THE STANDING SENATE COMMITTEE ON NATIONAL FINANCE
EVIDENCE
OTTAWA, Wednesday, December 13, 2023
The Standing Senate Committee on National Finance met with videoconference this day at 3:30 p.m. [ET] to study the subject matter of Bill C-56, An Act to amend the Excise Tax Act and the Competition Act; and, in camera, to study the subject matter of Bill C-56, An Act to amend the Excise Tax Act and the Competition Act.
Senator Percy Mockler (Chair) in the chair.
[English]
The Chair: I wish to welcome all senators and viewers across our country of Canada who are watching us on sencanada.ca.
[Translation]
My name is Percy Mockler, senator from New Brunswick, chair of the Standing Senate Committee on National Finance. And now, honourable senators, I’d like you to introduce yourselves, starting on my left.
Senator Forest: Welcome. My name is Éric Forest, senator from the Gulf region of Quebec, and I’m the sponsor of Bill C-56.
Senator Gignac: Hello, my name is Clément Gignac and I am a senator from Quebec.
Senator Loffreda: Hello, Senator Tony Loffreda, Quebec.
Senator Galvez: Senator Rosa Galvez, Quebec.
[English]
Senator Pate: Kim Pate. I live here in the unceded, unsurrendered territory of the Algonquin Anishinaabe.
Senator Ross: Krista Ross. I am a senator from New Brunswick.
Senator Smith: Larry Smith, Quebec.
Senator Marshall: Elizabeth Marshall, Newfoundland and Labrador.
[Translation]
Senator Dagenais: Jean-Guy Dagenais, Quebec.
[English]
The Chair: Thank you, senators.
Today, we begin our study on the subject matter of Bill C-56, An Act to amend the Excise Tax Act and the Competition Act, as referred to us by the Senate of Canada yesterday on December 12, 2023.
Today, honourable senators and Canadians, we have witnesses with us who will speak on the bill. I will introduce the witnesses who will be making opening remarks and ask the other witnesses to introduce themselves if ever they are asked to answer a question.
From the Canadian Anti-Monopoly Project, we have Keldon Bester, Representative.
[Translation]
From the Competition Bureau Canada, we have Matthew Boswell, Commissioner of Competition.
[English]
From the Canadian Chamber of Commerce, we have Mr. Matthew Holmes, Senior Vice President of Policy and Government Relations. Joining us by video conference is Mr. Matthew Hatfield, Campaigns Director, OpenMedia.
To each and every witness, thank you for accepting our invitation, and a special thank you on behalf of all senators for accepting our invitation in the last 12 hours. Welcome to all of you.
We will ask that you make a presentation of only 90 seconds. We will start with Mr. Keldon Bester. The floor is yours for your comments, please.
Keldon Bester, Representative, Canadian Anti-Monopoly Project: Thank you to the committee for inviting me to speak today on this important topic. My name is Keldon Bester, and I’m the executive director of CAMP, a Canadian think tank dedicated to addressing the issues of monopoly power in Canada.
This is an exciting time in Canadian competition policy. After nearly 40 years, Canada is moving towards meaningful reform of the laws that Canadians depend upon to protect competition and affordability in markets across the economy.
Bill C-56 is an important investment in the future of competition in Canada, and CAMP is happy to support it. Far from radical changes, Bill C-56 corrects long-standing issues with Canada’s competition laws and brings us up to speed with the baseline of international peers who are now looking to move even further with their own laws. By strengthening our merger enforcement framework, broadening protections for abuses of dominance and allowing for the in-depth study of competition and markets, Bill C-56 creates the foundation for more vigorous competition in the Canadian economy going forward.
The path over the past 40 years has left Canadians with fewer choices and less competition in important parts of the economy. With Bill C-56, this committee has the opportunity to diverge from that path towards a more competitive future for Canadian businesses, workers and consumers.
Thank you for your time, and I look forward to your questions.
The Chair: Thank you.
Matthew Boswell, Commissioner of Competition, Competition Bureau Canada: Good afternoon, Mr. Chair and members of the committee.
[Translation]
My name is Matthew Boswell. I am the Commissioner of the Competition Bureau. Joining me today are my colleagues, Jeanne Pratt and Anthony Durocher.
The Competition Bureau is an independent law enforcement agency that protects and promotes competition for the benefit of Canadian consumers and businesses.
[English]
In March of this year, we made a public submission to the government’s consultation on the future of competition policy in Canada with over 50 recommendations to help modernize and strengthen Canada’s Competition Act. We are pleased that some of our suggestions could be implemented through Bill C-56.
We believe these amendments mark a key step in modernizing Canada’s competition law and ensuring that the bureau can better protect and promote competition throughout Canada. A more competitive economy will benefit all Canadians by offering more choice and greater affordability for consumers and businesses.
Rest assured that if these proposed amendments become law, the bureau will take care to ensure that its approach going forward with respect to their application is communicated clearly and transparently to businesses and stakeholders alike.
Thank you. We look forward to your questions.
The Chair: Thank you, sir.
[Translation]
From the Canadian Chamber of Commerce, we have Matthew Holmes, Senior Vice President of Policy and Government Relations. You have the floor.
Matthew Holmes, Senior Vice President of Policy and Government Relations, Canadian Chamber of Commerce: Mr. Chair, senators, thank you.
[English]
Congratulations, by the way, on bringing in so many Matthews today.
At the Canadian Chamber of Commerce, we commend the government’s efforts to ensure Canada’s competition laws are strong in order to promote competition and foster a thriving economy.
While we support the need to enhance competition in Canada, we are very concerned by the manner in which changes have been repeatedly introduced as parts of omnibus implementation bills, ways and means motions, or peppered throughout other legislation, such as Bill C-56, without what we feel is real consultation with the Canadian business community or academic experts in what is a very particular area of the law. Therefore, we urge the Senate to approach the proposed amendments to the Competition Act in Bill C-56 with careful consideration.
Honourable senators here today, ask yourselves, what the urgency is behind this bill? Will these proposed changes to the Competition Act change prices in grocery stores in time for New Year’s celebrations? Perhaps they will by 2030; perhaps they won’t. In fact, they could have the opposite effect, even diminish competition, especially given some of the new litigious elements considered under Bill C-59. The reality is, unfortunately, we just do not know.
Quite frankly, it is almost absurd for me to be speaking to you today about a handful of changes in Bill C-56 when other changes are being proposed in Bill C-59, currently before the house. Intentionally or not, this approach lacks transparency and obfuscates the actual plan for the future of competition law in Canada. That approach ultimately makes it more difficult, more expensive and riskier for business.
I recognize that the government is under considerable pressure to address the affordability crisis that Canadians face today. It needs to show action, and it needs to convince Canadians it has a plan. Unfortunately, in my view, Bill C-56 does not actually do anything about real problems being faced by Canadians as far as competition policy goes. We have some ideas on the housing section as well. At best, it is a vehicle for administrative change. At worst, it risks broadening the mandate of the Competition Bureau to become something of a price regulator, which would be inappropriate and concerning.
By rushing this through with a false sense of urgency, we risk making decisions that could have outsized impacts on businesses of all kinds, as well as consumers and the broader economy. We maintain that changes to the Competition Act that are consequential and lasting should benefit from robust consultation with stakeholders and a clear plan on what the end goal is.
Thank you.
The Chair: Thank you, Mr. Holmes.
Matthew Hatfield, Campaigns Director, OpenMedia: Good afternoon. I am Matt Hatfield, executive director of OpenMedia, a grassroots community of over 280,000 people in Canada who work together for an open internet. Today I am joining you from the unceded territory of the Tsawout Nation, and I’m here to tell you that Bill C-56 is a crucial step to improving Canadians’ daily lives that you must speedily pass.
