Debates of Feb. 25th, 2002

The House resumed from October 24 consideration of the motion that Bill C-248, an act to amend the Competition Act, be read the second time and referred to a committee.

Competition Act

[Serge Marcil, Liberal, Parliamentary Secretary to the Minister of Industry]

Mr. Speaker, I am pleased to rise to speak to Bill C-248, an act to amend the Competition Act.

I want to thank my colleague, the hon. member for Pickering--Ajax--Uxbridge, for his constant efforts on behalf of all Canadians to ensure that the objectives laid out in the purpose section of the Competition Act are fully achieved. In particular, he dealt with the role of the act in preserving and enhancing competition in order to ensure that small and medium size businesses get a fair opportunity to take part in the Canadian economy and to ensure that consumers get competitive prices and a choice in products.

The bill before us today addresses directly those objectives and the way gains in efficiency are dealt with in the review of merger transactions.

We have found that there is considerable support in the House for the principles of this bill, the purpose of which is to clarify the clause in the Competition Act concerning the argument of gains in efficiency. The bill stipulates that consumers should benefit from a merger which results in gains in efficiency but that these gains should not be used to justify a merger which will result in the creation or strengthening of a dominant market position.

This bill was triggered by the acquisition of ICG Propane by Superior Propane. The Competition Bureau challenged the merger because it would have created a monopoly in several local markets, particularly in rural and northern communities. The competition tribunal recognized that this would markedly reduce competition, and at the same time that the anti-competitive impact of the merger was offset by the gains in efficiency cited by Superior Propane, such as savings in delivery costs and the operation of client information centres.

It has been pointed out by several members just how contradictory it seems for a act of parliament aimed at encouraging competition for the benefit of consumers to be used to enable Superior Propane to establish a monopoly or semi-monopoly in several markets on the grounds of gains in efficiency.

We ought perhaps to examine more closely the underlying intention of Bill C-248. The bill would not allow gains in efficiency to be used to justify a merger or proposed merger which, and I quote:

—will result or is likely to result in the creation or strengthening of a dominant market position.

This is an attempt to disallow scenarios where a merger would result in a monopoly.

We must be cautious when making reference to businesses with a dominant market position. Dominance pertains to the situation of a competitor within a market, and not its behaviour. It is too tempting to make a connection between dominant and large, and between large and bad. Abuse is the exception, not the rule.

The Competition Bureau examines proposed mergers and attempts to predict future effects based on specific factors. It examines market share, concentration, existing competition, and accessibility of the markets in question to new competitors.

Dominance is not, in itself, a problem under the act. Let us not forget that anti-competitive behaviour is addressed separately under civil provisions. The Bureau does not oppose mergers merely on the conjecture that the merged entity might engage in anti-competitive behaviour. However, anti-competitive behaviour will most definitely be contested under civil provisions.

Our economy is not always able to sustain a great number of competitors. Such is our reality. This compels us to ask whether it is more important to have more competitors or more competition. There is a difference between the two.

Regardless of their size, competitors are always welcome to our markets, on the condition that they act fairly and respect the rules. A merger must not be prohibited on the grounds that it will create a bigger competitor. Size and success is a characteristic of a competitor; it does not mean that it is guilty of anything in terms of competitive behaviour.

The purpose of Canada's competition policy is to protect competition, rather than protecting individual competitors, in order to ensure for Canadians the many benefits that come from fair and healthy competition. Among these benefits are greater choice, lower prices, better service and increased innovation.

By now, those who are listening have probably concluded that this is a very complex subject. Efficiencies play an important role in assessing mergers. Our colleagues on the Standing Committee on Industry, Science and Technology spent a great deal of time and effort in understanding how efficiencies are treated and assessed.

The issue now is one of timing. The Competition Tribunal finished its hearings in October 2001, and is now in the process of reviewing its decision based on the instructions given by the Federal Court of Appeal. The tribunal's upcoming ruling will outline clarifications on how to deal with gains in efficiency. However, it will be important to continue to examine the issue. Regardless of the tribunal's findings, I believe that we have heard convincing arguments for a full and careful analysis of this very complex question. The results may prove that the Competition Act requires clarification.

