Parliament proposes bill to tackle geographic price discrimination

Megan MacDonald and Erica Lindberg

On December 9, 2014, the Government of Canada introduced legislation aimed at addressing geographic price discrimination, specifically in the form of the much-discussed “U.S.-Canada price gap”. If passed, Bill C-49, titled the Price Transparency Act, will amend Canada’s Competition Act (the Act) to give the Commissioner of Competition the power to make inquiries into complaints that the selling price of a product or class of products (or of a similar product or class of similar products) is, or was, higher in Canada than in the United States.

What You Should Know about Bill C-49

  • Scope of the Proposed Investigative Power: When making an inquiry into potentially discriminatory pricing practices, the Commissioner will be empowered to make ex parte applications to obtain court orders compelling a person to (a) attend and be examined under oath or affirmation; (b) produce specified records, copies of records, or any other thing; or (c) deliver a written return showing in detail the information specified in the order. The amendments to the Act will permit such orders to be made even where the person who is the subject of an order is located outside Canada. 
  • Purpose of the Proposed Investigative Power: The proposed power to make inquiries into alleged discriminatory pricing will permit the Commissioner to determine the facts underlying a complaint, including the extent of an alleged price difference and the reasons for that difference.
  • The Commissioner’s Public Reporting Obligation: The Commissioner will be required to prepare a report detailing the conclusions of any inquiry into price discrimination, and to make the report available to the public.
  • Timing of the Commissioner’s Report: The Commissioner must take all reasonable steps to have his report available within one year of the day on which information considered sufficient for the inquiry is received.
  • No Remedies or Mechanism to Contest: As currently drafted, Bill C-49 does not provide the Commissioner with the power to impose any remedies (such as fines) if price discrimination is found. Nor, however, does the bill provide any mechanism allowing a party to contest an accusation or unfavourable report, or offer guidance as to the degree of price differential that must exist in order for the Commissioner to take action.
  • Five-Year Review: Bill C-49 stipulates that the proposed amendments are to be reviewed within five years after the day on which they come into force.

History and Implementation of Bill C-49

The proposed legislation realizes various government commitments to take action against the so-called “price gouging” of Canadians allegedly arising from unjustified cross-border price discrimination. The Senate Finance Committee began studying price differences between Canada and the United States in October 2011, releasing a report in February 2013 shedding light on why large price gaps exist between the two countries, even when the Canadian dollar is at or above par. The report, which stressed the complexity of the issue, made four recommendations to narrow price gaps, including a comprehensive government review of Canadian tariffs. The proposed Price Transparency Act goes beyond the scope of the report’s recommendations, introducing a new investigatory and reporting tool within the existing Canadian competition law regime.

Bill C-49, which the Minister of Industry has stressed will not set or regulate pricing in Canada, has the support of the Retail Council of Canada and several large consumer groups. When questioned regarding the costs of implementing the new measures, the Minister of Industry suggested that the Bureau will be able to conduct price gap inquiries with the resources currently at its disposal. Given the complexity of the task the Competition Bureau will face in establishing the reasons for any difference in price between the United States and Canada, however, the costs of an inquiry, both for the Bureau and for persons compelled to provide information, could be high.

While the government has proclaimed that the proposed legislative amendments will exert downward pressure on prices and influence business behaviour, cross-border pricing will continue to be influenced by a variety of other factors including tariffs, taxes, distribution costs, regulatory barriers, and exchange rates. With no power to impose remedies where discriminatory pricing is found, but significant power to compel information from targeted companies and other related industry participants, within both Canada and the United States, it remains to be seen what impact the Bureau’s new investigatory and reporting tools will have on cross-border pricing and whether the proposed “naming and shaming” power will be worth the overall cost.

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