On December 9, 2014, Bill C-49, the Price Transparency Act, received first reading in the House of Commons. It proposes to amend the Competition Act in two respects. First, it proposes price transparency measures, pursuant to which the Commissioner of Competition is (i) authorized to conduct inquiries to determine why a product or class of product has a higher selling price in Canada than in the United States; and (ii) required to report on his findings. Second, it proposes a number of technical amendments to the Competition Act. As we explain below, the bill proposes considerably less in relation to pricing than had been promised in the February 11, 2014 budget plan, and proposes significant technical amendments to the Competition Act that were not discussed in the budget plan and for the most part have nothing to do with pricing.
Price Transparency Amendment
As we reported in our April 23, 2014 blog, Proposed Amendment to the Competition Act Respecting Unjustified Cross-Border Price Discrimination, in its 2014 budget plan, The Road to Balance: Creating Jobs and Opportunities, released on February 11, 2014, the federal government announced that it intended to introduce legislation “to prohibit unjustified cross-border price discrimination to reduce the gap between consumer prices in Canada and the United States”. Bill C-49 proposes nothing of the sort. Rather than prohibiting cross-border price discrimination, the bill proposes to find and expose unjustified Canada vs. United States price discrimination in the hope that such exposure will result in its elimination. Moreover, while the budget plan sought to prohibit what it referred to as “country pricing strategies – that is when companies use their market power to charge higher prices in Canada that are not reflective of legitimate higher costs…”, the bill makes no reference whatsoever to an abuse of market power.
Specifically, the bill proposes to authorize the Commissioner to conduct inquiries to determine the reasons why a product/service or class of product/service has a higher selling price in Canada than in the United States and requires the Commissioner to make public reports on completed inquiries. Note that the Commissioner “may” initiate an inquiry whenever he has “reason to believe” there is cross-border price discrimination. That said, given the limited resources at the Commissioner’s disposal and the likely complexity of any inquiry, the Commissioner is likely to be selective as to the circumstances in which he will initiate an inquiry. Note that private parties may not compel the Commissioner to initiate an inquiry, although a private party interested in triggering such an inquiry presumably may encourage such an inquiry by providing compelling evidence of apparently unjustified cross-border price discrimination to the Commissioner.
While there are many reasons to be skeptical with respect to both the stated objective of the price transparency provisions of the bill and their likely effectiveness in achieving such objective, the Government should be congratulated for abandoning its previous plan to regulate prices. Importantly, the bill requires the price transparency amendments to be reviewed within five years after they come into force.
Technical Amendments
As noted above, the bill also proposes a number of important technical amendments to the Competition Act. Specifically, the bill proposes to amend the Competition Act to:
- expand the concept of affiliation and, as a result, the exemptions for agreements, arrangements and other conduct among affiliates in various provisions of the Competition Act, including those pertaining to conspiracy, bid rigging, price maintenance, tied selling, market restriction, exclusive dealing and competitor collaborations. The expanded affiliate definition also broadens the assets and revenues that will be counted in determining whether a transaction is subject to mandatory pre-merger notification;
- expand the concept of “person” and introduce the concept of “equity interest” to broaden the reach of (but also certain of the exemptions from) the pre-merger notification provisions; and
- broaden the persons in respect of which records and information returns may be required to be produced pursuant to section 11 orders (subpoenas). This should help support cross-border price discrimination inquiries although its enforceability may be an issue.