I would like to thank the hon. member for Pickering--Ajax--Uxbridge for his tireless support in helping improve our Competition Act. He has once again highlighted the important and difficult issues involved in competition policy.

I would invite my fellow members to vote to have Bill C-248 referred it to the Standing Committee on Industry, Science and Technology for a more thorough examination.

[Charlie Penson, Canadian Alliance, Peace River, AB]

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.

[Norman E. Doyle, Progressive Conservative, St. John's East, NL]

Mr. Speaker, I want to say a few words on Bill C-248, an act to amend the Competition Act.

The bill has a couple of very important sections that we should talk about and highlight, one being proposed subsection 96(4), which states:

--gains in efficiency cannot offset the effects of a lessening or prevention of competition unless the majority of the benefits derived or to be derived from such gains in efficiency are being or are likely to be passed on to customers within a reasonable time in the form of lower prices.

That is a very important subsection.

Also, proposed subsection 96(5) states:

This section does not apply where, after the transaction has been completed, the merger or proposed merger, will result or is likely to result in the creation or strengthening of a dominant market position.

In layman's terms, proposed subsection 96(4) stresses that mergers resulting in a monopoly or near monopoly must ultimately be of benefit to the consumer. Proposed subsection 96(5) states that we should not approve a merger that in addition to creating the position of market dominance provides economic efficiencies to only the merged companies. In other words, monopolies can only be tolerated, and rightly so, if they are in the public interest.

My colleague from Fraser Valley spoke on this bill on October 24 and pointed out that one of the incidents that provoked the drafting of the bill was a merger in the propane industry in 1998, giving Superior Propane control over 70% of the Canadian propane market. The competition commissioner opposed the merger on behalf of consumers but the competition tribunal approved the merger because of efficiencies that would amount to roughly $29 million over a 10 year period and would accrue to the merged companies.

The purpose of Bill C-248 is to force the tribunal to give more weight to consumer protection when making these decisions. Efficiencies, as we all know, are fine, but they have to play second fiddle to the right of consumers to enjoy the benefits of a highly competitive marketplace.

In North America we have mainly a private enterprise economy. We have a North American free trade agreement among Canada, the U.S. and Mexico. Monopolies are not something favoured in such an economic climate. There are those who feel free enterprise is based exclusively on self-interest, and to some extent that may be true, however, self-interest on the part of more than one person or company also breeds competition and competition is good for the consumer by decreasing prices for goods and services.

Monopolies may involve greater internal efficiencies but in the long run a monopoly that is well established has the tendency to keep prices for goods and services very high. The self-interest is still there and when it is unfettered by competition the consumer is almost always the one who will lose in that particular case.

Let us look at a more recent case. I remember that when I came here in 1997 my constituency was served by a two airline industry made up of Air Canada and Canadian Airlines International. As we are all very much aware, there was lively competition between the two airlines. The traveller benefited a great deal by getting better service, better frequency of service and much cheaper fares.

In short, the travelling public was serviced by an airline industry that actively sought out business. It is not 1997 any more; it is now 2002 and I know my constituency in St. John's is no longer serviced by an airline industry. It is now serviced by Air Canada, which has a virtual monopoly in the Atlantic region. Gone is the lively competition that we had in the airline industry. Up went the prices, down went the frequency of service and down went service, period.

A few years ago the Liberal government was faced with a tremendous upheaval in the airline industry. The nation's second largest airline, Canadian Airlines International, was in a great deal of trouble and the questions were these. Should Canadian be allowed to go bankrupt with the hope that someone would pick up the pieces? Can we find someone or some company that would build another national airline to operate in competition with Air Canada?

In the end, of course, the powers that be decided that Air Canada would be allowed to absorb Canadian, with the attendant pain in terms of job losses and service reduction. Canada now has one national airline. Yes, WestJet may still be alive, but the other newcomers have been chased off the block.

