Madam Speaker, I want to commend my colleague for introducing this bill and for taking such an active interest in competition law. As he mentioned, his own government is supporting this so I expect we will see the bill become law fairly soon.
I do want to raise some concerns about this piece of legislation, because we in the Alliance and I in particular have decided after reflection not to support this particular bill.
I want to begin my talk here today with a few thoughts on economics, efficiencies and the distribution of wealth. The purpose of the Competition Act, whether we like it or not, is to create wealth. Obviously society would like to have some checks and balances on wealth and wealth distribution, but largely we depend on the market to regulate itself. What makes this subject complicated is that it raises the issue of distribution of wealth. The interesting thing about this bill is that it would set in motion a new purpose for the competition commissioner, that is, to make decisions about wealth distribution.
The issue of wealth distribution or dividing up pieces of the pie is inherently a political question. Who deserves more? Who deserves less? Who does the distributing? Surely these are issues for elected and accountable representatives, not civil servants or quasi-judicial tribunals. The other thorny issue with wealth distribution is that once we begin to consider it, efficiencies are cast aside. If we think of all the time and effort that goes into redistribution in government, if we look at some of the regional development agencies, and if we look at Technology Partnerships Canada, the politicians basically focus on who gets the money, not on keeping the underpinning or the economy healthy to balance that.
Others will give their interpretation of the bill and now I will give mine.
Under the Competition Act, the competition commissioner has the ability to challenge mergers that likely would lessen or prevent competition. The parties to the merger can defend their merger based upon what presently is called the efficiency defence. Such a defence can be made where the merger is likely to bring about gains and market efficiency that will be greater than, and therefore offsetting, the supposed anti-competitive effects of the merger.
Why is this technical economic theory an issue? Mainly because of one prominent case. When Superior Propane proposed a merger with ICG in 1998, it was found that the new company likely would achieve a national market share in propane of 70%. This would have enabled it to become virtually a monopoly propane provider in 16 local markets, mostly in Atlantic Canada. The Competition Bureau deemed this merger to be anti-competitive and therefore challenged it.
Superior and ICG defended their merger using the efficiency defence. The efficiency defence is technical and cumbersome. It falls under section 96 of the Competition Act. It assesses the social benefits of a merger: whether or not a marginally higher price passed on to the consumer outweighs the market efficiencies gained by the creation of a new company.
In the end, the Superior-ICG merger was allowed because the efficiencies resulting from the merger increased the competitiveness of Canadian propane by reducing duplication and allowing the firm to engage in more efficient production. In other words, the increase in productivity resulting from the merger was seen to outweigh the possible costs to the consumer; the costs were not known for certain. They actually did come up with a number for this case. It was found that the impact on low income Canadians possibly could be as high as $8.6 million. The benefit of the merger, from greater efficiencies of scale and other positive impacts, was found to be $29 million.
Bill C-249 attempts to clarify the efficiency defence by limiting the application of this efficiency defence. However, the sponsor of Bill C-249, the member who just spoke, has just explained that he has amended his own bill, something that does not typically happen. He sought to amend it because he thought it would be much better than the current form.
Either in its original form or amended as it is, we in the Canadian Alliance simply cannot support Bill C-249. There are several reasons why we cannot support the bill, which I would like to outline.
First, throughout hearings over the past three years on the issue of competition, the Canadian Alliance members of the Standing Committee on Industry, Science and Technology consistently have put forth the view that Canadian consumers and producers are best served not by a tribunal or by government intervention in the marketplace, but by genuine business to business competition.
The focus of competition policy should not be to protect individuals or individual companies but to facilitate competition itself. Therefore, another intervention into the marketplace as outlined by both the bill and the amendment would not necessarily promote competition but could allow for ways for government bodies to interfere with competition.
Second, the industry committee recommended in April 2002 that a task force of experts be established to study the role of efficiencies in the Competition Act. One of the reasons the standing committee made this recommendation was that the efficiency defence has caused a problem within the Competition Bureau itself. Just when the tribunal came to agree with the bureau's guidelines on the treatment of efficiencies according to the total surplus standard, the bureau abandoned its guidelines.
The standing committee also heard from witnesses concerning the problems in accurately calculating efficiencies. Obviously there are not too many members of the House who are experts in econometrics, but this is something where we are looking into the future of efficiencies and predicting. Even those people who are experts in this area have a difficult time doing this.
I would note here that the Competition Bureau commissioned and received a comprehensive study by experts on the treatment of efficiencies in merger reviews. However, that was a study on different international jurisdictions, where the standing committee requested a study of the role that efficiencies should play in all civilly reviewable sections of the Competition Act. In our view, this is a subtle but critically important difference.
Another reason why the committee would like to have this issue studied on a broader level is historical. To quote from the Canadian Bar Association when it appeared before our committee:
It's our understanding that the inclusion of section 96 in the package of amendments to the law enacted in 1986 was a response in part to concerns which had been raised by the business community about the then new merger provisions. It is particularly important to modify [the efficiency defence] only after due reflection has been given and an opportunity for broader public discussion. There is a constituency out there that thinks that was part of an understanding about how the act would have been amended.
The third reason why we in the Alliance cannot support the bill has to do again with interference in the marketplace by government, specifically for the purpose of what it calls wealth distribution. No matter how one looks at the bill or the amendment, it will change competition law by asking the Competition Bureau to play a role in wealth distribution. This is a role for which it is ill suited. There are other mechanisms, for example a taxation system, that are better suited to wealth and income distribution. The intent of the amendment is consistent with the intent of the original bill where the sponsor wanted “gains in efficiency to be passed onto customers within a reasonable time in the form of lower prices”.
We in the Canadian Alliance believe the marketplace can sort out these issues better than any formula proposed by Parliament.
Section 96 is designed, in theory, to help Canada create a more productive economy. To quote the Canadian Chamber of Commerce:
Unlike the United States anti-trust laws which aim to directly protect and benefit consumers, our [Competition Act] seeks to ensure that marketplace frameworks are in place to promote competition and the efficient operation of markets. This in turn will lead to benefits for all segments of society.
In conclusion, in our view Canadian consumers are best served not by a tribunal or by government intervention in the marketplace but by genuine business to business competition. The focus of competition policy should not be to protect individuals or individual companies but to facilitate competition itself. The Minister of Industry should recognize business to business competition as one of this government's highest priorities and the Liberals should make a concerted effort to reduce regulation and government interference in the marketplace.
