THE STANDING SENATE COMMITTEE ON NATIONAL FINANCE
EVIDENCE
OTTAWA, Tuesday, June 11, 2024
The Standing Senate Committee on National Finance met this day at 9:01 a.m. [ET] to study Bill C-59, An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023.
Senator Claude Carignan (Chair) in the chair.
[English]
The Chair: Honourable, senators, before we begin, I would like to ask all senators and other in-person participants to consult the cards on the table for guidelines to prevent audio feedback incidents.
[Translation]
Please take note of the following preventative measures in place to protect the health and safety of all participants, including the interpreters. If possible, ensure that you are seated in a manner that increases the distance between microphones. Only use a black approved earpiece. The former grey earpieces must no longer be used. Keep your earpiece away from all microphones at all times. When you are not using your earpiece, place it face down on the sticker placed on the table for this purpose.
[English]
Thank you all for your cooperation.
I wish to welcome all of the senators as well as the viewers across the country who are watching us on sencanada.ca.
[Translation]
My name is Claude Carignan. I’m a senator from Quebec and chair of the Senate Committee on National Finance. Now I’d like to ask my colleagues to introduce themselves, starting on my left.
Senator Forest: Good morning. Éric Forest from the Gulf senatorial division in Quebec.
Senator Gignac: Good morning. Clément Gignac from the Kennebec senatorial division in Quebec.
Senator Moncion: Hi. Lucie Moncion from Ontario.
Senator Dalphond: Hello. Pierre J. Dalphond, senatorial division of De Lorimier, Quebec.
Senator Loffreda: Hello and welcome. Tony Loffreda from Montreal, Quebec.
[English]
Senator Pate: Hi, my name is Kim Pate. Welcome. I live here in the unceded, unsurrendered territory of the Algonquin Anishinaabeg.
Senator MacAdam: Jane MacAdam, Prince Edward Island.
Senator Ross: Good morning, Krista Ross, New Brunswick.
Senator Marshall: Elizabeth Marshall, Newfoundland and Labrador.
Senator Smith: Larry Smith, Quebec.
[Translation]
The Chair: Honourable senators, today we begin our study of Bill C-59, An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023.
Although the committee has held several meetings on the subject matter of this bill since February 2024, we have now been referred the bill itself, which was recently amended by the House of Commons. To discuss these amendments, we’re pleased to have with us, from Finance Canada, Lindsay Gwyer, Director General, Legislation, Tax Legislation Division. Welcome. From Innovation, Science and Economic Development Canada, we are joined by Samir Chhabra, Director General, Marketplace Framework Policy Branch, Martin Simard, Senior Director, Corporate, Insolvency and Competition Directorate, and Ian Disend, Senior Analyst, Corporate, Insolvency and Competition Directorate.
Welcome and thank you for accepting our invitation. We’ll start with a brief introduction for five to seven minutes.
Lindsay Gwyer, Director General, Legislation, Tax Legislation Division, Department of Finance Canada: Thank you, Mr. Chair, and thank you for inviting me to speak to you today.
[English]
I am Director General, Legislation, Tax Legislation Division at the Department of Finance Canada, and I am here to answer questions on the amendment that was made in clause 28 of Part 1 of the bill. This relates to the dividend received deduction.
The dividend received deduction is a deduction in the Income Tax Act that generally allows corporations to deduct dividends received on shares of other Canadian corporations. In Budget 2023, the government announced the Income Tax Act would be amended to change the dividend received deduction so that it would not be available to financial institutions on dividends received on portfolio shares that they hold. Bill C-59 implements this amendment.
There was an amendment made in the House that would modify this measure to provide a broad exemption for insurance companies. Under the modified amendment, the dividend received deduction would not be denied in situations where the dividend is received by an insurance company on shares they hold directly or indirectly through a mutual fund trust if the shares or mutual fund trust units are held in the course of an insurance business.
I would be happy to answer any more questions or to provide any more description on that amendment.
[Translation]
The Chair: Thank you.
Samir Chhabra, Director General, Marketplace Framework Policy Branch, Innovation, Science and Economic Development Canada: Thank you, Mr. Chair.
[English]
I will speak on Bill C-59 Fall Economic Statement Implementation Act, 2023 with a focus on the important changes made to complete a significant reform of our competition law to encourage innovation and lower prices for Canadians. More specifically, I will speak to one of the changes made to the proposed legislation since your pre-study of the bill.
[Translation]
During the deliberations on this bill at the finance committee, there was collective support for a number of adjustments, primarily aimed at responding to concerns raised by certain stakeholders and to recommendations from the Commissioner of Competition. The amendments adopted in committee have to do with merger review, consumer protection and greenwashing.
[English]
Let me start with the three adjustments made with respect to merger review, which is often referred to as the first line of defence in competition law.
First, the court remedies for anti-competitive mergers have now been designed to eliminate all competitive harm rather than reversing the degree of harm that makes the lessening or prevention of competition substantial.
Secondly, a new structural presumption has been created to treat mergers resulting in a significant increase in market concentration as anti-competitive unless proven otherwise. This will require the parties to such mergers to proactively justify why their proposed deal will not harm competition. In essence, it reverses the burden of proof.
The third change completes this effort on merger review as the Competition Tribunal will now be able to consider changes in market share or concentration as relevant factors in the assessment of mergers and not only the effects of those changes. This will apply even if a merger does not trigger the new structural presumption.
[Translation]
The committee members were also quite interested in strengthening protections for consumers. First, clarifications were made to ensure that in the Competition Act’s various provisions on drip pricing, the only amounts that can be excluded from the upfront price are those imposed by law directly on the purchaser of the product, such as sales tax.
Next, the committee decided that sellers advertising reduced prices should be able to prove that the regular price is genuine. In practical terms, this means that sellers advertising discounts will have to be ready to submit a list of past prices to the Competition Bureau upon request. Regarding the right to repair, the committee added some clarifications to ensure that the scope of the provisions was broad enough to cover the main types of refusals encountered by repair providers.
[English]
Finally, on doubtful environmental claims or so-called greenwashing, the law will now require those who make environmental claims about their businesses or business activities — and not only about their products — to support their claims with adequate and proper substantiation in accordance with an internationally recognized methodology.
In conclusion, it is important to note that no changes were made to significant portions of the original bill, including frameworks for a review of collaborations between competitors, the new measures to facilitate private enforcement before the Competition Tribunal, as well as several other changes made to better empower the Commissioner of Competition to protect and promote competition.
My colleagues and I are happy to take any questions you may have. Thank you.
The Chair: Thank you.
Our first question will be from Senator Marshall. We will have four minutes each, because this panel will finish at 10 o’clock.
Senator Marshall: I will start with Innovation, Science and Economic Development. Have you had any response from stakeholders? Because we have received a lot. I think one has been positive and everything else has been negative. I want to know what kinds of responses you have had from stakeholders.
In regard to the consultation process, now that these changes were made unilaterally, sort of, how does it fit in the consultation process? There is quite a lot of concern about the amendments.
Mr. Chhabra: Thank you, senator, for the question. In the past several weeks, we have indeed heard from a number of industry stakeholders, in particular, who have expressed concerns about the greenwashing amendments that were adopted in the House committee. There is concern about the implementation of that approach, how it would shape up and what kind of impact it would have.
Our response to date has been to note that there will be a bureau guidance process, which is generally taken in consultation, that will help define things. As I mentioned in my opening remarks, “internationally recognized methodologies” is an undefined term, so I would expect that the bureau will take some time to engage on what they will interpret as internationally recognized methodology in this instance.
In regard to consultation, the government did undertake significant consultations resulting in nearly 500 inputs from Canadians and companies over the course of about six months, with a number of national round tables undertaken across the country as well. The specific change undertaken by the committee in the House to adjust the greenwashing provisions on business activities was not an element that was specifically tested to a significant degree in that consultation.
Senator Marshall: Thank you very much.
I have a quick question for Ms. Gwyer. On the amendments made to the Income Tax Act — I expect some people are happy and some people aren’t happy, but what impact does it have on tax revenues? Is it significant?
Ms. Gwyer: The amendment benefits insurance companies and, indirectly, people who buy insurance products. Insurance companies are, we expect, happy with the amendment. The revenue is about $100 million to $115 million per year, and that reflects in a reduction in the revenues that would have been derived from the measure as originally included in Bill C-59.
Senator Marshall: Has there been any consultation with any of the stakeholders, given that the amendment is in favour of some but the initial legislation is still going to affect others? There’s a perception that there is an unfairness there now. Has there been any consultation with the stakeholders that didn’t receive this benefit?
Ms. Gwyer: The change was announced in Budget 2023, and since then there has been significant consultation, primarily with stakeholders. It applies to financial institutions, so it is primarily banks and insurance companies. The department heard from them about their views on the measure. This amendment is a decision of the government, but it reflects feedback received, from insurance companies in particular, over the course of the last year or so and the impact that they believe —
Senator Marshall: But not the banks?
