Canadian COMPETITION LAW

March 11, 2014

In one of the more interesting local competition stories I’ve begun to follow, Toronto is proposing to liberalize the operation of food trucks in the City.  According to a new City of Toronto staff report, rosily entitled “New Opportunities for Toronto’s Street Food Vendors”, the new food truck proposal is intended to provide “new opportunities for street food vendors across the City and more choices to the public for a diverse street food experience”.

The City’s report also predicts a somewhat blissfully diverse range of new food experiences:

“The City is currently home to dozens of licensed street food vendors selling diverse, world class fares. The difference between Toronto’s street food industry, and many others staff reviewed, is not a lack of menu options here, but rather an inability for all but a handful of vendors to make those menus regularly and conveniently available to the public. The path to a street food experience in Toronto that truly matches its celebrated diversity is through easing restrictions and creating opportunities for vendors to make their businesses easily accessible to the public.”

This all sounds great, but is it true?

On a closer read of the City’s staff report, draft by-law and related documents, what actually emerges is a slightly less promising situation (actually significantly less promising) for food truck operators, as has also been pointed out in a number of comments over the past several days – see for example: here, here, here, here and here.

In fact, what is being proposed, among other things, is a system (via a new Toronto street vending by-law) where food truck operators could pay an annual $5,066.69 fee, to vend for up to 3 hours on designated streets, provided they were not within 50 meters of an operating restaurant or 30 meters from a school or place of worship (with no more than two trucks per street).  Local BIAs and councilors would also have the power under the proposal to request that certain areas be listed as “Restricted Zones” (i.e., no street food vending permitted) or that vending be restricted to certain times of the day, subject to a somewhat unclear appeal process.

In reading the proposal, it seemed to me that there were a number of rational justifications for some of the proposed restrictions (e.g., balancing traffic with food trucks, rules prohibiting canopy doors from obstructing traffic, etc.).  The City’s report also discusses the fact since Toronto amended its current vending by-laws in 2012, there have been no restrictions on the types of food that may be sold from carts or trucks, provided the City’s Public Health regulations concerning food storage and preparation capacity are met.  Again, certainly seems to make sense in terms of competing policy rationales to competition (i.e., food safety).

What struck me, however, and many others apparently, is why the proposal also includes a number of competitive restraints – for example, restrictions on parking time (3 hours), number of trucks (2 per block), proximity to competing restaurants and a mechanism for local BIAs or competitors to oppose food trucks.

Outside the regulated sphere this would, if among competitors, generally be called an illegal market division or output restriction agreement – both rather serious no no’s under the federal Competition Act (see: here).

When regulated, apparently, they represent, in the words of the director of policy for the City’s licensing and standards department, “a balance between trucks and restaurants” (see: here).  Also, while I’m no expert on food trucks, the $5,000+ annual fee (increased for inflation) seems rather steep (though whether it will, if the proposal proceeds, actually operate as a barrier to Toronto food truck competition will remain to be seen).

Overall, this new municipal food truck competition debate made me wonder again why some industries that are essentially merely retail (i.e., food trucks, liquor retailing) win local or provincial legislative protection, while others must face ordinary competitive pressures.  It is also difficult to understand, apart from the perhaps obvious answers votes and taxes, why conduct that may be subject to criminal competition law sanction (i.e., an arrangement to keep competitors apart, impose quotas, etc.) is condoned if regulated.

The legal reason is that regulated conduct can be immune from competition law scrutiny under the “regulated conduct defense”, but what I am getting at is why restrictions that wouldn’t be palatable outside legislation be permissible when regulated.  I also found the proposed restriction on operating near churches slightly puzzling – the faithful don’t get hungry?

Should the same restrictions (i.e., capped hours, restricted locations, distance from competitors, ability for competitors to oppose entry, etc.) apply to other new entrants in retail sectors?  If so, apart from protecting incumbents, why?  Don’t we want more competition?  If Torontonians want to eat from trucks not their local restaurant shouldn’t they have that choice?

If significant location, duration and proximity restrictions (i.e., distance from competitors) are to be imposed on food truck operators, would similar restraints apply to “bricks and mortar” restaurants?  In other words, will traditional restaurants be required to stay 50 meters away from other restaurants?  Seems rather ridiculous, but why apply a different standard to food trucks?

In reading the commentary on Toronto’s new food truck proposal, I also thought about what similar restrictions might look in the legal profession.  Yes the legal profession is regulated.  And yes lawyers must meet education and licensing requirements.  It struck me, however, as rather absurd to contemplate a similar regime for lawyers whereby they could only practice on certain streets, for three hours a day, not too close to schools or churches (or too close to traditional competing law firms) and could be banned from practising if a competing firm didn’t want you practising in their territory.  Even I admit that the regulation of law can, at times, appear rather closed and topsy-turvy – but not this topsy-turvy.

In sum, choice and competition, it seems, is good to a point to the City of Toronto in this proposal, so long as it doesn’t mean too much competition for existing restaurants.  Is this food truck “throttling” controlling competition in food in Toronto?  If so, why?

My view?  Regulate the traffic and safety considerations, and by all means think about municipal revenues, but leave the competitive restraints (or most of them that don’t have legitimate policy rationales) out of the by-law.

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