If you pay attention to economic forecasts, you know Canada’s economy is faltering. A central reason is that we have allowed our economy to become dominated by sluggish oligopolies that collect excessive profits from us on one hand, while under-investing in the technology and infrastructure that should secure our future on the other.
We’re not all economists, but Canadians feel that situation in our bones. Every time we call our cell phone provider, see another unjustified grocery price spike or try to speak to an actual human about harassment we face on an online platform, we hear the message from oligopolies loud and clear: “We don’t need you. You serve us. Where else are you going to go?”
That has to change. For our system to function, Canadians must have many places to take our business for any product or service. Bill C-56 cannot fix that alone, but it is the first essential step. For nearly 40 years, we’ve hamstrung the Competition Bureau’s ability to do much of anything to promote competition in Canada, and the results are all around us. It is time to let them act.
Thank you. I look forward to your questions.
The Chair: Thank you, Mr. Hatfield.
We will move immediately to questions. In the first round, honourable senators, we will have five minutes each. I want to bring to your attention that Senator Forest, who is the sponsor of the bill, will be the last to ask questions.
Senator Marshall: Mr. Holmes, I will start with some questions for you. You spoke about the lack of consultation. I know from reviewing the bill that the government had published what they had heard during the lengthy consultation period — it is on the Government of Canada website — but the bill itself was released the next day. I would expect that the Chamber of Commerce submitted some comments when it was open for consultation. Was there any consultation with regard to the specific amendments in Bill C-56?
Mr. Holmes: Thank you for the question.
No. Not for us or our members. This is a pattern that we are seeing on this file. Budget 2022 included a number of amendments to the Competition Act which were introduced under the Budget Implementation Act. We were happy and willing participants in the broader consultation. We participated in roundtables through the spring or summer. We formally submitted to the process, and we were pleased to see the What We Heard document. That is an important part of the process.
As you well know, the introduction of legislation and adoption of bits and pieces from various sources, including the opposition’s private members’ bills, is a very different process that requires a different analysis and consultation process. Telling us, “We put it up on the website somewhere as part of a vast exploration of what any Canadian could submit about what they wanted to see,” is not the same as proposed legislation.
Senator Marshall: That is what I understood, too.
One of the issues that concerns not just governments but all Canadians is the low investment in Canada. I had asked the officials in the department if they looked at the proposed amendments through that lens. Do they expect to see businesses who want to invest in Canada to be more encouraged to invest as a result of these amendments, or would they look at these amendments and then think that they do not want to invest in Canada? Do you have any views on that?
Mr. Holmes: I could not speak to what sort of analysis was done by those drafting the legislation. To my knowledge, that hasn’t happened, but I wouldn’t know. I would defer to those who may have a better sense of that. In terms of what the impact of this legislation may be, there is the risk that it could disincentivize investment in Canada.
Senator Marshall: That is what you were saying earlier, that there are positives to some of the amendments, but there could also be some unforeseen problems with regard to what is being implemented. As you say, it is being rushed through. Even in the Senate, it is being rushed through. You are the only group of people that we are going to be discussing this bill with. We are under pressure to pass the legislation.
You did say that you had some comments on the proposal with regard to housing and the $4.5 billion. I would be very interested in hearing your views on that.
Mr. Holmes: Yes. We are quite supportive of the housing element. We think that the measures to address the GST on new residential rental property is an important step. We feel that it could be extended and expanded slightly by the introduction of text in paragraphs (a) and (b) to say, “where production begins or is under way as of September 13, 2023.” That would capture current projects that are under way but are facing the same affordability crisis and the same supply chain volatility that has hampered some of these new builds. In intent, we would argue for the GST rebate to apply both to new builds and those that are currently under way as of the introduction of the proposed legislation.
Senator Marshall: Those are not caught up in the legislation.
Mr. Holmes: Currently not.
Senator Marshall: Mr. Boswell, I know the minister now has a role carved into your legislation. There is a perception by some people, including myself, that your office could be politicized. You are an office that is supposed to be independent — it is on your website that you are independent — but now, with the minister so close to you, it gives the perception that it could almost be considered a division of his department. Could you just speak to that concern?
Mr. Boswell: Thank you, honourable senator, for the question.
In fact, this issue came up at the house committee assessing Bill C-56. I indicated some concern with the structure of the market study power in the previous version of the bill, and it was amended at committee. The amendments do a great job of addressing the concerns with respect to politicization that I raised in the house committee. Now the commissioner has the ability to initiate the market studies. I have to consult with the minister; I do not need to seek his approval. It clearly says “consult.” The minister can direct me to go on to conduct a market study, but he must discuss with me whether it is feasible, including whether I have the resources to do it. There is lots of room there for me to prevent a political-type market study as opposed to what we do at the bureau and have done for years, which is evidence-based inquiries to really get to the root of whether there are competition problems and how we can fix them. The amendments to the bill that were made in the house in the committee were very positive amendments, and I am supportive of the way that the bill looks now.
Senator Marshall: The concern that I would have is that while, Minister Champagne is there and he seems like a good minister, we’ve also had other ministers and some were good and some weren’t so good. I must say I appreciate your comments, but I do have some concerns. It seems like the minister is bringing the Competition Bureau closer to the minister and politicizing it. I do wish you the best once the legislation is passed, but it is a concern for me.
[Translation]
Senator Gignac: Welcome to the witnesses. I’d like to pick up on what my colleague was saying about the department’s independence from the minister. We understand that you have the ability to conduct your own inquiries, and that’s reassuring. I also agree with my colleague about the fact that we know the current minister well but things may change one day.
I’d like to understand political independence. So, the minister can mandate the commissioner to conduct inquiries, but is there a framework or guidelines? What will determine the main criteria by which you might accept the minister’s request to launch an inquiry?
Mr. Boswell: Thank you for the question, senator.
[English]
The revised section 10.1 that would be included in the Competition Act provides multiple different safeguards that provide transparency to the process and strike a balance between the minister’s involvement and the commissioner’s independence. Those safeguards are something that we pointed out and recommended in our submission to the government’s very broad consultation on the future of competition law in Canada.
Senator Gignac: Can you share two or three of them?
Mr. Boswell: Absolutely.
As I said, there is the element of my just consulting with the minister. If I determine that it is in the public interest to pursue an inquiry, then I can go forward. I then would be tasked with publicly publishing draft terms of reference and taking feedback from Canadians on those terms of reference, which would all be visible to the public, and then going to the minister and getting those terms of reference approved. It would be very clear to the Canadian public if there were a dramatic change in the terms of reference after the draft version had been published. That is a transparency and safeguard in the process.
There is also the timing of the market study inquiries, where it is set out that it shouldn’t be longer than 18 months, which is something that we at the bureau agree with. That is something that the business community has flagged as a concern, because 30 to 40 years ago, there was a market inquiry by the predecessor to the Competition Bureau that went on forever. We are very supportive of that. I don’t think that it fetters our independence to have time limits on our work. It doesn’t say what our results are going to be or what we are going to say about competition in a particular sector. It just says we have to get our work done in a timely way. I embrace that kind of direction and transparency for the Canadian public.
[Translation]
Senator Gignac: One of the amendments to the Competition Act would repeal sections 90.1 and 96 of the act. If these sections had been repealed at the same time last year, would the merger of Rogers and Shaw have been approved? Would the outcome have been different?
[English]
Mr. Boswell: Thank you for a very interesting question.
