Canadian COMPETITION LAW

May 13, 2011

Canada’s Minister of Industry Tony Clement announced May 12^th that he will be asking members of Canada’s oil production industry to appear before a new parliamentary committee to “explain their pricing methods to Canadians”.

In making the announcement, Clement said:

“And we are hearing the questions and concerns Canadians have about fluctuating fuel prices. We know that the high cost of gas can be a burden for Canadian families. Everyone is feeling the pinch at the pumps. And especially at a time when household budgets are already tight, Canadians want and deserve answers.

That is why I will be asking refiners, distributors and retailers to come to Ottawa to appear before a parliamentary committee and explain their pricing methods to Canadians. Members of Parliament will get the chance to ask them the common-sense questions we’ve been hearing from Canadians.

I should note that this is not the first action the Harper Government has taken on this issue. We passed the Fairness at the Pumps Act to ensure that consumers are getting what they pay for when they fill up. We have expanded the powers of the Commissioner of Competition, who broke up a significant price-fixing cartel in Quebec last year.”  (see: Statement from the Honourable Tony Clement)

Yesterday’s announcement came as part of an escalating public debate about rising gasoline prices in Canada, some of which have raised renewed questions about whether the recent high gasoline prices were the result of anti-competitive coordination among suppliers.

Gasoline prices have been the subject of earlier parliamentary committee scrutiny (see for example the 2003 Industry Standing Committee Report, Gasoline Prices in Canada, which met with national, regional and multinational producers to study the “causes of the recent increase in the price of gasoline, and the significant negative effects” that it was having on the economy in 2003).  The Competition Bureau has also conducted a number of inquiries into the gasoline industry in various parts of Canada in the past and has issued materials for consumers relating to gas prices (see for example, Competition Bureau – Gas Prices).

The most recent gasoline price debate has also again raised the nonsensical term “gouging” by some commentators (see for example the recent Globe and Mail article that reported past investigations by the Competition Bureau stating that “the Bureau … found no evidence of price-gouging on a national scale”).

The federal Competition Act, however, does not regulate individual competitors except in relatively rare circumstances – the Act is commonly said to regulate competition not individual competitors – and has nothing whatsoever to say about “gouging” or high prices per se – for example, high pricing alone does not constitute abuse of dominance under the Act.

The Act does, however, prohibit criminal conspiracies (cartels), including price-fixing conspiracies, which, however, requires evidence of an agreement between actual or potential competitors.  For example, in 2010, the Competition Bureau concluded its largest criminal investigation in the Quebec gasoline price-fixing case involving 38 individuals and 14 companies (see: criminal charges against 25 invididuals and 3 companies in Quebec gas price-fixing case, criminal charges laid by competition bureau in gas price-fixing case).

Also, while the Minister has the power to cause the Commissioner of Competition to commence inquiries, and contravention of the criminal conspiracy provisions of the Act can lead to severe penalties (including fines of up to Cdn. $25 million and/or imprisonment for up to 14 years, per count), a Bureau investigation is unlikely to be the quick fix Canadians may be looking for the high gas prices and is more part of the current political theatre.  For example, the Bureau’s last major investigation, in the Quebec gasoline price-fixing case, took about three years to conclude. 

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