Mr. Speaker, I am pleased to speak today to Bill C-248, an act to amend the Competition Act with respect to the efficiency defence on merger proposals.
This private member's bill seeks to clarify the Competition Tribunal's power to make or not make an order in the case of a merger when gains in efficiency are expected or when the merger would create or strengthen a dominant market position. While I appreciate the intent of the hon. member in bringing forward this bill, I have great misgivings about reactionary legislation.
As the member for Pickering--Ajax--Uxbridge has told the House, Bill C-248 was drafted in reaction to the Superior Propane case, which is the first and only time the efficiencies defence was successfully proven at the tribunal. The competition commissioner appealed to the federal court, which ordered that the tribunal hear the case again. I understand we will have a final decision from the tribunal very shortly which should clarify this situation.
However, Bill C-248 seeks to change a law before we have heard the last word or the interpretation of the federal court. I have trouble with reactionary laws or amendments tinkering with existing legislation or laws that are designed to resolve a specific situation. This is not the way to make coherent legislation that will stand the test of time. I would rather see the process at the tribunal run its course. We need to hear from the tribunal before we seek to amend. In other words, we need more case law in situations like this to understand the implications.
I want to look for a moment at the efficiencies defence as it was prescribed in the Competition Act. Section 96 specifies that a merger may be approved by the Competition Tribunal even if it substantially lessens or is likely to prevent competition within a specific market, trade or industry as long as those advocating the merger can prove that such a move would bring about or would likely bring about gains in efficiency that would be greater than those offset by the effects of any prevention or lessening of competition.
In other words, if two companies were set to merge and the efficiencies were such where both could survive or both could fail if there were no chance to merge, what would be the ultimate outcome of the merger? It seems to me that at least there would be one merged company providing a service that maybe no other company could offer if the merger were not allowed.
Section 96 further instructs the tribunal to consider whether gains in efficiencies will result in a significant increase in the real value of exports or a significant substitution of domestic products for imported products. The Competition Act is clear that a redistribution of income between two or more persons or groups cannot be considered an efficiency defence. In other words, if a proposed merger will benefit one person or group to the equal detriment of others, that cannot be considered an efficiency.
Bill C-248 would create two new subsections for section 96, subsections (4) and (5), to further instruct the tribunal on the consideration of efficiencies in a merger case. I would argue those instructions would muddy the waters and quite possibly stand merger review on its head.
Currently, when considering gains in efficiency, the tribunal does not discriminate between groups as long as one group does not benefit at the expense of another. That would be considered merely a redistribution of income.
However, proposed subsection (4) would require that the majority of benefits derived from gains in efficiency be passed on to customers and consumers. In addition to requiring the tribunal to favour consumer interest over producer interest, the amendment would also straitjacket producers into passing on the gains of a merger to customers in the form of lower prices only. Bill C-248 does not take improved services or quality into consideration. I suggest that is a narrowminded and misguided point of view.
Subsection (5) would disallow the efficiency defence entirely should the merger result in the creation or even the strengthening of a dominant market position. This would require the tribunal to discriminate against dominant players. We have a lot of industries where there are dominant players in Canada but that does not mean that there is no competition. In a country with a domestic market as small as Canada's, this may not make economic sense in a number of sectors.
What is even more worrisome is that Bill C-248 would enshrine in legislation outright discrimination against dominant players in the Competition Act. I do not believe that the dominant players in the market automatically are abusing their dominant market positions. This is presuming guilt before innocence. There is nothing inherently wrong with a dominant player in a market. However, subsection (5) could have the effect of preventing dominant players from emerging even if that is the best situation for the market.
It never ceases to amaze me how the Liberal government feels that some monopolies are in the national interest and some are not. Canadian ownership laws and other regulations specifically designed for the airline, banking, book retail industries and, I might add, the Canadian Wheat Board and many others, have prevented competition policy from dealing adequately with issues such as market power and monopoly. However I suppose it goes along with the way in which Liberals approach industrial policy: they like to pick winners and losers.
I would suggest that it is fairly easy to be a winner when the federal government is backing one's operation. We see industrial grants to certain industries favoured over others. No wonder these businesses are winning and able to compete in the world market when the Government of Canada is their banker.
Bill C-248 was designed for a specific scenario but it has a broad spectrum of implications. It implies that the purpose of the Competition Act is not to enhance real competition but regulate competition.
Canadians deserve real competition in the market not a regulated competition of a few industries under strict rules where others have no regulation at all.
I would say that we have been studying competition law for approximately two and a half years at committee. This is a very narrow group of specialists, as many people know. Most business goes on in Canada day in and day out not subject to competition law but normal business practices. I would say that this only applies to a very small sector of our economy.
Nonetheless I do think we need competition law but we cannot go along with this Liberal government's approach of thinking that it can have competition law to browbeat or beat industries over the head in the place of good policy that fosters a good economic situation in which companies can thrive and compete not only in Canada but internationally.
We need laws in place in this country, such as low taxes and lower regulation, that will allow companies to compete without tying one hand behind their backs. We need competition law that is reasonable and a government that recognizes a healthy business environment to accomplish the goal that we all want.