In terms of the removal of the efficiencies defence, which the Competition Bureau strongly supports and has been a supporter of and advocate for many years, we are an international outlier. We are literally the only country in the world that has that defence. It would not have played a role, sir, because the way that things unfolded in the Rogers-Shaw trial, the efficiencies put forward by Rogers on the original transaction did not come into play. The tribunal made their decision on a different set of factors that the public is aware of. It would not have made a difference on the Rogers-Shaw transaction, but that efficiencies defence has made a difference on cases in the past, allowing harmful mergers to go ahead in Canada.
[Translation]
Senator Gignac: My last question is for Mr. Bester.
[English]
In your testimony at the Standing Committee on Finance in the other place, you stated that the Competition Bureau has made important strides in communication, how it works, to Canadians, but it is still very much a black box, and we fall short of the transparency of peer jurisdictions like the U.K. In your view, what are the primary lessons that we can draw from the U.K.?
Mr. Bester: Thank you so much. That is a fantastic question.
The U.K., in particular the Competition & Markets Authority, their equivalent to the Competition Bureau, lays out much more clearly the announcement of an investigation, whether it be a merger or their abuse of dominance corollary and the steps and time associated with updates provided to the public. For an example, a U.K. citizen could look at their Competition & Markets Authority and understand, with some exceptions, what is being investigated and the status of those investigations. Again, I commend the Competition Bureau for making strides, being proactive with communication and leading with explanations for select decisions, but still today a Canadian doesn’t or cannot find out what is actually happening or what the bureau is investigating currently. There will be limitations on that, especially for criminal investigations, but the U.K. gives us a model of a highly transparent framework, and I think Canadians would benefit from having a better understanding of what the bureau is up to.
Senator Smith: Mr. Holmes, this bill sat idle in the other place and, just before it was sent to us in the Senate, the government greatly increased its scope by making changes to the Competition Act. Your organization has highlighted concerns about the lack of transparent consultations regarding these changes, but, in general, they are concerns about a seemingly ongoing pattern of making changes to the Competition Act without consulting stakeholders. Could you talk about some of these concerns that you have? What sort of signal does this kind of approach to legislation by the government send to market participants, and what impact does it have?
Mr. Holmes: Thank you for the question, senator.
Our dispute or our concern is not directed at the bureau, by any means; it is the process by which we’re being introduced to these changes. It is difficult to get a full picture of their full impact or the full extent of what is being proposed when they are introduced with what seems, from our perspective, to have either a sinister design or an ad hocery to it. Either of those being true, neither is very positive.
We commended the government for moving forward with a large Competition Act review and the What We Heard document. Those are both helpful markers for us. They were open processes by which we could consult.
We represent over 200,000 businesses and over 400 local chambers of commerce across the country. It does take us a bit of time to hear from our constituents, analyze those issues and then bring them to government in a productive way that we feel is in the best interests of the country. We do need time for that.
We think it is also a beneficial process for legislators to let them see what it is that we are driving towards, so that when we have an instance like this, where there is a semblance of emergency that seems to happen in this town in December and June, that we have an intent and a sense of what that emergency actually is.
In terms of the specifics of your question, with the most recently introduced elements that were not introduced with the early legislation but were introduced towards the end, this is where we are concerned about a move towards price regulation. We have an abuse of dominance element, which discourages extremely low pricing. You could see how that might be abused in certain situations, but you also see your Black Friday or Boxing Day sales, where it is quite common. In that instance, we’re seeing a regulator position itself as saying, “Well, you cannot price too low,” which could, ironically, incentivize shrinkflation in the marketplace.
At the same time, we had new language introduced around excessive and unfair pricing. The commissioner, to his credit, is on record as saying that he has no interest in being a price regulator and seeing the commission as that. We support that fully. If we have language in here, which we would recommend be removed, on excessive and unfair pricing, the bureau is positioned to be the arbiter of what that is. So if they’re deciding what is fair and what is or is not excessive, then they’re also in the position of saying, “Well, this is too high, but this is too low.” So the commissioner and his colleagues here are put in the role, uncomfortably, of being Goldilocks.
Senator Smith: Mr. Boswell, what do you think of that question? No, sorry.
You noted in your opening remarks that your office provided 50 recommendations to the government on how to modernize our competition laws. You noted that some were accepted and some were not. Can you share with us some recommendations that you hope to see in the future as the government works to modernize the competition laws?
Mr. Boswell: Yes, thank you very much.
I’d be happy to react to Mr. Holmes’s comments, but I will stick to your question. I know there are rules.
Yes, there are some suggestions we made that we believe are very important that haven’t yet come forward, and I should say that this process has been going on for a long time. Senator Wetston started a broad consultation on reforming the Competition Act that originated from this chamber in 2022. It was followed by the government’s consultation.
There are a few areas that haven’t been tackled yet that are very important. One is, what is the remedy for a merger that causes a substantial lessening of competition? In Canada, the law now says that all you have to do is take out the “substantial.” The merger can lessen competition but not substantially. We don’t view that as appropriate, and it’s out of line with many jurisdictions around the world, including the United States, where the remedy is, if you want your merger to go forward, you restore competition to what it was before you initiated the merger. That is a very important change, especially in the context of the concentrated economy we have in Canada. We released a competitive intensity study a couple of months ago that demonstrated that the problem of concentration in this country is getting worse. It has gotten a lot worse over the last generation, and it’s something that all of us, as people who are passionate about our country and our economy and policy, need to address.
That’s one of the recommendations that hasn’t been addressed yet. There are others, but I’ll just give you the number one.
Senator Smith: We have known for years that there has been major market concentration, even going back to the 1990s when I was working with John Labatt Limited and Ogilvie Milling Company. We tried to do the deal to buy Maple Leaf Milling Company, but we were told by Mr. Wetston, who later on became a senator and I ended up working with him. That cost me a little bit of a career change when Archer Daniels Midland came in and said, “We bought the company.”
I’m just wondering if you could give a few more comments along the way on those types of issues, the length, and what you expect to be done now.
Mr. Boswell: Yes.
The Chair: You can follow up, Mr. Boswell, with a written answer within, I’ll say, the next few minutes, if you have time.
Mr. Boswell: I’ll just type it out on my phone as we go.
The Chair: That is a constraint of time.
Senator Pate: I think, within my time, you may have time to elaborate on that.
The question I have for each of you, starting with you, Mr. Boswell, is, if you had been the first person consulted on this bill, what would your recommendations have been?
Mr. Boswell: On Bill C-56?
Senator Pate: And the competition — well, you know what the objectives of the bill are.
Mr. Boswell: I think that it was the recommendation that came up during the house committee, which was to put in an ability for the commissioner — he or she — to initiate a market study inquiry on their own volition. I’m very happy, as I’ve already said, to see that change.
Also, I’m pleased to see the changes that have been made to the abuse of dominance provision, which is the changes to section 79 of our act. Those changes don’t get us all the way there, but they start us on the road to catching up with all our international peers. Canada’s abuse of dominance law is out of line with all our international peers. The three-part test is arguably the hardest test in the world to establish; it’s very complex.
A point I’ll make all afternoon — if you’re willing to hear it all afternoon — is that this is about catching Canada’s competition law up to our key international partners. It’s not something out there in left field. It’s nothing drastic or irrational. This is just catching us up. When people say, “Oh, this is going to hurt investment in Canada,” I don’t follow that, because the laws in the United States, the European Union, the United Kingdom, Australia and New Zealand are all what we are trying to get to. So I don’t know why they wouldn’t want to invest here as compared to all those other countries that have better competition laws.