We need at least two national airlines in order to have a real airline industry. Instead, we are served, and I have to use that term served quite loosely, by a monopoly. Herein lies a role for the Government of Canada. It has to develop economic and transportation policies that are in the public interest, policies that encourage entrepreneurship in the airline industry. It has to develop competition laws that actually foster competition in the marketplace and discourage the formation of monopolies.

Bill C-248 helps in that it turns thumbs down on the creation of a monopoly that does not pass on its efficiencies to the customer. Bill C-248 should have been in force when Air Canada was trying to take over Canadian Airlines. It might have prevented the takeover altogether. The evidence so far certainly shows that air travellers have not received better service or lower fares as a result of any efficiencies arising from the merger of these two airlines.

I support the free enterprise system. I support a competitive marketplace. I support the thrust of the hon. member's bill. I request that it be forwarded to the appropriate standing committee for study and action.

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

Mr. Speaker, I rise on a point of order. As you know, I have spoken to Bill C-248 and I thank all hon. colleagues for doing the same. I understand that there may be an opportunity for a few more minutes. Could I seek the indulgence of the House to make a few more comments before the House decides to deliberate?

[The Acting Speaker (Mr. Bélair)]

Is there unanimous consent to proceed in such a fashion?

[Some hon. members]

Agreed.

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

Mr. Speaker, I wish to thank all my colleagues for giving me a few minutes. I will be brief.

First, I wish to congratulate the new Industry Minister, who is responsible for this file, as well as his new parliamentary secretary, who made a speech a few minutes ago.

Without belabouring the point, it has been stressed here enough that there is no doubt that the prime trigger for the changes in Bill C-248 and, prior to that in the previous parliament in Bill C-509, was indeed the Superior Propane case. About that there is no argument. I think that what is important for the House to understand is that it for the first time creates a precedent in law whereby someone may use the efficiencies defence to obtain a monopoly.

I need only give the initial judgment of August 30, 2000 to relay my point. After looking at this, the tribunal realized just how dangerous this takeover of Petro-Canada's ICG by Superior Propane would be when it said:

Although the Tribunal finds that the merger is likely to prevent competition in Atlantic Canada and lessen competition substantially in many local markets for national account customers, the majority...dismiss the application...on the grounds that the respondents have been successful in demonstrating their efficiency defence--

That sets not just a precedent but a very dangerous precedent. While I understand that the Supreme Court of Canada has said let us not deal with this and the federal court ordered the tribunal to revisit this issue, the effect of which is that the competition bureau has suspended part of its merger guidelines dealing with this because we are in sort of a no person's, no man's land on the bill, it is important for us to stress that the role of members of parliament will become extremely pivotal in doing our job: creating legislation.

We do not have rule made law in this country. It is for that reason that the bill is very timely. I have heard a couple of other comments from members suggesting that we should wait until the tribunal or whoever makes its decisions. I respectfully submit that we are the ones who create laws and we are the ones who will protect the interests of consumers to the extent that does not collide with other laws like, for instance, the constitution of this country and the Canadian charter of rights. I see no reason why those important pieces of our mosaic are not challenged. I cannot see why the parliament of this country, in particular beginning with the House of Commons, would not refer this matter to the committee.

I am pleased to see that the government and other parties will be doing so. I would not characterize the comments that we have made here as being somehow selective or, as one of my colleagues from the Alliance has suggested, very narrow minded. While I appreciate his concerns, I would also remind him that the very concerns that I have brought forward can be found in the Treaty of Rome, by which the competition bureau in that country operates on a set of assumptions very similar to what has been presented in Bill C-248. It states that it is clear that there is a limit for the defence under section 85 of the Treaty of Rome:

The limit of that use of the defence efficiencies argument is the elimination of competition. Even if parties can prove that an agreement would bring about high efficiency gains, these efficiencies are not able to justify the elimination of a competitor.

This is a very pivotal sector of our economy: heating. I do not wish to trivialize the importance of Superior Propane. As many people in the country know, last year a lot of people did without and had to turn their thermostats down. They are people who are listening today and people who are on fixed incomes, individuals who live in every single riding of the country. They now know that with this proposed legislation they would at least have some semblance of hope that there will be some meaningful competition.

