When the Conservative government tabled its 2014 budget
yesterday, it announced its intention to introduce legislation
amending the Competition Act to "address price
discrimination that is not justified by higher operating costs in
Canada, and to empower the Commissioner of Competition ("the
Commissioner") to enforce the new framework". The Minister of Finance indicated that more details
would be provided in the "coming months".
While few details were provided on the proposed framework, it
will likely affect international suppliers and retailers that sell
their products and conduct business in Canada. This initiative
flows from various studies indicating that manufacturers appear to
be engaging in "country pricing" or "pricing to
market" with the result that prices in Canada on many items
are higher than those charged to US consumers. The Budget cited a
recent study by the American Economic Review that suggested that
the observed cross-border price discrepancies may be the result of
corporate agreements that restrict the ability of stores to
arbitrage price differentials and mandating the use of domestic
Although the nature of any framework is unclear at this point,
there is a concern that it may impose an onerous burden on
companies requiring them to justify how/why manufacturing and/or
distribution costs result in higher prices for consumers in Canada.
On this issue, the Minister of Finance told the press that
companies "better have some sort of explanation other than
they're targeting Canada because our people are relatively
affluent and will pay".
Although the Commissioner will be responsible for implementing
the proposed framework, it is interesting to note that
representatives of the Competition Bureau who testified in 2011 and
2012 before Parliamentary committees were of the view "that
the Bureau is not a price regulator, and that high prices in and of
themselves do not fall under the purview of the Competition Act unless they are the result of
We will continue to monitor developments related to this
For a copy of the 2014 Federal Budget, please click here.
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