The Chair: Senator Pate, I will have to interrupt. You will still have your three minutes left.
Senators, we have a vote. We will suspend immediately to go vote and then come back here, and our witnesses will be waiting for us.
(The committee suspended.)
(The committee resumed.)
The Chair: We now continue our meeting. Senator Pate, you have three minutes left. Please go ahead.
Senator Pate: Mr. Boswell, I don’t know if you wanted to continue, but in the meantime, one of our colleagues, who you know, suggested that I ask you this: How do we make companies more client-centric, and are there ways we could be improving this bill in order to do that? He came up here to say “hello” to you as well.
Mr. Boswell: A fundamental benefit of vigorous, healthy, fair competition in any free-market economy is that, not only does it lower prices, which the current Governor of the Bank of Canada called “good disinflation” before he was in the job, but it enhances customer service. When you have to compete to get your customers, as Mr. Hatfield from OpenMedia said in his opening remarks, you treat your clients a lot better if they could go across the street, if they could move or switch. When you have a highly concentrated economy where competitive intensity has been declining for decades, you don’t have that client-centric approach in many sectors of the Canadian economy. Enhancing competition in our economy is long overdue, and it has tremendous benefits for Canadian consumers, Canadian businesses, GDP growth and productivity growth. It also provides for better client-centric service because you have to compete to keep the people who are your customers.
Senator Pate: Thank you very much.
Do any of the rest of you have anything you would like to add?
Mr. Bester: We talked about the efficiencies defence for mergers and how that would not necessarily prevent a Rogers-Shaw situation. Something to think about that Canada really could stand to benefit from, including its merger law, is structural presumptions. It’s a term of art for presumption against mergers in already concentrated markets. If a market is already made up of two or three firms, it should be much more difficult. Those firms should have to make a case as to why they should be able to acquire competitors. That is something our law currently lacks and, in fact, does the opposite. Incorporating structural presumptions to protect Canadians in already concentrated markets is definitely something we would like to see in the law.
Mr. Hatfield: What I think is so exciting about Bill C-56 from a consumer perspective is that there is a chance through market studies that we could actually look at what’s wrong across our economy and start to make competition better. We’ve been living in this world where the Competition Bureau could only ever sometimes stop the flow of competition. There was never an opportunity to actually increase competition. As a result, of course, over time, competition has declined. We need to see that change.
Senator Pate: Thank you very much.
[Translation]
Senator Carignan: My first question is on the Competition Act. Maybe Mr. Boswell would be better placed to answer, but the others are welcome to weigh in. We welcomed Minister Champagne in the Senate earlier today. I asked him a question, and he gave me an answer that I’d now like to verify with you.
He explained that Bill C-56 would make it so that shopping mall owners can’t prevent other grocers from setting up shop in the same shopping mall, or enter into covenants to that effect. This is a common practice in real estate, which I was quite active in not that long ago. If there’s already a dollar store, a smoke shop or a specific type of restaurant in a shopping centre, it’s fairly common for there to be clause in the rental agreement preventing other such businesses from setting up.
The minister stated quite clearly that the bill would prohibit that practice. The answer surprised me, but since we were pressed for time, I wasn’t able to delve any deeper into the issue.
Could you point me to the provision in Bill C-56 that would accomplish that? This has piqued my curiosity. Please start by telling me whether this is the case, and if it is, please tell me which provision it is. And if it’s not, then what could possibly explain the minister’s interpretation? It’s pretty shocking.
Mr. Boswell: Thank you, senator.
[English]
The amendment that Minister Champagne was speaking about is an amendment to section 90.1 of the Competition Act and the addition of a new section that would allow the bureau to enforce against vertical agreements between parties that would prevent or lessen competition, and they don’t have to be competitors. The scenario that has been spoken about a lot is the bureau enforcing against restrictive covenants that are put in place often — as the minister pointed out and has been discussed a fair bit — by large grocery stores when they go into a particular plaza and they have an agreement with the landlord that there will be no other food stores in this plaza. You can imagine the detrimental effect on competition when those types of agreements are put in place. They’re very widely used across Canada. We know that from our grocery market study. They have been identified by independent grocers as one of the big problems for them to be able to compete with the big grocery stores in Canada. This new clause in the Competition Act would give us the ability to enforce the law against those restrictive covenants one at a time. What we suggest in our grocery market study is that provincial governments should consider whether they amend the provincial laws to prohibit these types of restrictive covenants.
Once again, as I was saying to Senator Pate, this isn’t radical. This is being done in countries around the world. In fact, New Zealand engaged in an in-depth grocery study and found the same problem, and they have recently put in a law where they prohibit these types of restrictive covenants that hinder competition. That is all they are meant to do. They build what we call in the competition world “a moat” around the business so that no one can come in. When you think of a medium-sized town where there is —
[Translation]
Senator Carignan: I understand. I might have a supplementary question. I’m a real estate lawyer, what do I tell my shopping mall owner client? Are these covenants allowed or are they not? There are a lot of them out there. Will they become null and void? Are we stepping on provincial jurisdiction?
[English]
Mr. Boswell: This section doesn’t come into effect for a year, so it gives people time to get their affairs in order. It will give time for the bureau to give guidance on how it will go about enforcing the section so that the local real estate lawyer you talk about will understand exactly how the bureau is going to approach the matter.
The Chair: Thank you, Mr. Boswell.
Senator Loffreda: Thank you to our panellists for being here.
Mr. Boswell, you mentioned that the competitive intensity has declined for decades. I do agree that in the last two decades competition has substantially decreased in Canada. It is confirmed in a report by the Competition Bureau in October 2023, as you well know, examining the general state of the economy and competition, and they confirm that, since 2000, many factors have led to the lack of competitiveness in Canada.
I believe that knowing the reasons why and where there exists a lack of competition will lead us to a better analysis of this bill here, so I’d like you to elaborate. Two decades is a long time. What factors have led to such a decrease in competition? Are there certain industries where there is less competition or more could be done? Looking forward, is this bill going to improve the situation in Canada, and over what period of time, if it will?
Mr. Boswell: That is a very good question. Thank you.
Our competitive intensity study looked at various indicators of competition in the economy across the economy, in multiple different sectors of the economy, and showed some very troubling results in terms of the state of competition across the Canadian economy. Concentration was rising, and concentration was rising the most in already highly concentrated industries. Entry and exit rates were going down, so there was less business dynamism across the Canadian economy. Profits and margins were up, and up the most in sectors that already had high profits and margins that point to a lack of competition. There were multiple performance and structural indicators that really painted a dreadful picture.
I would say the cause of this, sir, is that, frankly — and this was pointed out in a blue-ribbon panel report as far as back as 2008, the Wilson panel — Canada has been a country that for decades has not placed significant emphasis on competition in the organization of its economic affairs. That is point finale. This is what has led us to this point. We have had a weak Competition Act since 1986 with policies and approaches that are out of line with the rest of the world and a weak enforcer. Until recently, when our budget was increased, we had the same budget we had 20 years ago and fewer people than we had 20 years ago in a much bigger and more complex economy.
My short answer would be that, for a variety of reasons, and not just the federal government, at all levels of government, competition has been allowed to atrophy in this country for a long time, and now we are paying the price and Canadians are angry about it.
Senator Loffreda: Will this bill correct the situation? I’m curious. You’ve been in the industry for so long. We’ve had both Conservative and Liberal governments. Why has it lasted so long? Is it repairable?
Mr. Boswell: I think it’s repairable.