Ms. Gwyer: We have heard from the banks and they have, in the course of the consultation, provided their feedback, but the amendment does not address banks.
Senator Marshall: Thank you.
[Translation]
Senator Forest: Thank you for being with us today. My first question is about the greenwashing amendment. A number of stakeholders have contacted us to point out that requiring a product’s environmental performance to be proved in accordance with internationally recognized methodology is an overly vague and ill-defined criterion.
Could the problem be solved with an interpretation notice that would provide more certainty to industry players? That’s my first question.
Martin Simard, Senior Director, Corporate, Insolvency and Competition Directorate, Innovation, Science and Economic Development Canada: Thank you for the question. I’ll just repeat what my colleague said. Typically, when a change is made to the Competition Act, new terms are introduced. The Competition Bureau holds consultations and develops what we call guidelines. They explain how the bureau will interpret the new act and how it will enforce it. What you’re suggesting would typically be the next step. The consultations for defining the term will inform the Competition Bureau’s enforcement guidelines.
Senator Forest: Would taking out the phrase “internationally recognized methodology” be an acceptable compromise, or would it make the proposed amendment meaningless?
Mr. Simard: That was a choice of words that was made by the members of the House of Commons. We wouldn’t be comfortable putting ourselves in their shoes. But we were present in the room when they presented it. As I understand it, they were looking for a compromise that would result in an appropriate level of proof. They settled on the phrase “internationally recognized methodology.” Does it go too far? Not far enough? That’s a question for legislators. The idea is to include robust standards in the act and define them through guidelines and in practice, because the Competition Tribunal will have to make rulings on this later on. Furthermore, in the event of an appeal, the case law will establish the scope of the new phrase.
Senator Forest: I’m not asking you to judge what legislators said, but since your expertise and your primary responsibility lie in helping legislators make informed decisions, in your opinion, would this be an acceptable compromise?
Mr. Chhabra: Thank you again for the question. It’s hard to say whether it’s a reasonable compromise. Obviously, a lot of stakeholders from the systems, like the courts, have noted the importance of taking steps to fight greenwashing. The specific element in this case is the inclusion of branding.
[English]
Corporate brands. Big picture, rather than specific products. As soon as you get into the space of the brand exercise, you are immediately in a space that is more of a grey zone. That’s how I describe it. You are not talking about a specific product that you can undertake a specific test against, you are talking about broad environmental claims, broad branding claims, like “Canada’s favourite cereal.” When you get into a space like that, you are immediately in a grey zone.
We feel that there is an understandable degree of concern from certain stakeholders on the industry side about what this will mean. We also understand that there was a very strong perspective from environmental groups noting that there may not be sufficient attention being paid to the nature of the claims being made on a broad basis by some firms about their brands and their activities. This is the grey zone in which we find ourselves.
As we pointed out earlier, part of the issue will be how the bureau goes about defining its guidance around this issue and how the first few cases through the system on the issue get treated by the tribunal, how that case law develops and shapes how we think about these things in a practical way.
[Translation]
Senator Forest: Thank you very much.
Senator Gignac: Welcome, witnesses. I’d like to continue the discussion that Senator Marshall started about the treatment of dividends. Could you please explain that aspect? You’re familiar with this. Why weren’t insurance companies excluded from the start? They’re excluded now. I’ve worked for both banks and insurance companies in the past. This last-minute amendment is leaving an odd impression.
Why didn’t you exclude insurance companies from the outset? I think it was a Liberal government MP who suggested it. I’m surprised they weren’t excluded all along. What was the rationale for all this? Why should we accept this amendment now?
Ms. Gwyer: Thank you for the question.
[English]
It is correct that it was an amendment brought by the government. When the measure was introduced in Budget 2023, we received a large number of submissions from banks and insurance companies in particular. Over the course of that consultation, one of the changes made in Bill C-59 was to exclude taxable preferred shares. That was based on feedback received from banks and insurance companies that taxable preferred shares should not be subject to the measure. That was expected to address some of the concerns related to insurance companies in particular, and the concerns that they raised related to life insurance products, and the fact that under several life insurance products the incremental tax that they would have to pay on those dividends would be expected to be directly passed on to customers.
The feedback we heard was that this measure would increase the cost of life insurance products or reduce the return passed on to customers of life insurance products. After Bill C-59 was tabled, we heard the amendment made on taxable preferred shares would not sufficiently address those concerns. The government continued to consult, and ultimately it was a policy choice by the government to decide to exclude most dividends received by insurance companies.
Senator Gignac: Thank you. Since you are independent from politics, we find it is a compelling case to exclude, because it was not the case initially. Is it something that could happen because life insurance is related to contracts? Is it a compelling case from your point of view?
Ms. Gwyer: It was a choice made ultimately by the government, so I can only speak to the considerations of the stakeholders, who provided a lot of information that led the government to conclude that there was a compelling reason to treat insurance companies differently from other financial institutions, and, for that reason, to introduce this amendment to exclude insurance companies.
Senator Gignac: Thank you.
Senator Smith: I have a question for Innovation, Science and Economic Development Canada, or ISED. The business community has asked for this amendment to be removed and for the government to undertake substantive consultation on the path forward or — at the very least — to extend the coming-into-force date until the international methodological standards have been approved. What’s the federal government’s position on this?
Mr. Chhabra: Thank you for the question. As I noted earlier, a number of organizations have raised the overall practice of greenwashing and the need for Canada’s Competition Act to do more in that space. While it is true that the specific amendment adopted by the House committee to extend this application to brands or broad claims of businesses or business activities and to make more specific representations regarding restoring environment and social and ecological causes of climate change, it is true that those specific elements were not well or deeply treated in the previous engagements.
Directionally, it was clear that there was enough interest and evidence that there was not a great deal of strength or attention paid to the deceptive marketing elements of the Competition Act and how those would apply to environmental issues. In saying that, I want to be clear that deceptive marketing — knowingly making false claims — has always been illegal under the Competition Act. On the criminal side, if you knowingly make a claim that’s untrue, that’s a criminal provision. On the civil side, it has been illegal on a civil basis to make such a claim without having prior knowledge of being offside.
Having said that, it was clear that a number of organizations who pointed out that we were not doing enough to ensure that the marketplace was being fairly managed in ensuring that organizations were not able to get away with making claims that were not adequately substantiated or tested. On the product side — as I pointed out earlier — that’s a simpler and more straightforward exercise to undertake on a brand-wide or business-wide basis. To undertake that approach has complexities associated with it. As I pointed out earlier, the government recognizes that some of the language could induce some uncertainty, but is also confident that there will be an opportunity to work that through with the Competition Bureau, its issue of guidance and then following court cases.
Senator Smith: There is also concern about the aggressive coming-into-force date. As it’s written, companies wouldn’t have time to adjust or revise their claims once these provisions are passed. Why was there no delay in the coming-into-force date to allow companies to comply and adjust their claims?
Mr. Simard: While that is true that this enters into force upon Royal Assent, there is a one-year entry-into-force date for private action, which was one of the causes of concern of businesses, because it is a new world for them. It is not only the government or the Competition Bureau public enforcer that would go, but they were worried about a private actor that might act strategically. That part is delayed from one year, so it should give time for the guidance to come.
Until we get to that point, the Competition Bureau is in the driving seat. The Competition Bureau is a public office that should act in the public interest. It is not a “gotcha” company. Its mandate is compliance. In fact, it has an arm that is about educating businesses and making sure that they run into compliance. The lawsuits and legal proceedings are only the fallback to make sure the law is followed.
For the first year, the bureau is in the driving seat. There were also concerns that even though it is one year before private action kicks in, perhaps someone could try to do a retroactive action. There, there is another safeguard in the proposed bill, which is a public interest leaf test. Again, we would have a public office — the tribunal — that has to decide if the case has merit. If the case is retroactive and “gotcha,” it is a high bar to say that this is in the public interest to go do this “gotcha” proceeding.
Senator Kingston: My question is for Ms. Gwyer. It is something that I didn’t get a chance to ask last time regarding vaping. How much money will be recovered from the vaping industries in particular, and will this amount cover the costs that you have put forward, $66 million, I believe? That’s for tobacco and vaping, but I’m more interested in the vaping piece.
Ms. Gwyer: Sorry, senator, I can’t speak to that measure. That would be one of my colleagues, but I can check if we can get that information for you.
Senator Kingston: Thank you. I will pass then.
