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December 9, 2014

Earlier today, Canada’s Minister of Industry James Moore announced that the Federal Government had tabled a new bill (the Price Transparency Act (Bill C-49)) in Parliament for first reading, which would amend the federal Competition Act (the “Act”) to address so-called “unjustified” Canada/U.S. price discrimination.

This anticipated new legislation was first announced last February, as part of the Government’s federal budget (see: here) and received widespread criticism at the time in theory from the business community, members of the Canadian competition law bar, policy makers, academics and others. When it was first announced, the new rules appeared as though they would introduce penalties for retailers and others that engaged in cross-border pricing strategies where they charged higher prices in Canada without any relation to higher Canadian input costs.

Opponents of the Government’s planned Canada/U.S. “price gap” law pointed out, quite rightly I think, that such legislation, if passed in its anticipated form, would likely be: a significant departure from current Canadian competition law policy (that is, from specific rules to address particular market distortions to more widespread price regulation, which is not the purpose of the current Act); would suffer from serious definitional challenges (foremost being how to distinguish ordinary profit seeking behavior that is natural in any free market economy from so-called “unjustified price discrimination”); and would also likely raise serious enforcement related issues (for example, how the Competition Bureau would be expected to practically enforce the new rules when it currently, for example, only has resources to bring 1-2 cases per year in similar complex areas, such as under the abuse of dominance provisions of the Act).

What was actually introduced earlier today is in fact significantly less intrusive than had been expected. Bill C-49 would if passed in its present form:

1. Allow the Commissioner to commence inquiries where he has reason to believe that the selling price of a product is higher in Canada than the selling price of the product (or a similar product) in the United States, including to determine the extent of any price difference and reasons for the difference.

2. Allow the Commissioner to obtain production orders to compel Canadian (or foreign) affiliates to produce records or other information related to a price gap inquiry (or written returns under oath).

3. Require the Commissioner to prepare public reports with conclusions from price-gap inquiries (with periodic Parliamentary oversight).

The proposed legislation would also make a number of conforming changes to the Act, including broadening the existing definitions of “affiliate” to include a broader range of business organizations (tied to the new term “entity”). This would be relevant to, for example, the affiliates exception under the criminal conspiracy section of the Act (section 45).

As such, while the Minister pointed to a number of claimed benefits of the new legislation, including remedying consumer “gouging” by retailers, the new draft bill appears both significantly more benign than what had been anticipated earlier this year when the new rules were first announced and would essentially give the Commissioner the power to conduct market inquiries not unlike those conducted by the Bureau’s predecessor the Restrictive Trade Practices Commission in the 1950s and 1960s.

Notably, despite understandable worries from the retailer business community in Canada and others, the new legislation does not introduce any new penalties for cross-border price discrimination.

Having said that, it will be interesting to see what industries the Commissioner chooses to review in the event the new legislation is passed and whether chosen sectors are consistent with the Bureau’s current competition advocacy efforts.

For links to the Industry Minister’s speech, Industry Canada’s News Release and Backgrounder see: here, here and here.

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