To go back to the first part of your question, Bill C-56 is a significant, positive step in the right direction. The Fall Economic Statement and the implementation bill contain further positive steps. In our assessment at the Competition Bureau, it’s not just the act. Fixing the act is important, but we as a country — the leaders of this country such as all of you — need to say that we need a whole-of-government approach at all levels of government in this country to attack the competition problem. That will help with productivity, with GDP growth and with having all the benefits that consumers experience when competition is thriving in an economy.
I’ll be really quick. I know I’m making long-winded answers, but Australia did this in the 1990s. They had a productivity commission that increased their GDP by 2.5% by attacking competition problems throughout their economy. The result was an increase of about AUS $5,000 to AUS $7,000 per household. The United States is doing it as we speak. President Biden had an executive order two years ago for a whole-of-government approach to addressing the competition problem in the U.S. economy and has been making great strides. He continues to push. He has a competition council in the White House. All the key secretaries of cabinet are there and they work on it all the time. The Competition Bureau has been advocating for this. We need that kind of effort in this country. It’s very important. This bill is a good start but there is more work to do.
Senator Loffreda: It’s great to hear that. Thank you.
Are there any other national standards that we’re not adopting that you would bring into Canada? With your vast global experience, would you say, “This is something we should bring here, into Canada. It’s helped other countries thrive economically?”
Mr. Boswell: Absolutely some of the changes to the law, including what Mr. Bester pointed out, namely, structural presumptions on mergers. In Australia right now, they’re having an active debate about changing their law to what they call a satisfaction test. That is where the onus is on the merging parties to satisfy the competition enforcer, or the courts, that their merger will not harm competition. That’s the kind of mindset that we’re seeing around the world.
The vast majority of mergers that we review at the bureau are not problematic. In fact, they’re beneficial, and we wave them through in five or seven days after looking at them quickly. It’s the problematic 5% or 10% of mergers that seriously harm the Canadian economy. Once that structural harm has taken place, it lasts for years, decades and longer.
Senator Loffreda: Thank you.
[Translation]
Senator Dagenais: Mr. Boswell, you’ve been investigating bread price fixing by the big grocery retailers for over six years now. This story is 15 years old and goes back to 2007. After spending so many years on a fruitless investigation, do you believe you still have any credibility in the eyes of Canadian consumers?
Can you tell us what part of the bill will allow you to speed up your investigations in future? On the bread issue, what slowed the process in the price fixing case?
Mr. Boswell: Thank you for the question.
[English]
You are correct that our bread price fixing criminal investigation is ongoing. You will recall, though, that, in the summer, one of the parties, Canada Bread, pled guilty to four counts of a criminal price-fixing conspiracy in 2007 and 2011. They paid a $50 million fine, the highest fine in Canadian history for price fixing. Obviously, that was as a result of our investigation. Before that, Loblaws and Weston came into the bureau for immunity and exposed the alleged conspiracy. We have been investigating. It’s a large, complex investigation. Obviously, it’s a top priority at the bureau.
In 2017, 2018 and 2019 combined, we executed 17 different search warrants against nine companies, and we continue to work on what we call a referral to the Public Prosecution Service of Canada. We are the investigators and they are the prosecutors. Our referrals are under the criminal standard where we have to provide them with a case that they can take to court and prove beyond a reasonable doubt. It’s a significant endeavour. I understand that people are concerned that we’re still investigating, but it’s a large, complex investigation. We did have a positive step forward last summer with the $50 million fine and guilty plea by Canada Bread.
[Translation]
Senator Dagenais: Thank you, Mr. Boswell.
[English]
Senator Galvez: My first question is to the Competition Bureau. I read your report on competition in Canada’s grocery industry. The conclusion is clear: Canada’s grocery industry is concentrated. I cannot make out why you took so long to produce this report because you could have done it a long time ago. You spoke about all these mergers that have been concentrated in a few companies from 1986 to 2021.
You said that this bill is a good step, but you had four recommendations. Your first one is grocery innovation as a strategy. Is this in the bill? No. Second, encourage the growth of independent grocers. Is this in the bill? No. Third, you want to harmonize the unit prices requirement. You’re saying that it takes 20 years to do the one for bread, so that’s a no. Fourth, you’re now saying that limiting property controls is a provincial thing.
On the one hand, you’re telling us that it’s bad in Canada and it’s been bad for decades. At the same time, however, I see some inertia in your bureau. Can you explain what is first, the egg or the chicken?
Mr. Boswell: Thank you for the question.
At the Competition Bureau, our role is to enforce the Competition Act and to promote competition. In terms of promoting competition, we engaged in this grocery market study to understand some of the elements of retail grocery in Canada and why there were problems. At the end of that, we then provide recommendations to all levels of government on how they can assist in fixing the problem.
As you say, an innovation strategy to encourage different types of grocers to come into the marketplace, for example, more online grocers, is not something the bureau can control. That would be a government policy, whether it’s federal, provincial or territorial.
Harmonized unit pricing is also something that’s not within the bureau’s control. In fact, it’s not something within the federal government’s control. That’s a provincial jurisdiction. The provinces could say to the grocery stores, “Here is what you have to do. You have to put a little sign underneath” — and some stores already have it. It’s mandated already in Quebec where it states the price per 100 millilitres, and it’s the same. When we say “harmonize,” we mean all the provinces work together so that’s the experience of all consumers across the country. The bureau can’t do that.
We also say that governments should consider removing restrictive covenants or the ability to have restrictive covenants, as I was speaking about with the other senator. The bureau can’t do that. Provincial legislatures have to amend their real estate laws to prohibit those types of anticompetitive, restrictive covenants in malls across their province.
Senator Galvez: In terms of the small steps that we’re taking in this bill, will they result in a reduction of prices in December and January?
Mr. Boswell: No, likely not. It is improving the competitive environment and the ability for the bureau to meaningfully enforce the act in certain ways. The changes to the abuse of dominance provision, which are changes to section 79 of the Competition Act, will make it more in line with other laws around the world and will give the power to the bureau to go after large companies behaving badly to harm competition in Canada. That’s a very positive step forward. When laws are strong, the players in the marketplace modify their behaviour because they know that the enforcer has the tools necessary to come after them. So no, I’m not going to sit here and say that Bill C-56 will dramatically change the price of groceries before the holidays or before the new year, but it’s a very important step for competition in Canada, and that’s why we see it as positive.
Senator Galvez: Mr. Holmes, in clause 7.1, there is a (k) that has been added, “directly or indirectly imposing excessive and unfair selling prices.” I’m hearing that that can cause problems because you cannot make prices low, for example, during Christmas or for whatever moment of the year it is when prices decrease. How do you interpret this? Should it remain or be removed?
Mr. Holmes: Our position is we’d like to see that newly introduced text removed. Higher prices, along with lower output, are already embedded in competition law as an effect that can be ordered as evidence that the challenged merger or conduct violates the Competition Act. In our opinion, enforcement of such a provision would turn the Competition Bureau into a price regulator, as I mentioned earlier, a responsibility that it has clearly not sought and one that might require a different set of skills and the establishment of new regulatory units, both within the bureau and the tribunal.
Senator Galvez: Can you provide a concrete example?
Mr. Holmes: The language clearly states excessive and unfair pricing. Who determines that, and how? In what context within the marketplace?
An exorbitantly excessive price can be a clear signal or a clear effect of a non-competitive marketplace — we’re not debating that at all — but it may not be the actor themselves responsible for that situation in that context. In the U.S. standard, we have a demonstration of dominance and any competitive effect. There has to be both the intent and the effect for consumers. In Bill C-56, we’re removing effect, in essence.