Senator Ross: Thank you and good morning. As Senator Marshall mentioned, we have received a lot of communication from various business associations. I want to read a couple of sentences that struck me and get your take on them:
. . . these most recent amendments to C-59 would mark a radical departure from traditional competition policy and international best practices. Notably, one amendment seeks to codify structural presumptions in merger reviews by transplanting language from the 2023 U.S. merger guidelines — guidelines which have been widely criticized, have not been adopted by any court, and thus are not part of current U.S. law. Canada is going beyond the U.S.’s approach by adding presumptions to its competition statute. Instead of judging mergers based on a rigorous analysis of their likely effects on competition, this change will allow mergers to be blocked based solely on simplistic rules of thumb, even if a more economically sophisticated review were to suggest they would increase competition to benefit consumers and the economy.
I’m looking for some feedback on that statement.
Mr. Chhabra: Thank you, senator, for that question. To properly answer that question, we have to look at where Canada has been over the last several years, and where the international best practice has been. By all accounts, Canada has slipped far behind the best practices in this space over a number of years. Canada’s approach was one in which the tribunal was even barred from considering market shares in its assessment of whether a merger could likely present harm to competition. The government moved under the original Bill C-59 to reverse that scenario and allow for the tribunal to undertake an understanding of these issues on the basis of market shares. The company sought to move a step further and adopted some language from the U.S. merger guidelines based on the Herfindahl–Hirschman Index, which measures degrees of concentration and puts in place a structural presumption.
In the paragraph that you read, it noted a merger could be blocked simply on the basis of this index or the degree of concentration. The way the structural presumption works is it reverses the burden of proof or reverses the onus. So instead of the competition bureau having to prove there would be anti-competitive effects undertaken by a merger, the approach now will be such as when there’s a significant degree of concentration indicated by the merger, the burden of proof reverses. It now has to be the firms who are seeking to merge who need to convince the government or tribunal of the appropriateness of the potential positive effects and the potential benefits to consumers.
Of course, there are scenarios in which two firms could merge to a rather significant degree of concentration, say 40%, but if they’re competing against a larger firm and they’re now going to be better primed to compete in that space and offer more innovative services and to have a lower cost base that they could then pass down to consumers, it could actually be pro-competitive. It depends on the overall market dynamics at play and the existing size and concentration of players who are involved. In a way, the point you’ve raised and the paragraph that you’ve read is quite right. It’s a dynamic analysis that needs to understand a number of factors that are happening in the economy or in that specific market. But the issue here is not one of outright banning. It’s about the reversal of proof.
Senator Ross: I appreciate that distinction. A lot of these business groups are telling us that this change will have a chilling effect on deal-making. What’s your comment on that?
Mr. Chhabra: That’s a somewhat reasonable argument to make. The counterargument would be that perhaps Canada, by international measures, has been too lax on enforcing competition policy for decades and has allowed the concentration into oligopoly in a number of sectors that have potentially reduced our competition and competitiveness and has been seen by some experts and readers to have a negative impact on our productivity as well. So I certainly agree. I don’t think it would be unfair to call the changes contained in Bill C-56 — which received Royal Assent in December of 2023 — and then Bill C-59, taken together, a generational change in our competition laws.
The question is whether a generational change was needed. I believe most experts, and most Canadians who wrote into our consultation and participated, certainly seemed to indicate that significant change was required.
Senator Ross: Thank you very much.
Senator Pate: Thank you to our witnesses. My first questions are for you, Ms. Gwyer. Thank you for pointing out that it was between $100 million and $115 million in tax that will be foregone by the amendment that was made.
I’m curious as to what other potential courses of action were examined beyond this amendment by the department, and in particular whether any steps were taken to evaluate, and how you can still hold accountable the affected insurance companies to pay their fair share while preventing them from passing the cost of these tax measures on to their clients or on to policyholders, rather than simply exempting the insurance companies?
Ms. Gwyer: We did consider different options, and ultimately this was a decision of the government. We considered different options and provided different advice.
We looked at different ways that you could provide more targeted exemptions. It does become difficult to do that given the nature of the structure of insurance companies and products. This was determined to be an appropriate exemption. It does require that the shares be held in connection with an insurance business, so that does effectively provide an anti-avoidance rule.
In the context of a corporate group, it would prevent shares from being held purposely by an insurance company that are unrelated to the activities of that insurance business, so that is intended to provide some safeguards around the exemption.
There are also a number of other specific anti-avoidance rules in the Income Tax Act that do deal with the dividend received deduction. There was an amendment that was made, I believe, in the first Budget Implementation Act in 2023 to deal with certain hedging transactions. There was an additional amendment that was announced in Budget 2024 that deals with certain other types of synthetic transactions.
Those amendments are intended to and do apply equally to insurance companies. Those are intended to try to put safeguards around the dividend-received deduction and ensure that it cannot be abused. This amendment was a broader change that dealt specifically with financial institutions, but those safeguards do still exist and, as announced in Budget 2024, is something that is staying in place, and something that we’re continuing to expand, so insurance companies would be subject to those.
Senator Pate: Thank you for that. You mentioned in response to a colleague’s question an example of life insurance policy, and the cost being passed on to the policy holders. I’m curious as to whether there was any thought to clearly articulating that this cannot be done. Thank you for pointing out some of the other measures that could be, but to be clearer in that and ensuring that policyholders know that protection is going to be in place for them.
Ms. Gwyer: In the course of making these amendments, we do think about those types of possibilities. I’m not an expert in terms of all of the specific types of products, but my understanding is that at least some of them, what is called a “dividend” is paid to the holders of the policies and that does reflect after-tax profits related to the policies. I think it’s built into those contracts that they just receive after-tax profit.
In some other cases, it’s built into the pricing and then there would be ordinary competition, potentially restrictions, that would determine whether a company would be able to build that into the pricing. But it is a hard thing from a tax perspective to try to restrict a company from passing on tax costs to customers when it’s built into their pricing. It is not really something that would be feasible to do through the Income Tax Act.
[Translation]
The Chair: The next question is from Senator Moncion, the bill’s sponsor.
Senator Moncion: I would like to change the subject and talk about clause 244, concerning the refusal to deal. I would like you to explain how consumers will benefit from this amendment. I will read it.
[English]
The amendment in C-59 broadens the Competition Act’s refusal to deal provision in section 75, to include refusal to provide means of a diagnosis or repair, other than trade secrets. It also introduced an additional remedial order available to private applicants, namely monetary payments to those affected by conduct dealt within the section and sets out terms that the tribunal may consider in making a payment order.
This amendment was proposed by the Automotive Industry Associations of Canada and LKQ. They argued that section 75(1) remedial order could be too narrow to include the automotive after market since it could only allow the courts to force the acceptance of a person as a customer. This amendment would clarify that the tribunal can require the manufacturer to give access to any person instead.
This change is not likely to have an impact. The provision, as drafted, is only activated when the person to be accepted as a customer has been substantially affected in his business or is precluded from carrying on business due to the refusal, a test which is undergoing slight modification in Bill C-59 but continues to relate to effect on business. It is clear that customers in this instance is another business, not an end customer. Nevertheless, further clarity in the text is not harmful.
I would like to understand the effects that this is going to have on the customers and on the companies who want to have access to your remedials.
Mr. Chhabra: Thank you for the question again.
Your assessment, as you read it out, is quite accurate from our perspective. The customer in this case is actually the secondary repair shop, for example. The adjustments that were made are clarifying in nature rather than substantive in terms of changing the overall frame. The right-to-repair issue is one that is a significant issue in a number of different zones in Canada these days, including two private members’ bills that are with the Senate now, Bill C-244 and Bill C-294 that seek to make changes to the Copyright Act to ensure that Canadians have the ability to seek repairs for their devices in a manner that’s not blocked by the Copyright Act.
Similarly, this is an issue that has found its way into the conversation and the Competition Act, specifically in the refusal-to-deal provisions, to ensure there is the appropriate degree of encouragement to ensure companies are not, in an anti-competitive manner, refusing to work with, for example, a repair shop that is outside of its dealer network, would be one common example that is used.
The changes proposed in Bill C-59 clarify and ensure there is adequate incentive and guard against the ability of companies to self-preference a narrow network of service providers and, instead, would be obligated to provide an open opportunity for other organizations, firms and small repair shops to step up and provide those services.
Senator Moncion: If they’re not made available freely, then it’s going to become a court matter for the small repair shops who want access to the information to get it from larger dealers who won’t want to give the information.
Mr. Chhabra: The language clarified it to ensure the remedial order is to make the means of diagnosis or repair available within a specified period of time, or the conditions the tribunal would impose.
We saw the definition of the means of diagnosis or repair was broadened to include maintenance and calibration; this is about ensuring there was not an inadvertent absence or loophole that was not appropriately covering off the range of reasons why you might need to have access to certain diagnostics or materials. That’s essentially what is being put forward in the bill now.
Senator Moncion: A refusal from some providers will have to be dealt with through the courts, unless I’m not getting this.
Mr. Simard: Yes. It’s in the Competition Act. The Competition Act enforcement framework applies.
The first call would be to the Competition Bureau. Do you want to take this case? Maybe the Competition Bureau calling will see a change in business practice.