That is not to say that companies cannot create some kind of efficiency by simply being the only player in town. Sure they can. We are simply saying that if they do that it has to be passed it on to the customers. There has to be a very real trade-off between having a monopoly or a near monopoly or a dangerous anti-competitive monopoly and the ability for that to flow through to customers or at least to consumers.

I am heartened to hear that other members will be supporting the bill. I want to take this opportunity to thank the members of the industry committee who are now beginning to really sink their teeth into the issue of competition. This will fall at a very good time since our industry committee chair is now beginning to understand the issue of efficiencies, not only from the perspective that there are 200 economists and lawyers who have an opinion but in fact from the perspective that there are people in the House of Commons who have also developed a modicum of understanding of this very complex act. They are now realizing that if Canada wants to compete with its global partners, and I am sure that the members of the Alliance will agree with this, we should not have laws that are weaker than those of our American or other trading partners. We should have laws that, while showing similarities, differences and nuances between ourselves and the rest of the world, do not leave consumers in a situation where they are always paying the highest price for their own product.

Therefore I leave this with you, Mr. Speaker.

Mr Speaker, I am very grateful for the time you have given me. I know you are aware of the energy situation in your riding. A few years ago, a Liberal committee on gas travelled to northern Ontario to express itself, study the situation and find the problems. I wish to acknowledge the effort you made with other members of parliament to create a great momentum in terms of changes to the Competition Act.

I believe we all agree with that. I will say to my colleagues that I look forward to at least the opportunity to have the bill discussed before a committee of the House that has some expertise. I have faith in the committee system and I think we can do this by ensuring that the bill is sent to that committee.

[The Acting Speaker (Mr. Bélair)]

Is the House ready for the question?

[Some hon. members]

Question.

[The Acting Speaker (Mr. Bélair)]

The question is on the motion. Is it the pleasure of the House to adopt the motion?

[Some hon. members]

Agreed.

[Some hon. members]

No.

[The Acting Speaker (Mr. Bélair)]

All those in favour of the motion will please say yea.

[Some hon. members]

Yea.

[The Acting Speaker (Mr. Bélair)]

All those opposed will please say nay.

[Some hon. members]

Nay.

[The Acting Speaker (Mr. Bélair)]

In my opinion the yeas have it.

[An hon. member]

On division.

[The Acting Speaker (Mr. Bélair)]

Accordingly, the bill stands referred to the Standing Committee on Industry, Science and Technology.

(Motion agreed to, bill read the second time and referred to a committee)

[Joe Jordan, Liberal, Leeds—Grenville, ON]

Mr. Speaker, I rise on a point of order. I would ask that we suspend the House until 12 p.m., at which time government orders could begin.

[The Acting Speaker (Mr. Bélair)]

Is it agreed that at the request of the parliamentary secretary the House stand adjourned until 12 p.m.?

[Some hon. members]

Agreed.

(The sitting of the House was suspended at 11.36 a.m.)

The House resumed from February 21 consideration of Bill C-5, an act respecting the protection of wildlife species at risk in Canada, as reported (with amendment) from the committee, and of the motions in Group No. 2.

Species at Risk Act

[Larry Spencer, Canadian Alliance, Regina—Lumsden—Lake Centre, SK]

Mr. Speaker, it is an honour to speak to the species at risk bill. We on this side of the House would be in favour of protecting the species, however we find it difficult to agree with some things the government wants to do. Therefore, we must speak in opposition to some of these, even though it is a great attempt to protect some of the species.

The Canadian Alliance submitted an amendment which would require that for a person to be found guilty of a criminal offence, the person must knowingly have done harm to an endangered species. This is not the case with this bill. We are concerned that someone could be charged with a criminal act even though he or she had no criminal intent or if it were an accident.

The bill would make it a criminal act to kill, harm or harass any one of the hundreds of endangered species or to interfere with their critical habit. We have a problem with that. There are problems recognizing all the different species and knowing where they are.