Senator Galvez: Thank you.
Senator Ross: My question is for Mr. Holmes. Yesterday, when we had a technical briefing, we heard from officials that there was a robust consultation that began a year ago, during which many issues were covered. What I’m hearing from you is that, although there was consultation and that the Canadian chamber and other business organizations participated, you felt that you would have liked to have had more input on the specifics of this amendment or this bill. If you had to say the top two things that you would have done differently or that the Canadian chamber would like to see changed or different from how it has been presented, what would those be?
Mr. Holmes: Thank you for the question, senator.
There was a robust consultation and — again, I spoke to this earlier — we supported that, we participated in that and we were happy to see a transparent document that included a “what we heard.” It was published the day before the new legislation was introduced, which again, is just piecemeal legislation. We’re seeing this incrementalism approach, often at the last minute or as part of an omnibus bill. We are concerned by the process because if we are to have a true overhaul or renewal of our competition law in Canada, then let’s be bold and let’s do that. Let’s not chip away at it in this incremental way that is ineffectual and doesn’t give businesses, consumers and policy-makers a clear vision of what we’re actually moving towards. That’s really the genesis of the concern here. In terms the particulars, we have a whole host of things that we’d like to change.
In terms of the restrictive covenants that were discussed for grocery stores, if that’s the target, then have we fully explored our powers as a federal government to make that particular? Other jurisdictions are very targeted in how they approach this issue within the grocery sector, so why are we doing something that is so blanket in its approach that it will affect all kinds of other businesses? The extent, intent or impact of that we haven’t actually analyzed. That’s one piece.
There is the growth in the administrative monetary penalties, the AMPs. These are now doubling, increasing up to $35 million. They were just increased in Budget 2022. What is the purpose behind the continuous increase? What is the problem we’re solving here? That hasn’t been clearly communicated to us.
On the market study powers, which we’ve heard some discussion on, we are pleased to see some of the changes coming out of the house that were introduced with the commissioner’s suggestions. I think there are positives there in that they provide some due process and guidelines. We’d like to see those furthered and developed for industry so that there is a clear sense of due process in how these market studies will be conducted.
We have other concerns about being politicized. I have many members in many sectors who are silent on this because they feel that that it is being politicized. They feel that there is a whole group of sectors that are routinely brought before parliamentarians and admonished. They’re put in the public lens, and perhaps that’s for good reason, perhaps it’s not, but it’s easily politicized. It’s an environment that can become quite toxic towards businesses, and our concern is that we don’t know how this information may be used, shared or provided in a public way in the future.
We have also seen a tendency of looking for proprietary information, trade secrets and contractual evidence being brought before house committees and in other situations, which makes a lot of the business community feel like they can’t do business with the Government of Canada. This is an ongoing pattern that we’re seeing. As there are these new powers for market studies, the compelling of information and the release of that information, how will that be monitored? By whom? What are the parameters? What are the rules? What are the standards we set for the access to propriety information that may be misused by other competitors in the future?
The Chair: We will now turn to Senator Forest, the sponsor of the bill.
[Translation]
Senator Forest: I’d like to thank you for accepting our invitation on such short notice and I’d also like to thank my colleagues for their interesting questions.
I have a few questions of my own. Mr. Boswell, in terms of the bill’s passage, there are all sorts of regulations that will follow, to implement the legislation’s various provisions. How long would that take, in your estimation? Do you think there will be any consultations leading up to the drafting of these regulations?
Mr. Boswell: Thank you for the question.
[English]
In terms of how the bureau would react if the bill were passed into law, we have a long-standing tradition that we’re very much committed to wherein we provide draft guidance to the stakeholders of the Competition Bureau, whether that’s the Canadian Bar Association, businesses or anyone who is interested in how we’re going to go about enforcing the act with the amendments of Bill C-56. We would do that in short order. If the bill were passed soon, we would have draft guidance out within a month, and then we would hear back from anyone who wanted to provide us their views on what we say in terms of our guidance. Then we put it out there. We have done that over and over again with every section of the act that we enforce. There wouldn’t be necessarily regulations required, but there would be very clear and transparent guidance to the business and legal community and to all Canadians who were interested in how we are going to enforce the changes in Bill C-56.
[Translation]
Senator Forest: So you’re confirming that there will be a consultation period in the development of this guidance.
[English]
Mr. Boswell: Absolutely. We do that on any sort of enforcement guidance that we put out. In fact, we have draft enforcement guidance out right now where we are seeking guidance from the business and legal community and Canadians across the country.
[Translation]
Senator Forest: Mr. Boswell, if my interpretation of the spirit and the letter of the bill is correct, the minister can ask you to launch an inquiry, but it can’t require you to do so. Is my interpretation correct?
[English]
Mr. Boswell: The language of the law is that the minister may direct me to engage in a market inquiry, but he also must consult with me as to whether it is feasible, including factors such as costs. There would be a dialogue, in my view, on that. I can tell you — certainly speaking for myself, maybe not speaking for future commissioners — that the dialogue would also involve whether it was a good idea to do a market inquiry that the minister was suggesting.
When we do market inquiries, which we have done for years, we haven’t had the powers to go to court. It is important to point out that we have to go to court and get a court order to compel information. That is clearly set out in the act. I’m not really sure what Mr. Holmes was concerned about.
There would be a dialogue in terms of whether that’s the right sector to conduct a market inquiry in. The Competition Bureau is made up of tremendous expertise on competition and is always acting in the public interest when it is assessing where it is best to do a market inquiry or where it is most beneficial for Canadians.
[Translation]
Senator Forest: I have a few questions for Mr. Bester. You talked about transparency. You stated that there was a kind of black box. In your view, will Bill C-56 improve transparency around the Competition Bureau and its activities?
[English]
Mr. Bester: Thank you for the question.
This bill does not speak to the transparency aspect of it. That is something that is missing and is missing from Bill C-59 and which might be considered in the future. Again, the bureau, within its current scope, has done more to be clear in communicating with Canadians, but again, how do we reassure people that they know that the enforcer is working on important issues? That is a task for a future piece of legislation.
[Translation]
Senator Forest: I think we’re all in agreement: The last iteration is 37 years old, so our competition legislation is obsolete. The purpose of Bill C-56 is to update the act and bring it in line with that of peer countries.
In your opinion, are the industry’s concerns about the bill being incredibly harmful to business attractiveness and competition in Canada warranted, or is it more of a misinterpretation and lack of consultation and information?
[English]
Mr. Bester: Thank you for the question.
The amendments, particularly the abuse of dominance, are refocusing around we want a law that prevents dominant corporations from behaving in an anticompetitive fashion. This goes along with Mr. Boswell’s line about taking competition more seriously. For many years, we’ve had a law that said competition is nice but we can trade it off for different things that may also be beneficial. What these amendments, which I think is most important — looking at international peers, and I think about a country like Germany which has really strengthened its abuse of dominance and said that specific activities are problematic and we should take a stronger approach to those — are in line with that kind of approach and, again, really valuing competition.
The Chair: For second round, I will need your undivided support, senators, with one question or two short questions to the witnesses. Witnesses, please answer within a 30 second time frame for your answer.
Senator Marshall: Mr. Hatfield, did you participate in the open, public consultation? Answer that question first. Yes or no?
Mr. Hatfield: Yes, we did.
Senator Marshall: You did. Did you see any of the suggestions that you made during the public consultation in this Bill C-56? Was there something that you said during the consultations that did not make it to the bill but you would have liked to have seen in the bill?