There is also a review by large companies. When a new Competition Act is put in place, all the lawyers go through the licensing deals, agreements and make recommendations to their clients as to how to comply. That’s the first step.
Then there is a call to the Competition Bureau who may decide to take the case. There is private action now as well. Ultimate recourse is the repair shop, maybe in conjunction with others, taking the matter up.
The law will be clearer, so it should affect behaviour. Then we have a public enforcer, the Competition Bureau, then there is also private access now.
[Translation]
Senator Moncion: That could take years. For example, a car dealership that has its own diagnostic systems would not necessarily want to give that away.
Mr. Simard: They have an association.
Senator Moncion: I understand the process.
Mr. Simard: There are industry standards. I think that there is a debate going on right now within the industry, and the industry has a code of conduct. Does the code of conduct need to be modernized? That would be part of the conversation that we need to have to find solutions together.
Senator Moncion: Thank you.
Senator Dalphond: I want to come back to greenwashing. A lot of companies wrote to members of the Standing Senate Committee on National Finance to express their concern about that.
I’m right to be concerned because, as you mentioned earlier, there was no prior consultation. This amendment was tabled by an MP in committee and it was adopted, so there was no prior consultation. What is proposed is that we use an internationally recognized methodology. One of the concerns that was raised is this: Is that not a threat to creativity and innovation? The first ones out of the gate will not be complying with an international standard. They will be the first to do something that has never been done before.
I am thinking in particular of aluminum plants in Quebec and the Elysis project. The Government of Quebec, the Government of Canada, Rio Tinto and Alcoa invested $200 million in that project to manufacture aluminum without producing greenhouse gas emissions or to at least significantly reduce them. The companies involved will use and market that technology. They invested in this project. Why would they need to comply with non-existent international standards? They came up with something new, and it is a project that was approved and subsidized by the Government of Canada and the Government of Quebec.
Mr. Simard: That’s an excellent question. Thank you for asking it. I think that goes right to the very heart of the companies’ concerns.
The term “internationally recognized methodology” is new, and that is how we understand it. If we look at the history of this provision, there are precedents. When a company makes a claim about a product’s performance, for example, “This soap gets whites whiter,” under the Competition Act, the company has to do tests and must be prepared to give the Commissioner of Competition proof of that claim if he comes knocking on the company’s door to find how the company is able to claim that the product meets that performance objective. That has been the case for a long time now. Companies have had to conduct tests on products for a long time now and there is case law in that regard. A good test can be reproduced, and there are science-based, peer-reviewed standards. There is a whole body of literature to explain what reliable testing involves.
Now, testing is turning into something more general, providing evidence. If a company claims to be a green company, then we are getting away from the product and something that can be tested in a lab and moving toward something more generic. We went from using the word “test” to using the word “evidence.” Quite a lot of work will need to be done to determine what constitutes sufficient evidence. The provision has to do with greenwashing, so we are talking about sufficient evidence and an appropriate methodology to combat greenwashing. That is how the Commissioner of Competition and the Competition Tribunal are going to think. If we have innovative companies that can prove, through testing…. When I talk about internationally recognized methodology, some have used science to prove that there are environmental benefits, so I think it will be really hard to say that greenwashing is occurring. There is evidence.
Senator Dalphond: Even if there is no internationally recognized methodology?
Mr. Simard: It depends on how you interpret “internationally recognized methodology.” Are we talking only about generally recognized best practices to support a claim or are we talking about a very textual interpretation and saying that an ISO 999 is required? It depends on what direction we take —
Senator Dalphond: I’m sorry to interrupt you, but my time is running out.
To guide companies, are we going to ensure that the ground rules are clarified and that the Competition Bureau issues guidelines, consults and puts everything in place within the next year, which is the period during which legal action cannot be taken, but there is a reverse onus? Can all that be done in a year? Can the government guarantee that all that will be done or will the Competition Bureau be able to do all of this at its own pace?
Mr. Simard: The Competition Bureau is independent. I cannot make any commitments on behalf of the bureau, but I will tell you what has happened in the past. The last time that changes were made to the Competition Act was through Bill C-19 in 2022, and the bureau completed the process within a year. It was able to produce a draft and hold consultations on the draft a month before the provisions took effect. The last time, the Competition Bureau was able to do that. The changes had to do with wage-fixing and the provisions were to take effect after one year, and the Competition Bureau was able to complete the process.
Senator Dalphond: Thank you.
[English]
Senator MacAdam: My question is on Part 1, clause 28. There have been a number of questions around this amendment but, to confirm, is it only insurance companies who offer life insurance policies that are impacted by that amendment?
Ms. Gwyer: It is all insurance companies.
Senator MacAdam: All insurance companies, okay.
My next question is on drip pricing in clause 234. What are the practical effects of removing the clause “the purchaser of the product referred to in subsection 1 to 3” in the drip pricing section? What are the practical effects of that amendment?
Mr. Chhabra: Thank you very much for the question. The clarification made regarding drip pricing was to ensure that we’re aligning both the provisions on standard and electronic commerce, and it was to clarify the amounts that can be excluded from the upfront price for those imposed on the purchaser of a product by federal or provincial law — in essence, ensuring that the regime was consistent across the board for purchases made online versus purchases made in a bricks-and-mortar shop.
This is a relatively minor amendment, more in the order of housekeeping or technical changes. We don’t expect it to have a major impact. It does clarify against the potential for some businesses to attempt to layer in additional fees.
For example, a government policy decision was taken that has increased the prices that I pay for goods coming across the border. I’m going to keep my price at a certain level and then apply that additional surcharge in a way that would be, perhaps, deceptive to the customer or client.
This attempts to clarify that it’s only the charges imposed by a government at the point of sale. For example, taxes or eco-fees imposed in Ontario when you buy an electronic device could be held at the register instead of being built into the initial price.
Senator MacAdam: Thank you.
Senator Loffreda: Nice to see you all here again. Welcome.
My question is on the amendment to clause 236 of Bill C-59.
Could you elaborate on the specific changes introduced by the amendment to clause 236 of Bill C-59 to the Competition Act? More specifically, how do these changes impact the definition of “misrepresentations” to the public and the criteria for a Competition Tribunal review?
If we have time, can you provide examples of misrepresentations to the public that may lead to a review by the Competition Tribunal under the modified paragraph 74.01(1)(b.1) and the new paragraph 74.01(1)(b.2)? If we have time, could you further elaborate as to why you feel these amendments were necessary?
Mr. Chhabra: Thank you, senator, for the question. In terms of greenwashing, the requirements have been updated and adjusted such that the requirement for products would be that they must have been adequately tested before making claims about their environmental benefits. These were expanded to include restoring the environment and mitigating environmental, social and ecological causes, not only the effects of climate change.
In addition, as we’ve talked about in a couple of different rounds here, persons making a claim about environmental benefits of a business, or business activities more broadly, must also have adequate and proper substantiation to do so, which must conform to internationally recognized methodology.
As I pointed out earlier, a number of recommendations were received by the government through consultation with a number of environmental organizations pointing out that notwithstanding the fact that there existed provisions in the Competition Act against misleading information or against greenwashing claims in general, it may not be specific enough or targeted enough to support the bureau in undertaking action on this basis. So these adjustments were made, and then, of course, followed up on by a committee to further press the point, particularly with regard to the broader claims around business or business activities.
I’ll ask my colleague to jump in with more specifics about these issues as well.
Mr. Simard: Maybe a follow-up question would help us.
Senator Loffreda: Do you have an example where misrepresentations to the public may lead to a review by the Competition Tribunal?
Ian Disend, Senior Analyst, Corporate, Insolvency and Competition Directorate, Innovation, Science and Economic Development Canada: The substance of what is false or misleading representation is not being touched by these amendments. For example, if a person were to claim that their product is beneficial to the environment, when that’s not true, that is already reviewable. That can be brought by the Commissioner of Competition either to the Competition Tribunal or to regular courts for a corrective order, which could be something like issuing a notice saying that that was not true or to pay an administrative monetary penalty.
These amendments would require an additional step having been taken before making an environmental representation at all. If it is found, for example, that a person did not do that — they made an environmental representation, it was challenged and they’re unable to provide evidence that they did attempt to substantiate it in advance, that would engage the same court procedure. Once again, that would be brought before the Competition Tribunal or the court system; and if it was found that they had not undertaken that testing or substantiation work, the same sort of corrective order could be issued.
Senator Loffreda: Thank you.
[Translation]
The Chair: I would like some clarification about the matter of dividends for insurance companies when it comes to investment funds. Many people use trust funds or insurance policies to invest. This is not just an insurance vehicle but an investment tool as well. Does the fact that we are giving so-called preferential treatment to trusts issued by insurance companies under an insurance policy and not to loyalty or other such investment funds not create a special advantage that these other trust or investment fund vehicles are not able to access?