The fines would be very steep, even higher than for some intentional crimes that might be committed. For instance, a corporation could be fined $1 million. An individual could be fined $250,000 and could be imprisoned for up to five years on an indictable offence. However someone could commit such an offence without even knowing it or without intent. The bill does not require intent or reckless behaviour. It puts the burden of proof on people to prove due diligence.

I remember being in a hayfield of my father-in-law a few years ago. This hayfield happened to be next door to a prairie preserve. It was not located in Canada, rather it was located in the United States. As I came around for a second time with the mower, there was this fog of bumblebees. Without knowing it, I had crossed through their home. They were quite irritated about it, and rightly so, and they let me know it. That could have been quite a stinging experience, but I escaped and the bees were fine.

However in that same area there are prairie chickens, which are on the endangered list in Saskatchewan. I could just as easily, without knowing the difference, have mowed through a nest or killed an animal. That could happen in Saskatchewan. We have so many species that could easily be interfered with by a farmer in his normal operations, but to recognize them and know they are there is the big thing.

We expect farmers, ranchers and loggers to recognize these species when in fact some of them are so rarely seen that we have no way of recognizing them. We have the sage grouse, the barn owl, the aurora trout, the Atlantic salmon, the prairie lupine and the American water- willow. Not only do people have to recognize them, but they have to recognize their critical habitat as well. They have to know where they live there. They have to know if they live there part time and what time of the year they might go there or if it is a part of their cycle of life. They do not want to destroy their habitat.

Then I think about right in the middle of the city. I live in the beautiful city of Regina, which is part of the riding of Regina--Lumsden--Lake Centre. We have some endangered species called the peregrine falcon which live on top of some of our high buildings. It is on the list from the Committee on the Status of Endangered Wildlife in Canada.

I was just envisioning what would happen if I was driving down the scenic Saskatchewan drive heading back from my riding. Just suppose a peregrine falcon decided that one of those nice white rabbits jumping along the railroad tracks might make a good lunch. It swoops down in front of my vehicle, I run over it or hit it, and accidentally kill a peregrine falcon. As I understand it, I could be charged in that accident for killing the peregrine falcon.

What about a sprague's pipit or the prairie loggerhead shrike? How would I know if I killed one? What if I were driving across my riding to see some of my distant ranchers, and as I drove through the prairies and wheat fields a swift fox ran across the road, only not quite swift enough? What if I struck it and killed or injured it? I would be in the middle of committing a crime.

What about a sage grouse or the burrowing owl? What if I was out in a field mowing or riding across the pasture in my four-wheel and I came across a burrowing owl quite by accident and killed it? Perhaps I mowed a certain area and only after I finished mowing it I discovered that I killed a burrowing owl? Not only did I kill the borrowing owl but I crushed its burrow. Then where would I be? I would be guilty of more than one crime without even knowing the owl was there.

I would need to recognize the greater prairie chicken, the piping clover, the mountain clover and the sage thresher. I could go on and on if I got the complete list of all those animals, birds, plants, fish and frogs that I would need to recognize so I could protect them or protect myself from accidentally harming them.

We support the goals of protecting endangered species, but we also believe in protecting our honest citizens ensuring they are not susceptible to becoming instant criminals honestly.

I understand there have been 80 plus amendments brought forward to this legislation to improve it. Why are so few of these amendments, which would make such good improvements in such a simple way, continually rejected by the committee or by the government as a whole?

For instance, companies that operate huge areas of oil fields or forestry have to demonstrate due diligence over their operations of hundreds of thousands or millions of hectares. How can they control all the factors on their land? Yet they stand to be arrested if something happens to one of the species there.

The hon. Minister of the Environment has said

It's a legitimate matter for concern. The accident, the unwitting destruction...it is a concern, and we want to give the maximum protection we can to the legitimate and honest person who makes a mistake, who unwittingly does that.

My question is this. Why do we not simply write it into the legislation instead of leaving it up to them to have to prove their innocence in some other way?

The fear and the anger that will come from the general public and the mistrust of the government, will in fact end up harming the habitat and the existence of endangered species rather than helping them. No one wants to see that happen.

I urge the government to pay close attention to the average citizen out there who also needs protection, not just the species that are endangered.