Mr. Hatfield: This is all part and parcel of a healthy process. Bill C-56 is a tremendous start. Bill C-59 has other ideas that we also need to see incorporated. There was a back and forth, what is provincial and what is federal. All levels need to be contributing. This is the most important thing as a baseline floor to get us started, passing Bill C-56.
Senator Marshall: That is my time. Thank you.
[Translation]
Senator Gignac: I’d like to get back to it. There is something being added to section 78, namely the notion of directly or indirectly imposing excessive and unfair selling prices.
My question is for Mr. Boswell. Let’s take a concrete example: the pharmaceutical industry. You have a choice between the brand-name medication and the generic medication.. We could claim that the price of brand-name drugs is excessive, but is it really necessary to include it in the act? There’s a distinction to be made between excessive prices and lack of competition.
What’s more, there are agreements with the provinces by which pharmaceutical companies are placed in certain locations because they do research. What is the scientific basis of your claim that the price will be excessive? Isn’t there a risk of unintended consequences?
I’d also like to hear Mr. Holmes’ reaction, briefly.
[English]
Mr. Boswell: In terms of pharma prices, the Patented Medicine Prices Review Board provides very clear safety for Canadians in terms of excessive pricing there.
What I do want to point out, and this was said by Minister Champagne, is that section 78(1)(k) has to be connected with the beginning of section 78, which is that excessive and unfair pricing would be an anticompetitive act only when it is intended to have a predatory, exclusionary or disciplinary negative effect on a competitor or to have an adverse effect on competition. It is very circumscribed.
Once again, I respectfully don’t agree with Mr. Holmes saying that it is a terrible risk that is going to make us price regulators. It is not going to make the Competition Bureau price regulators. We do not want to be price regulators, and this is not going to do that.
Senator Gignac: Thank you.
Mr. Holmes, in 30 seconds, do you agree or disagree with what has been mentioned?
Mr. Holmes: In a properly competitive market, I would note that an excessive price would drive a customer to an alternative. We see an excessive price as an effect or as a symbol of a non‑competitive market, not necessarily as a bad actor.
Senator Smith: Mr. Holmes, Bill C-56 would remove the efficiencies defence, meaning that even if market players could prove a merger would result in efficiencies for the economy greater than and offset any potential anticompetitive effects, it still may not be sufficient to pass. Why would the government remove this from the Competition Act, other than to try and simply punish certain actors who are in the public eye? What is a broader, more complete argument for this change?
Mr. Holmes: Thank you for the question.
I can’t speak to the intent fully behind the drafters of the legislation, but I do recognize that we are one of the only, if not the only, jurisdictions with an efficiencies defence still in place. Where we see some benefit is that there are instances in which an efficiency can have economic benefits. Mergers can create those efficiencies that enhance the broader competitive marketplace, such as jobs, investment and innovation and economic growth. It is difficult to prove. It is difficult to show that.
We see, in Canada, a very pronounced and long-term decline in productivity. What we heard from Commissioner Boswell earlier — and coming out of the report that was done and released in October — was concern around whether that is a non‑competitive marketplace that is behind that. When I look at those numbers, what I see is an incredible disincentive and barrier for new entrants to the Canadian marketplace. We are not fostering and growing an economy here and creating new entrants who scale up and create those challengers for our domestic industry. That is a big part of our problem in Canada. We are not innovators right now. We are not productive. We are not fostering new growth.
I do not think that it is a bunch of evil magnates who are hiding in dark rooms and keeping everybody down from starting new businesses. There is a deep and profound inclination here to overregulate. We have many jurisdictional issues as well, which have been acknowledged. There are a number of other issues between our internal trade and the ways in which businesses can contribute in a meaningful way to Canada.
[Translation]
Senator Carignan: My question is for Mr. Holmes and deals with the goods and services tax, or GST, credit.
I think that’s an interesting proposition, because there are projects going forward and construction is moving along. That said, when we speak to people in real estate, it seems that construction is stalled for other reasons, mainly the fact that the banks are running stress tests. Indeed, they’re extremely reluctant to loan any money and they’re setting extremely high condo pre-sale levels or rental levels, and then developers can’t see their projects through.
I was speaking to a representative today who was telling me that his building was 90% sold but that the bank only wanted to lend him money for 60%, so he had to turn to mezzanine. Given the profitability ratio and the cost assessments, people are risk‑averse and projects just can’t get off the ground.
My point is this: The GST rebate may be a good idea, but people can’t take advantage of it if projects can’t get off the ground. Is that something you’re hearing among your members?
Mr. Holmes: Thank you for the question, senator.
[English]
We have a housing council that has just formed, the Housing and Development Strategy Council within the Canadian Chamber of Commerce. This is an issue that they have been looking at.
I would say that Bill C-56 is a beginning. This is a national crisis, as we all know well. There is a lot more work to be done to ensure that the fundamentals of building houses and homes in Canada is possible and encouraged and fostered. It is a very virtuous economy that we can bring skilled labour to, and we can develop and build these houses and create these homes.
The GST credit within Bill C-56, as I spoke to earlier, is a positive. We see that — and we have heard from our members — as having an immediate effect on new builds. We would love to see that expanded, with a couple of small tweaks to the language, to current builds that were under way at the time of the legislation being introduced.
Looking forward, we could also see the government do what other jurisdictions have done, which is establish a GST rollover program for current projects under construction that incentivizes entities to reinvest the equivalent GST amount into additional rental housing. It creates a virtuous, ongoing program.
There are a number of new models that we can look at. I would hope that this is only the beginning.
[Translation]
Senator Dagenais: I’ll stay with Mr. Boswell.
Mr. Boswell, how many major inquiries are you and your team able to carry out at the same time? And how many of them, obviously, can lead to a report within a reasonable timeframe?
Has the government made any promises to you in terms of increased budget or staff?
[English]
Mr. Boswell: Just to clarify, do you mean how many market study inquiries we can do? We have all sorts of other inquiries that are investigations into various aspects of the law.
[Translation]
Senator Dagenais: Studies in the same type of market.
[English]
Mr. Boswell: That is a very good question.
We have to manage our resources in terms of how many market studies we can do. We usually only do one at a time because the bulk of our work is enforcing the law. We have four different areas of the law that we have to enforce and, at any given time, we have 100-plus investigations going on across the organization. We generally do one market study at a time. The last one we did was the Retail Grocery Market Study. We would probably continue along that pattern because we realize that the main thrust of our work is to be out there enforcing the law across the country to the best of our ability, but these market studies do add great value to legislators or policy-makers across the country when we have done them.
[Translation]
Senator Dagenais: Do you have a bit more staff since your workload has gone up?
[English]
Mr. Boswell: As I said earlier, we did receive a budget increase in 2021, and we had not had a budget increase in over 10 years and, in fact, we had fewer people than 20 years before. We are putting that budget increase to work across the organization, including in Mr. Durocher’s branch, the Competition Promotion Branch, which drives the market studies. We will evaluate it as we go forward, but it would not be a situation where all we would be doing is market studies and we would just stop enforcing the law. Our main focus is always on enforcing the law to protect competition and consumers.
Senator Pate: I feel the need to ask a question of you, Ms. Pratt, seeing as you have not had an opportunity to speak at all, although if you want to pass it to someone else, I will leave that to you.
Statistics Canada data indicates that one in five people in Canada is now food insecure, with those who are below the poverty line, children, single moms, Indigenous and racialized people over-representative among those who are food insecure. Is there any data you could share regarding how Bill C-56’s competition measures are expected to affect food insecurity?