[English]
Ms. Gwyer: The existing rule applies to dividends received by corporations only, so it’s only relevant to corporations. The amendment would stop the prohibition on corporations deducting the dividend; it would stop that from applying to insurance companies if they received the dividend in the course of their business.
They do have to hold the shares directly. There is a rule in the amendment that says they can receive the dividend through a mutual fund trust.
I’m not sure if that partially addresses your question. In general, the dividend received deduction is only relevant in the corporate context, to start.
[Translation]
The Chair: My other question is a bit technical. It comes from the Canadian Bar Association, which is somewhat opposed to the definition of the term “concentration index” set out in subclause 249(4). They are recommending that we review it because the meaning given does not really have any practical applications, and we are moving away from what is being done in the United States. Could you explain your position as opposed to that of the Canadian Bar Association?
Mr. Simard: Yes, I can answer that. They contacted us as well. I think that this is a matter of legal drafting. The bill talks about both upstream and downstream markets. The wording is a bit different than in the U.S., where they do not make that distinction, but our interpretation is that the meaning is the same. There can be a monopoly or a monopsony. This is written out in full in Bill C-59, as amended, whereas the American guidelines are more abbreviated.
Our understanding and the general understanding in all parliamentary debates is that this was proposed by the Commissioner of Competition. It is his wording, and he wrote it in the style of Canadian law. Obviously, his intention was to imitate the U.S. guidelines, and he was transparent about that. In our opinion, the legislator’s intention is quite clear. It involves doing things the same way as the United States. It is just written differently because our law is drafted differently.
The Chair: The courts can read your statement when interpreting this. Thank you.
Senator Gignac: In 2022, an expert panel produced a road map outlining the steps that to need to be followed to publish a taxonomy. We are still waiting for that, and the Minister of Environment has yet to release anything. The benefits will include the fact that emitting companies will be required to commit to publishing a plan and targets and to making sure to disclose information related to the climate and the credible, green transition. The problem with this last-minute amendment is that many companies will think twice before disclosing anything. As Senator Dalphond mentioned, the point may even be this:
[English]
This concern is exacerbated with the additional proposed amendment to expand private rights of action to include actions under section 74.
[Translation]
We are the chamber of sober second thought, so perhaps we need to think twice before adding this element.
Mr. Simard, would we not be putting the cart before the horse by doing that at this stage, when we are still waiting for the taxonomy guidelines?
Mr. Simard: I think that your question is about taxonomy. There are other initiatives, like the recycling logo, for example, and the time when we can use the recycling robot. There is an initiative pertaining to what we call the disclosure of climate-related financial information for businesses regarding the volume of greenhouse gas emissions. All of that is constantly changing. There were initiatives in the past and there will be others in the future.
I think that the Competition Act is a principles-based marketplace framework law. This is all constantly evolving, so what the Competition Bureau and the courts will consider to be sufficient evidence will change over time. I think that there was a world before the taxonomy guidelines and what we considered sufficient before the taxonomy guidelines, and when the taxonomy guidelines are ready, then they will help with what is considered recognized and sufficient.
There will always be new standards, so I don’t know whether we really have to wait for this one element in particular before amending the Competition Act. I think that the most important thing is to ensure that we take into consideration what constitutes sufficient evidence and the fact that this is an evolving concept.
The Chair: Thank you very much for answering our questions. Ms. Gwyer, I think that you told Senator Kingston that you would give her more information. I don’t want to inconvenience you or ask the impossible, but we have to proceed with clause-by-clause consideration tomorrow.
Ms. Gwyer: I’m not sure, but I can ask my colleagues to give you an answer.
The Chair: Thank you very much. We would appreciate it if you could do that before clause-by-clause consideration.
We will resume our study on Bill C-59, An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023.
To discuss the amendments adopted in the House of Commons, we are pleased to welcome with us today representatives from the Canadian Chamber of Commerce: Bryan Detchou, Senior Director, Natural Resources, Environment and Sustainability, and Liam MacDonald, Director, Policy and Government Relations.
I understand that you’re going to share your comments. You have four or five minutes to do so and then there will be questions from senators. Thank you.
Bryan Detchou, Senior Director, Natural Resources, Environment and Sustainability, Canadian Chamber of Commerce: Thank you, honourable senators.
[English]
Honourable senators, on behalf of the Canadian Chamber of Commerce, our 400 chambers and boards of trade and approximately 200,000 businesses across the country, thank you for the opportunity to participate in today’s discussion as this committee reviews the amended version of Bill C-59.
We were pleased to present our views before the Senate Committee on National Finance on March 20 and the House of Commons Finance Committee on April 11 as they studied Bill C-59.
As you know, we raised concerns at that time about the retroactive nature of the proposed digital services tax, as well as significant changes being introduced to the Competition Act. However, on Tuesday, April 30, during the House of Commons Standing Committee on Finance’s clause-by-clause review of Bill C-59, we were surprised and disappointed to see significant new amendments to the Competition Act adopted without prior warning and without consulting businesses of all sizes that will be affected.
We believe these proposed changes will have a long-term negative impact on the economy and must be thoroughly studied and debated by parliament, and carefully reviewed by officials and legal experts inside the government. A clear understanding of the bill’s unintended consequences is essential.
Liam MacDonald, Director, Policy and Government Relations, Canadian Chamber of Commerce: Bill C-59 is the second piece of legislation in only a few months that will amend the Competition Act. It also contains the second set of proposals that were introduced without warning, substantially amended at the last minute, and then moved through parliament with hardly any debate. This piecemeal and ad hoc approach to reforming our competition laws means poor public policy choices that will negatively affect Canadians. After all, the Competition Act applies to all Canadian businesses and is one of Canada’s most important marketplace framework policies.
An amendment to Bill C-59 proposes to add structural presumptions for merger review consistent with those set forth in the U.S. Federal Trade Commission’s 2023 Merger Guidelines. As we noted in our first appearance before the committee on Bill C-59, these are just guidelines. They carry no force of law and have not been recognized by any U.S. courts, which continue to rely on well-established, effects-based anti-trust principles.
These guidelines have also been widely criticized by competition experts. An article published by the American Bar Association describes them as “anachronistic, constituting a marked retrenchment to long-discarded approaches and rejected legal positions.” Further, the amendments introduce language and figures that are inconsistent with the Competition Bureau’s Merger Enforcement Guidelines and practice.
If this committee does not remove the new amendments, then we have included proposed language in our submission to ensure, at a minimum, that Canadian law remains consistent with Canadian enforcement guidelines and definitions.
The consensus among anti-trust experts since the 1970s has been that measures of market structure, such as the Herfindahl-Hirschman Index, say little about competitive conditions, because market power is an outcome and not an immutable determinant of competition in an industry or market. Many firms gain market power precisely because they were operating in highly competitive markets and were able to outcompete rivals.
Lowering the burden of proof for enforcement is the wrong solution to the fact that proving competitive harm is difficult in today’s dynamic markets. This change will lead to enforcement being taken against benign or pro-competitive conduct which competition laws are meant to protect.
Mr. Detchou: Finally, we would like to address the new language on deceptive marketing practices when it comes to environmental claims. The Canadian Chamber of Commerce and our members are committed to decarbonizing our economy as we pursue net-zero targets. We strongly oppose any effort to mislead consumers or greenwash in pursuit of these goals. However, we believe the proposed amendments are excessively broad and represent a significant shift from the traditional scope of competition law.
Our diverse membership is justifiably concerned about the uncertainty introduced by the new, inherently vague standard. This standard could impact any company making public statements or warranties regarding environmental and climate change matters. We urge you to carefully consider the Commissioner of Competition’s advice to fully withdraw this amendment.
Decarbonizing Canada’s economy is one of the greatest challenges and opportunities of our time. Governments need to collaborate with businesses to drive the innovation necessary to achieve our ambitious climate goals. In light of this, we recommend that the Senate withdraw the amendment to paragraph 74.01(1)(b)(ii) to the Competition Act from Bill C-59, and engage with the business community and other constituents to determine a path forward that prevents misrepresentations without creating uncertainty or additional bureaucratic burden for business.
In conclusion, Canada’s business community recognizes the need to modernize our country’s decades-old Competition Act to ensure it remains relevant in a rapidly evolving economy. However, the latest proposed changes will put Canada out of step with international best practices and raise regulatory compliance costs, including on small- and medium-sized enterprises, and will likely reduce rather than increase competition. Thank you, senators.
[Translation]
The Chair: Thank you for your presentation.
[English]
Senator Marshall: Thank you very much to the witnesses for being here today. I understand the concerns that you have and also those of your membership. But, being realistic, I don’t think that these amendments are going to change. I think what you see will be the final version or pretty close to it.
You were talking in your opening remarks about the implications that it would have on your members and also on the economy as a whole. I know there has been a lot of concern about declining investment in Canada, declining productivity and things of that nature. Could you elaborate on what your concerns are about the economy as a whole? Because I do think these amendments will go through. Could give us a taste of what you expect to happen?
