of the so-called “efficiency defence”. Simply put, the efficiency defence allows for the consideration of gains in efficiency when examining the anti-competitive effects of a merger. Bill C-248 would limit this defence by addressing two specific circumstances under which it could not be used.
First, it would require that the gains in efficiency exceed the anti-competitive effects and lead to lower prices. This proposed price test is widely viewed as one of the simplest and most direct means of verifying that efficiency gains resulting from a merger will ultimately benefit consumers.
The second feature of the bill is that the efficiency defence would not apply if the merger would result in the creation or the strengthening of a dominant market position. The obvious extreme example would be a merger to monopoly.
Perhaps the inspiration for this bill was a decision by the federal competition tribunal in a merger between ICG Propane and Superior Propane.
This 1998 merger brought together the two largest propane suppliers in Canada and it was the first merger case where the efficiency defence was used to counter the anti-competitive impact of a merger.
The commissioner of competition challenged the merger on the grounds that it would clearly lead to both a substantial lessening and prevention of competition in the market for propane.
Superior Propane argued that the efficiency gains resulting from the merger would offset those anti-competitive impacts, so the merger should be allowed to stand.
In August 2000, the competition tribunal decided that the merger was likely to prevent competition in Atlantic Canada and lessen competition substantially in many local markets across Canada and for national account consumers.
It also concluded that the appropriate remedy for this anti-competitive result of the merger would be an order compelling the divestiture of ICG. However, the tribunal did not issue such an order.
The tribunal agreed with Superior that no order could be issued because the efficiencies resulting from the merger would be greater than and would offset the effects of any prevention or lessening of competition.
The commissioner appealed the decision to the Federal Court of Appeal. The federal court overturned the tribunal's ruling and sent the matter back to the tribunal for a re-determination hearing. Most recently, Superior Propane was denied leave to appeal the matter to the Supreme Court of Canada.
The matter of Superior Propane's acquisition of ICG Propane is important both for Canadians who use propane fuel and for Canadian competition law.
The question of how to treat various elements of efficiencies and how to balance them against the anti-competitive effects of a merger is one which became topical when Superior Propane proposed to acquire ICG Propane in 1998.
The hearings before the tribunal involved a large number of witnesses, including many economic experts. The tribunal heard a wide range of views on how efficiencies should be measured and how they should be balanced against anti-competitive impacts.
The federal court, in its reasons for judgment, disagreed with the standard of review used by the tribunal, but added that it would not itself tackle the question of what is the correct method for determining the anti-competitive effects, which reflects on the complexity of this area of competition law.
The bill before us received first reading on February 7, 2001, prior to the Federal Court of Appeal's ruling on the commissioner's appeal of the tribunal ruling. This was a period of uncertainty in Canadian competition law because it was unclear whether the federal court would uphold the tribunal's ruling, reverse it, or cast the efficiency defence in an entirely new light.
Bill C-248 appears to have anticipated a federal court ruling supporting the tribunal's decision, and therefore sought to clarify the issue by limiting the application of the efficiency rule.
It is difficult to propose rewriting a law while it is before the courts, but we must understand that there was considerable concern that if the tribunal ruling stood, there could be a wave of mergers to monopoly which would be unstoppable because of efficiency claims.
As I have indicated, the question of how efficiency claims should be treated in merger analysis is very complex. The Federal Court of Appeal has pointed this out in its ruling. While I understand the underlying motivation for this bill, I think the Federal Court of Appeal and the Supreme Court of Canada have spoken unambiguously on this subject.
I think it would be unfair to suggest already that the tribunal needs further guidance than that provided by the superior courts on the issue. It would not be helpful to change section 96 of the act while the tribunal is adjudicating a matter on that very section.
We do not presently have reason to believe that the act needs clarification through amendment in respect of the efficiency defence.
Let us be reasonable and let the competition tribunal do its job and revisit the propane merger now with the benefit of the wisdom of our superior courts.
Once again, I would like to thank the member for Pickering--Ajax--Uxbridge for bringing this important issue to the attention of the House.
The matter which gave rise to this bill is again before the Competition Tribunal and may yet again be brought before the Federal Court of Appeal and possibly the Supreme Court of Canada.
Given that this matter is currently before the courts, it would not be prudent of members in this place to presume the outcome. I trust members of the House will use their good sense to ensure that we make the right decisions.