Jeanne Pratt, Senior Deputy Commissioner, Mergers and Monopolistic Practices Branch, Competition Bureau Canada: As we have said, it is not going to bring prices down right away. It will allow us to have stronger laws to deal with not just grocery retail but the entire pipeline. We look at all of the inputs into food, from seed and fertilizer all through the supply chain. Having stronger merger laws will allow us to address the entire chain if there are anticompetitive mergers.
Regarding a direct line to food insecurity, I cannot give you any statistics to say that we will be a magic bullet to help that issue.
Senator Pate: Thank you.
Senator Galvez: Recently, you were asked about RBC buying HSBC. You put out there that you agreed with the merger, which seemed to be against competition. When I looked at all the suite of mergers on groceries, I did not see any opposition. This started in 1986. You did your study in 2021. There were many occasions for you to say that you were opposed to those mergers. When do you give your opinion and when do you not?
Mr. Boswell: That is a very good question. I will brief, because I know we are running low on time.
Regarding the RBC-HSBC merger, when there is a banking merger proposed, it is under the Minister of Finance to make a decision with respect to that. My job as Commissioner of Competition is to provide a report to the Minister of Finance after we thoroughly examine the merger. It is important to say we didn’t agree to the merger. We provided a report that said the merger was not going to result in a substantial lessening of competition, which is the test we have to apply. That is the test we work with all day long. We are creatures of the law; we have to follow the law. We provided that report, but we also highlighted some areas of concern in the banking sector, generally, that the minister might want to take into consideration when assessing the RBC-HSBC merger; that is, it is already highly concentrated, there are high barriers to entry, there could be coordinated activity and other things like that. That is our job. We provided the report, and now then it was up to the Minister of Finance.
In terms of grocery mergers, we have in fact intervened over the years on those mergers to demand that grocery stores in various local markets have been sold. We did that in Sobey’s acquisition of Safeway in Western Canada. We required something like 30 different stores across Western Canada to be sold. They were sold to independent grocers, which enhanced independent grocers in the West. It was the same situation when Loblaws bought Provigo in Quebec: We required divestitures. We also required divestiture of the brand “Loeb.” It is the same situation when Loblaws bought Shoppers Drug Mart. We required them to sell a number of stores and pharmacies.
When we are doing that work, we are constrained by the law. We can only do what is within the rules of the Competition Act. That is why we want the rules to be stronger on mergers. Mergers are the first line of defence in Canada. We do our job. We have to follow the law, but we need stronger laws.
Senator Loffreda: There is far more Canadian investment by Canadian entrepreneurs and Canadians outside of Canada than there is within Canada, by Canadians and by foreigners. If we look at those numbers, the deficit is huge. Would this bill bring us closer to closing that gap — more investment by foreigners and also investment by Canadians, domestic investment?
Mr. Boswell: Bill C-56 will enhance and improve the Competition Act. It will improve our powers to enforce against abuse of dominance. It will improve our ability to say “no” to anticompetitive and harmful mergers that result in increasing concentration in the economy.
Once again, it is not going to happen overnight, but by virtue of those two things, we can assist, through our enforcement work, in making the economy more competitive and more contestable where more small- and medium-sized enterprises can actually try to get in and not have to worry about being the subject of abuse of dominance by a big firm.
The more we make the economy competitive, so healthy and fair competition throughout the economy, the more likelihood that Canadians are going to invest in the idea of building or expanding a company within Canada when they do not have to constantly deal with high levels of concentration and big companies behaving badly. That is my theory.
Senator Loffreda: It is a good theory. I tend to agree with it. Thank you.
Senator Ross: This question is for Mr. Boswell. With regard to the restrictive covenants on leases and the way they might have an impact for the very smallest of businesses that might have found them to be an inducement to sign a lease, knowing that they could have an opportunity to grow their business in an environment where they were not competing against the big box stores or what have you, what would be the timeline for implementing something like that? How would we deal with contractual obligations of a lease? Would they just be cancelled? I am not sure how that would work. Help me to understand that.
Mr. Boswell: Yes, thank you.
As I was talking about earlier, it is a two-pronged issue. There is the inclusion of this section in the Competition Act, which will not come into force for a year, and we would provide guidance about how we are going to enforce this section, including whether we will exercise enforcement discretion on some of these issues. With the agreements, we would still have to prove they prevent or lessen competition in the market. We would be very mindful of that in terms of when we are enforcing this new provision with respect to restrictive covenants. The other side is what provincial governments might do. As we suggested in our grocery market study, they should consider, perhaps, limiting restrictive covenants for the large grocers to keep out the independents, but not the other way around, to allow for that competition.
It is easy to imagine a smallish town with public transit that only goes to one mall. Imagine a big grocer going into that mall and entering into a restrictive covenant so that nobody else can go into that mall, and that is the only one you can get to by public transit. Those people who are perhaps more vulnerable and require public transit are locked into going to only that grocery store. You can see how not only is it harmful to competition, but it is unfair. It is something we think should be addressed.
Senator C. Deacon: Thank you, chair, for allowing me the honour to ask a question at this committee.
Commissioner Boswell, there was a sense of legal ambiguity that was raised, stemming from a question that I asked of the minister, which is the repealing of the efficiencies defence. Does it leave any legal ambiguity in your enforcement of the law as it relates to looking for pro-competitive efficiencies in a merger review? My sense is that it does not, but I am not the enforcer or a lawyer, and my opinion does not matter, so I would really like yours. Thank you, sir.
Mr. Boswell: Your sense is exactly correct, sir, that the pro‑competitive efficiencies of a merger could absolutely be considered in the framework of considering whether the merger substantially lessens or prevents competition. There is a line, section 93(h), that allows the tribunal and, of course, the bureau, to consider any other factor that is relevant to competition in a market that is or would be affected by the merger or proposed merger. All our colleagues around the world look at efficiencies in their merger reviews in the sense of whether there are efficiencies that will be pro-competitive or that will enhance rivalry. Yes, we would absolutely look at that, and if they were there, then maybe the merger could go ahead. But right now, they can outweigh anticompetitive effects. They can harm Canadians.
Senator C. Deacon: You see no difficulty and no lack of the clarity.
Mr. Boswell: None whatsoever.
The Chair: Before we suspend, honourable senators, as chair, on behalf of the Finance Committee and all the members around the table, I would like to say something to the witnesses.
[Translation]
Thank you very much. You’ve done exceptional work. You gave us a lot of information.
[English]
As chair, I would also like to recognize the presence of Senator Dalphond and Senator Deacon, who are non-members of the committee but who have been here in the meeting to study Bill C-56. Senator Ross, well, it’s your second time, so again, thank you.
That said, I will say to the witnesses that we have a common denominator. Finance and budget are about transparency, accountability, predictability and reliability. You’ve shown you were very informative on Bill C-56.
Before we suspend, senators, I would like to ask the deputy chair of the committee, Senator Forest, who is also the sponsor, if he has closing remarks.
[Translation]
Senator Forest: I’d like to thank the witnesses, my colleagues, all of the staff. They were able to manage the situation so quickly that the clerk and our analysts managed to convene the meeting. We’re currently making a lot of progress on a lot of Canada’s major issues. When we look at food bank use, the number of homeless people, when we know that a balanced market should have a vacancy rate of 3% — I’m thinking in particular of a town like mine, Rimouski, where the vacancy rate is 0.008%. There is no vacancy, so these are major issues. Thank you.
We’ll get there by joining forces and working together. You’ve just taken the first step in that direction today. Thank you so much.
[English]
The Chair: Honourable senators, we will suspend for two minutes and then continue in camera immediately after.
(The committee continued in camera.)