Mr. Detchou: Thank you for your question, senator. First, on the amendment, we would be very disappointed if it were to go through with the current language. We have proposed language that we can share with senators regarding the language to the amendment specifically on greenwashing that could limit the potential unintended consequences. That is on your first point.
On your second point, when it comes to Canada’s goal to reduce emissions or achieve any net-zero targets, we’ve seen the government make significant investment in a number of different spaces. We’ve seen the government invest billions of dollars to attract the EV battery supply chain to Canada, for example. We’ve seen, in subsequent budgets, that the government committed billions of dollars toward the investment tax credits. All of that is in recognition that there is a global race and Canada is trying to be at the front of the pack.
Now, in this greenwashing amendment, the government is trying to be very ambitious. The government is also asking industry to be very ambitious. With this current amendment, the government is making it very difficult for businesses to be ambitious and to support its aims. Ultimately, if businesses are no longer able to make claims, and if businesses are now providing very conservative projections because they are scared to spend more time in court than actually developing their products and providing innovation, that is an investment that is flowing away from Canada into other markets. That would be my answer, senator.
Senator Marshall: You represent thousands of businesses, and you say you have heard from those businesses. Give us an idea of how broad the concern is that you are hearing. Are you hearing from just a dozen businesses, or is it much more extensive than that?
Mr. Detchou: Senator, anecdotally, I can tell you that since the amendment was passed, I have received many, many emails from members and calls from across the country. I think there is this conception that it is simply the energy sector that’s impacted by this, but that could not be further away from the truth. Pick a sector — they are impacted by this amendment.
We have received calls from chambers from across the country and members from across the country from every single sector. That’s one thing I really want senators to understand. Maybe it was designed to impact one sector, but it impacts the entire Canadian economy.
Senator Marshall: Thank you very much.
[Translation]
Senator Forest: Thank you for being with us today. I have a question right off the top. The position of the Canadian Federation of Independent Business is often based on surveys of its members. You mentioned that over 200,000 businesses were members of the Chamber of Commerce. Does your position come from the executive or is it based on member surveys?
[English]
Mr. Detchou: Thank you for your question, senator. In terms of the chamber, our strength is our membership. Our strength is the businesses that are members of ours and also businesses that are not necessarily members of our chamber, because we also have the strengths of our networks, like regional, provincial and local chambers. In terms of how we go about establishing positions, we certainly speak to our membership from across the country, and we are a consensus-based organization. We take input from our membership, and that’s how we make our decisions.
When we speak — and I think that’s one of the strengths and the credibility of the chamber — you know we have our finger on the pulse of business.
[Translation]
Senator Forest: I have a question about the genuine discounts as it pertains to establishing the ordinary price of products to determine whether the discount being offered is real. In your brief, you express your concern over shifting the burden to businesses to prove that the discounts they offer are genuine, if challenged by the Competition Bureau. Can you explain this or give us some examples to illustrate the complexity of the requirement to keep pricing data?
Mr. MacDonald: Thank you for your question. As you can imagine, this may be challenging for small and medium sized businesses. If we think of regional businesses, for example, that are very small, they may not necessarily have all the computer systems they need to track the price and volume of products they have sold if the Competition Bureau asks them to prove that their discounts are indeed real. The real issue is that the burden of proof is on the businesses; if they are charged and they do not have all the data or the price list and quantities sold to provide proof, they will lose their business. The Competition Bureau already has the authority to order the production of information on price and quantity sold, for example, which is not a challenge for large businesses. This change creates extra challenges for small businesses. It may be very demanding to track all the prices and volume for every product.
Senator Forest: It takes a lot of effort for little gain for the consumers?
Mr. MacDonald: Exactly.
Senator Forest: Thank you.
Senator Gignac: Welcome, witnesses. I agree with your position on the last-minute amendment on greenwashing; there is no reason for it.
I will address another topic. You said in your opening comments…. There was talk of the digital services tax and making it retroactive to three years. Normally there should not be retroactivity on any tax, but the government’s argument is that this was mentioned in a statement. The businesses should have known that this was bound to happen. Do you think that is a valid argument? What is the impact? I am not sure that companies have collected or billed the applicable amounts to the consumer over the past three years. If you go to Expedia and you took a trip, I do not think that the company billed you fees for that. Is this a valid argument?
Mr. MacDonald: Thank you for the question; I will try to answer it. I am no expert on this file, but you are right: We think it is unreasonable to ask businesses to pay taxes for past years when the tax did not apply. We are in a situation where it might take three or four years for this measure to come into force. That could create a heavy burden on businesses.
Our relationship with the United States is another thing. They have been very clear: They are against these measures. In the next few years, we will be renegotiating our free trade agreement. What is more, principles have been established by the OECD and the G20 and the fact that Canada is the only one moving forward on this goes against those principles. As you noted, this could have an impact. The government thinks this will affect big businesses only, but this may also have repercussions on SMEs. I am thinking about a small hotel in a local community, for example, that posts information on Expedia or platforms like that. The cost will be borne by the small businesses.
Senator Gignac: The U.S. Chamber of Commerce has taken a position on this and I believe that Nellie Liang, the Secretary of the Treasury, mentioned at a U.S. congressional finance committee that the United States is prepared to take action and dispute this decision by Canada. Is that correct?
Mr. MacDonald: That is correct. That is how we understand it as well. They have been very clear that they will take action. What we are doing with this tax is breaking the mould. We are the first to do it and we are going it alone. There are standards being set internationally and I think it would be best if we followed those standards instead of moving forward alone. This is going to spark reactions from the United States that are not going to benefit Canadians.
Senator Gignac: This is another contentious issue that needs to be monitored.
[English]
Senator Smith: Welcome, gentlemen. With respect to the amendments that you have spoken to here, I’m wondering if you are aware of similarly worded provisions in other jurisdictions. You mentioned other jurisdictions, but could you be specific? As a supplementary to that, you noted that there have been impacts across the Canadian economy. I am interested in how it would negatively impact energy companies. Two little questions.
Mr. Detchou: Thank you, senator. To the best of my knowledge, there is no other jurisdiction that has this specific wording. Certainly, when it comes to the reverse onus of proof and internationally recognized methodology. That’s not language we’ve seen before. It is very vague. I’m not quite sure from where that was plucked out from. That’s to your first question.
To your second question, it impacts that interest through the same way it impacts every other industry across Canada. It prevents companies from being ambitious. It requires them to be far more conservative in a number of their claims in order to prevent becoming victims of strategic actions by certain groups. Ultimately, it prevents Canada from moving in the right direction on climate goals. I want to reiterate that the position of the Chamber of Commerce and of all our members is that we are opposed to greenwashing. I want to make that clear. I don’t want that confused in any way, shape or form, but the impacts of this are significant.
Senator Smith: How do other energy corporations combat greenwashing?
Mr. Detchou: That’s a very good question, senator. It is something that many countries are trying to tackle, and the only way to do it appropriately and adequately is with proper consultation — in my opinion — with the business sector. I think that was lacking here in Canada. My advice to any other jurisdiction that is trying to tackle this very serious issue is that you need to engage meaningfully with the business sector. That is my advice, and I would say that has been lacking in Canada.
As you saw, this amendment was included at the very last minute. We have not had time to see it, and that’s why we are very thankful to be here in this committee speaking to senators in this chamber of sober second thought, hoping we can have a proper conversation on the implications of that amendment.
Senator Smith: Thank you very much.
Mr. Detchou: Thank you, senator.
Senator Ross: This question is for both of you. What do you believe is meant by “internationally recognized methodology”? What terminology would be acceptable? How could clarity be achieved if the purpose is to avoid untrue claims?
Mr. Detchou: Thank you for your question, senator. First, as to what we understand by internationally recognized methodology, unfortunately, that’s vague and the vagueness is a major concern. Law is not a field where vagueness is appreciated. I know there are a number of lawyers in this room who can appreciate that statement.
We need to understand that when it comes to the technologies needed to reduce emissions, many of them are new, and many of them have not been deployed at the scale with which we would like to deploy them in the coming years, and many of them do not have internationally recognized methodologies. Some may. Some have nationally recognized methodologies. Some may vary from province to province, state to state or region to region. There does not presently exist an internationally recognized methodology. That is the major concern.
Could you repeat the second question, please?
Senator Ross: What terminology do you think would be acceptable? If the purpose is to avoid untrue claims, how could clarity be achieved?
Mr. Detchou: Our preferred option is for that amendment to be withdrawn. However, if this committee does not find that to be a possibility, we do have a proposed amendment. I will read it. You will note that it removes the internationally recognized methodology portion. It also takes out the reverse onus. I will read it. I’m happy to provide this in writing to the clerk and committee. It reads as follows:
Section (b)(2) makes a representation to the public with respect to the benefits of a business or business activity for protecting or restoring the environment, or mitigating the environmental and ecological causes or effect of climate change that is false or misleading in material respect.
