Canadian COMPETITION LAW

March 13, 2013

Earlier today, the C.D. Howe Institute published a new report on the Canadian dairy industry, dairy regulation and competition entitled: Putting the Market Back in Dairy Marketing.  This new report, authored by Colin Busby and Daniel Schwanen, makes recommendations for reform of Canada’s dairy supply management system.  Abstract:

“Canada’s controversial but politically untouchable dairy supply management system can be reformed, while addressing the concerns of wary politicians, consumers tired of overpaying for milk and cheese, and farmers worried about their future. In ‘Putting the Market Back in Dairy Marketing,’ authors Colin Busby and Daniel Schwanen call for better representation of consumer interests in milk marketing decisions, a cap on milk prices, and steps to measure efficiency and open new markets for dairy farmers.”

The overall conclusion of this new report is that achieving the Canadian Dairy Commission’s legislated objectives requires fewer constraints on the production and trade of milk and dairy products, which the authors argue impose significant and unnecessary costs on Canadian consumers (and also raise potential longer-term viability issues for the industry).

Based on this conclusion, the report makes the following recommendations: (i) changing the membership of the CDC board of directors to ensure consumer and industrial users’ interests are represented in decision-making, consistent with the regulatory set-up in many other industries; (ii) capping prices for milk set by the CDC, until a reasonable benchmark is reached for an “efficient farm,” using national and international comparisons; and (iii) restoring to the federal government the powers over export and interprovincial trade that it delegated to the provinces so that interprovincial trade can expand, and efficient farmers who wish to operate entirely outside of the quota system may export outside of Canada.

This report comes also as the Canadian Competition Bureau appears to also be renewing its interest in advocacy in regulated sectors (i.e., areas in which the Bureau may not have direct enforcement powers).

For example, in one recent speech by the Interim Commissioner of Competition John Pecman, the Interim Commissioner confirmed that the Bureau is interested in “incrementally increasing” its competition advocacy efforts (in addition to enforcement) in key industries including the digital economy and retail and health sectors.  The Interim Commissioner also set out the following four factors the Bureau would consider in deciding whether to initiate regulatory interventions in particular sectors: (i) whether a forum exists and there is a high level of public interest, (ii) whether the Bureau would be contributing in a useful way (e.g., bringing forward unique arguments), (iii) being able to gauge the impact of advocacy efforts, and (iv) clear, tangible benefits for Canadians.

De-regulation, and increased clarity on competition law safe harbours from enforcement, such as the “regulated conduct defence”, have also been topics of increased recent debate and other reports – for example, the C.D. Howe’s November 2012 report: Closing the Back Door Route to Cartels: The Need to Clarify the Regulated Conduct Doctrine.

For a copy of this new C.D. Howe report on the dairy industry see: Putting the Market Back in Dairy Marketing.

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