This is language the business sector would be able to work with. I want to stress this again. Senator, you may know this from your past life working in chambers in your region: We are opposed to greenwashing. We do not believe any of our members should be practising such things. That is the proposed language. I am happy to provide that to the committee.
Senator Ross: Do you believe this clause will cause small- and medium-sized enterprises, or SMEs, or large businesses not to make claims at all or, worse, choose not to be leaders related to their environmental performance if they’re no longer using these claims for a competitive advantage?
Mr. Detchou: Yes. I know I have to be quick in my response.
Yes, senator. It impacts businesses of all sizes across all sectors across the entire country. Yes, that is, unfortunately, what I think the impact will be, whether it’s large businesses not wanting to dedicate so many funds to their legal and compliance team versus their innovation team.
We’ve spoken about Canada’s innovation and productivity challenges. Part of that is when these companies are spending their time growing their compliance and legal team and not their innovation team. For small- and medium-sized enterprises, as you know, they don’t have the resources to engage in this. They don’t have the resources to partake in a long, legal proceeding. It would impact everyone. Thank you, senator.
The Chair: We like quick answers.
Senator Pate: I have two questions.
When you appeared on Bill C-56, there were questions raised around whether competition measures proposed by Bill C-56 would have the desired effect in terms of reducing grocery prices.
I’m curious whether, since that’s been implemented, if you have data you could provide us regarding the impact of Bill C-56 and how it’s performed in terms of the impact on the cost of groceries and other essentials, particularly for those in poverty and those struggling to keep food on the table and roofs over their heads.
In the letter we received from the Chamber of Commerce, on page 2, you say the amendments will increase regulatory compliance costs. The government raised similar concerns when Don Davies originally brought this amendment. His response was to ask you for data.
I’m curious whether you have been able to produce that data on the impact of these provisions and, concretely, how you see them directly impacting your or your members’ competition.
Mr. MacDonald: Thank you for the question.
The first question on grocery prices, no, unfortunately at the chamber I don’t believe we have any specific data on that. Many people have been following grocery prices closely; they have been coming down. However, I would emphasize I don’t think that has much to do with the competition measures in Bill C-56. Now that we’re far enough away from the pandemic, we’re starting to see some structural pressures abate. Grocery prices are coming down.
In the overwhelming majority of cases, or in general, I do not think competition policy is an effective tool to lower consumer prices, a view we expressed at the time; we don’t think that has anything to do with the changes made in Bill C-56.
On the second point, unfortunately, that would be challenging data to come by. This is a relatively new amendment. We don’t have any specific data. However, the concern is real. It’s fairly easy to appreciate that, if you’re an SME, this burden could be quite difficult for you to meet.
Thank you for the question.
Senator Pate: What would you propose then, because the status quo is that the Competition Bureau has to subpoena the business’s information to prove false information.
Mr. MacDonald: Our position is that’s a sufficient standard because most large businesses collect this data anyway. If the concern is what they’re doing, I don’t think there’s an issue.
The issue is trying to balance regulatory compliance costs and ease of enforcement. This change tips the scale too far in one direction.
Senator Pate: You’re not saying there isn’t a problem with greenwashing by companies?
Mr. MacDonald: With greenwashing? My apologies.
Mr. Detchou: The question was on greenwashing.
Senator Pate: Generally, about some of the advertising practices but also the greenwashing; I see it as a trend in terms of the issue here is in ensuring companies are not falsely advertising or making false claims.
Mr. MacDonald: The discount portion of it.
Mr. Detchou: Certainly, when it comes to greenwashing, there are already mechanisms in place for private actors, or the Competition Bureau, to pursue companies who they believe have made misleading or false allegations. That is not a concern.
The major concern is the amendment and language around internationally recognized methodology specifically; that language is of major concern.
[Translation]
Senator Moncion: Since you recognize that Bill C-59 and the recent amendments by the House of Commons make significant changes to the Competition Act, could you indicate the best practices for implementing some of these new provisions? What sort of framework and guidelines would the businesses need from the government and the Competition Bureau after the bill is passed, if it is passed as worded?
Mr. MacDonald: Thank you for the question.
There have been changes to the act since 2022. I cannot name all the best international practices that we follow or not. Our concern is that we are making a radical change to decades-long standards without any real evidence. There is not a lot of reasoning to back up these changes. If we worked in consultation with the businesses as we move forward with all these directives that the Competition Bureau can give, that will certainly help. However, a radical change is being made to long-standing standards.
Senator Moncion: You talk about a radical change of standards that have been in place for many years. Everything currently being proposed in the bill was reviewed by a large number of experts. It is not what is being proposed in the current bill that is changing, except for the burden of proof. This burden falls on the businesses rather than the Competition Bureau. I hear you talk about former standards that have long been outdated. I expected a better position from you on an issue like this, since you are young, when it comes to the environment and the changes we are going to have to make.
I do not want to put words in your mouth, but I would ask you to answer my question.
[English]
Mr. Detchou: Thank you, senator, for your question. I’m glad you recognize my youth, despite my lack of hair. That’s much appreciated.
I am a Millennial, senator, and protecting the environment is a top preoccupation of mine. It is one of the reasons I am in my current role at the chamber. It’s something that I take very seriously, and when I engage with my members, I know it’s something they also all take very seriously.
What we need to understand is that in this global race to reduce emissions, Canada has a major role to play. That is one thing that I and many of our members completely agree on. Canada has a huge role to play. Whether it’s our abundance of natural resources, our improved relationship with Indigenous communities, our workforce or our academic institutions, Canada has an incredible role to play.
What we want is for Canadian companies, natural resources and innovation to help reduce our domestic emissions but also global emissions.
On the question of greenwashing, we certainly do not want any of our members to practise greenwashing. That is not something we support. As you mentioned, as Millennials, that is something that is top of mind for many people of my age and also for the generations coming after me.
What we’re saying is that as currently drafted, the amendment is going to prevent Canadian businesses from doing the work that will help Canada achieve its net-zero goals.
[Translation]
Senator Moncion: What you are telling me is that what is in the bill right now is not good, what was previously proposed…. The only thing that does not measure up for now is the amendment and not the language that is already in the bill?
Mr. Detchou: That is correct.
Senator Moncion: Thank you.
Senator Dalphond: I am going to pick up on what Senator Moncion was talking about. I am looking at the clause in the bill on greenwashing. You may not have been there earlier, but I have some concerns, as many people around the table do, on what “internationally recognized methodology” means. I understand that neither you nor any business mentioned in the letter you sent was consulted on this amendment. You suggest withdrawing it and you suggested a change to the text that would remove not only this part, but also the reverse burden of proof.
You are proposing to amend not subsection 236(1)(b.1), but subsection 236(1)(b.2), while the text in subsection 236(1)(b.1) pertains specifically to the products and not the activities of the business. There is a reverse burden of proof. Why do you accept the reverse burden on the products, but not the activities of the business?
[English]
Mr. Detchou: That’s a good question, senator, and that is something we’ll review on our end, and provide it to you in writing.
I can share with this committee that when we talk about business activities, we’re talking about goals that companies set. An example would be carbon capture and utilization storage. If you are a company, and you claim that you believe your major $7 billion project is going to reduce X amount of emissions from the air, there is no internationally recognized methodology for that. It does not exist.
Certainly, when we talk about a lot of the projects we wish to deploy, they have not been deployed on the scale at which companies are now hoping to commit. When you see the Pathways projects out west, it’s a $16.2 billion project. If completed, it will be the largest or second-largest carbon capture and utilization project in the world. There’s no internationally recognized methodology for that. If, on such a project, you claim it’s going to reduce 90,000 but it’s 70,000, is that misleading? Is that a misleading representation?
Senator Dalphond: I understand that concern, but my concern is that you also want to remove the words “the proof of which lies on the person making the representation,” which means the company — which means this big project or capture. It doesn’t reduce emissions, but it captures back some part of it.
Mr. Detchou: Correct.
Senator Dalphond: So why should we remove the reverse onus when you’re not opposed to keeping it with regard to the representations that are made in connection with the products? Would you be comfortable if we just remove “in accordance with internationally recognized methodology” and keep the reverse onus?
Mr. Detchou: That is something we can review, and that is why we think there should be a lot of dialogue with businesses. With this amendment, we have not had sufficient time to have a back and forth with government. These are the types of conversations, senator, that we would have liked to have had.
I would say that the reverse onus is putting an increased burden on businesses. That is our position, but certainly, we can have a conversation there. I think the role of this committee —
Senator Dalphond: The reverse onus comes with the fact that you choose to make representation. You’re not obliged to do representations. However, I want the companies to do representations. I want them to brand what they’re doing to improve the environment. But I’d like them to be able to support what they say, so maybe the reverse onus is a good thing.
Mr. Detchou: Senator, I would hope that the companies making these claims are always supported by science and facts. I believe that any company — certainly in our membership — that would be willing to make those claims are backed, and they’re not coming out of anywhere. They also know that if they were to make false claims, there is potential legal recourse. That system has been in place, so we don’t have concerns with that route.
I think the major concern is this new amendment and what it would mean for any company across any sector making any claim, trying to support the government in reaching its emissions-reduction goals. Certainly, in my lifetime — again, senator, you mentioned my age — we’ve never seen Canada achieve any of its emissions-reduction goals, and we, as the business community, are trying to help Canada — help the country — achieve its 2030 and 2050 goals.
Senator Loffreda: Thank you for being here. The fact that you represent 200,000 businesses across Canada is impressive.
Like you, we’re all opposed to greenwashing. I don’t know if you would have the data, but I’m curious how many businesses have currently been found guilty of deceptive claims related to their clean, green products. How widespread is this phenomenon, and why do you feel it was such a concern? We all know why it was a concern, but is it because there was so much of it going on — more in Canada than other jurisdictions? Why are we trying to lead? You did mention that our measure here — our amendment — is vague with respect to other jurisdictions.
You did answer my other question, which was whether you felt these amendments would simply discourage businesses from undertaking projects that would benefit the environment, given the uncertainty and vagueness of these amendments. You can add something to that if you want, but you did mention that your answer was “yes.” So I believe it was strictly political and short-sighted? All parties want to be seen as pro-environment. You made a few bold statements about the impact on Canadians and the negative impact on the economy in the end. Maybe you can elaborate on how specifically going beyond the environment would negatively affect Canadians.
That’s a lot for three or four minutes, but it’s an important issue.
Mr. Detchou: Thank you for your question. For the first part, you asked how many businesses have been found guilty of misleading practices. I don’t have that data, but that is certainly something —
Senator Loffreda: Is it something that is a concern because it’s a growing trend? What is the trend? For sure, you wouldn’t have the numbers, but do you feel there are more and more businesses doing that?
Mr. Detchou: Certainly globally, it is a trend that has been increasing. I know it is something that a number of international bodies — for example, the United Nations — are trying to hone in on. Certainly, as countries all try to reduce their emissions, there are more and more companies and sectors that are setting environmental or climate-related targets. I think that increased influx of companies venturing into that space leads to, perhaps, also an influx of companies that may have had misleading practices already just expanding their misleading practices into the environmental space.
Perhaps globally it’s an increasing trend. I certainly don’t have the data that would suggest that is the case in Canada. I do believe that it is something that we should take seriously, because surely, if we have businesses making false claims then by 2030 or 2050, we won’t reach our targets and we’ll all look at each other and we’ll be confused as to why no one hit their targets. The reason would be all these numbers provided were mumbo-jumbo. That is certainly not what we want.
But to your last question, we cannot create a regime that prevents businesses from being innovative. Again, I stress that a number of technologies that we will need to use to reduce our emissions have not been used before or have not been deployed at the skill which we need to deploy them.
We need to understand that, as a nation, as a global community, we will be taking some risks. We’ll take a couple of gambles and try new technology, that’s what innovation is. Not everything will work perfectly and not everything will work as intended, but we will deploy a number of different technologies to try to change consumer behaviour, reduce our emissions and make our economy more green.
Senator Loffreda: Why not change the behaviour of your 200,000 businesses and underpromise and over deliver, in essence? Will that be the solution? This will not be amended, I can tell you now. We can try as hard as we want, it won’t be amended. Reality is reality. Why not underpromise and over deliver? Would that be a solution?
Mr. Detchou: Underpromising, over-delivering, I’m not sure that’s necessarily the right policy.
Senator Loffreda: Maybe that’s why the amendments were made? Maybe yes or no?
Mr. Detchou: I’m not sure. I’m not sure how the amendment came about, senator.
Senator Carignan: I’m not sure. That’s a good answer. Next question, Senator MacAdam.
Senator MacAdam: Thank you for being here. There’s been recent reporting about the introduction of enhanced terrorism protection in the automotive sector against low-cost imports of Chinese electric vehicles, notably by the United States and the European Union. I understand this is something that Canada is also considering.
To what extent do you favour the introduction of new import tariff measures to protect Canada’s sensitive automotive sector over enhanced competition which would favour Canadian interests in low-cost electric vehicles and their inherent benefits to Canada’s climate change goals? It’s a broader question, but I’m curious what your thoughts are on that.
Mr. Detchou: On the question of tariffs, senator, the announcement made by the United States is relatively recent. We’re still engaging with our members and trying to understand all the potential repercussions of that decision to Canada.
I understand that it is also an exercise that the government is partaking in, so I don’t necessarily have an answer or a position on the questions of tariffs. But certainly, it’s a very important issue for us that we are monitoring.
We’ve seen in recent weeks or months, the government tried to establish Canada as an EV and EV battery superpower. There have been billions and billions of dollars invested into that space from upstream to downstream, all levels of the supply chain. We’ve made significant investments in that space, so certainly it’s something we have to monitor and take seriously because it will have an impact on the investments that the government has made and the thousands of jobs that are projected and thousands or the billions of GDP contributions that are expected from that sector being established in Canada. I’m not sure if that answers your question altogether.
Senator MacAdam: That’s fine, thank you.
Senator Kingston: I’d like to follow up on something that Senator Loffreda has been following, and that was the whole idea of you being against the reverse onus. When you answered the question at one point, I’m not sure if it was to Senator Loffreda or another colleague, you said all the initiatives that are undertaken by companies are based on science. That really doesn’t fit together in my mind. Could you just talk about why reverse onus is a problem for your members?
Mr. Detchou: Thank you for that question, senator. The reverse onus element, in my opinion, is also connected to the internationally recognized methodology. Those two items are connected.
Again, I want to stress that what we had asked the committee was for that amendment to be withdrawn because we think that it will have a number of unintended negative consequences.
What I was saying was that certainly our membership, when they made claims, those claims do not come out of nowhere. They are generally scientific, well researched, and that’s how they come about their claims.
If those claims are seen to be misleading or false, legal recourse already exists. There are already mechanisms in place to challenge those claims. That is our position.
What this amendment would do, I think I’ve already articulated that quite well. It would prevent companies from making claims and contributing to the nation’s desire to reduce emissions.
Senator Kingston: Even if they could prove through well-accepted research that what they were trying or what they were embarking on was, in fact, based on science?
Mr. Detchou: One of the main issues when we talk about increased burden on businesses is that this process is not as simple as provide us your documents, and this is over. It’s not send your PDF via email and the process is over.
We’re talking about businesses having to hire or bulk up their legal team. We’re talking about businesses having to spend time and resources going to court and going before the tribunal to prove those claims. That whole process is an increased burden on businesses. And whether it’s a small or medium, or a large business, that is not why they’re in business. They do not want to spend all that time and resources in court when they can be innovating and actually doing what they ought to be doing.
That’s one thing that we want to stress. This amendment means that these companies are now at risk of a number of strategic, legal actions, and that is something they would want to avoid at all costs.
Senator Kingston: My other question would be for Senator Loffreda, but I don’t think that’s what I’m supposed to do here.
[Translation]
The Chair: That can be done in the chamber.
You agree with having new standards to avoid greenwashing and that the businesses that claim to offer environmental benefits have to be able to back up those claims, but the biggest concern is the standard being set?
[English]
Mr. Detchou: Senator, that would be our biggest preoccupation. The amendment as currently drafted is far too vague, and it will have a number of unintended consequences.
Now we are told that perhaps after it becomes law, there will be further consultations, but there is no guarantee as to what the department or the bureau will settle on. We don’t know what the final language will be, and that creates an environment of uncertainty. That also pushes investment away from the country.
[Translation]
The Chair: Your other concern had to do with the issue of maintaining prices. I do not understand why a company would not maintain prices during a certain period, even a small business, with all the accounting tools and software that exist. I am trying to come up with an example where this might become more complicated. The thing that comes to mind is hotel room rates that fluctuate according to time of booking, time of reservation and the rate for the reservation.
The prices can fluctuate quickly. This information needs to be kept in a database for a certain period of time, but I think that is being done anyway. I do not really understand this concern.
Mr. MacDonald: I can answer the question. There are definitely some concerns for certain businesses, but honestly, that is not our biggest concern when it comes to the changes that have been made to the Competition Act.
The Chair: I understand what you are saying.
Mr. MacDonald: There is a risk; it is not our biggest concern, but for some businesses —
The Chair: Thank you.
That concludes our meeting. I want to thank the witnesses and the entire support team, our clerk, our analysts, and the interpreters.
Before closing the meeting, I would remind senators that our next meeting will take place this afternoon, at 2:30 p.m. to resume our study of the subject matter of all of Bill C-69.
(The committee adjourned.)