In the federal budget released on February 11, 2014, the
Canadian government has advanced a proposal to give the Competition
Bureau additional powers to prohibit what it refers to as
unjustified geographic price discrimination, in an apparent effort
to reduce the gap between higher consumer prices in Canada as
compared to the United States. This proposal may represent a major
change in Canadian competition policy.
The budget cites several studies that conclude that Canadian
consumers pay an average of 10 percent more than Americans for
identical goods. The government's Standing Committee on
National Finance reported that potential causes for price
differences include import tariffs, the relatively small size of
the Canadian market, higher operating costs and product safety
standards, insufficient competition in the Canadian retail market
and manufacturers engaging in country pricing strategies. There is
also the issue of constantly changing exchange rates. Needless to
say, this proposal is giving rise to uncertainty in the market, and
particular concern amongst multi-national suppliers and
The government is currently assessing whether tariff elimination
(for products such as hockey equipment and baby clothes) can narrow
the price gap for consumers, with results expected by the end of
2014. However, if enacted, this amendment to the Competition
Act will likely affect multinational companies that have
market power to charge higher prices and will require these firms
to ensure that any price differences are fully justified, based on
higher manufacturing or distribution costs.
The possibility of price regulation for consumer goods raises a
variety of practical concerns, related to compliance and
enforcement uncertainty. For instance, the test of "legitimate
higher costs" require that the government have a defensible
comparator of cross-border prices and operating costs. In addition
to the practical issues, this may significantly alter the role of
the Competition Bureau. It will have to carefully walk the fine
line between challenging anti-competitive conduct and regulating
market prices, notwithstanding earlier Bureau protestations that it
is not a price regulator.
There are also constitutional issues with the proposal.
Provinces may argue that anti-price discrimination provisions will
invade the provincial jurisdiction over "property and civil
rights". Such price regulation provisions would also be
inconsistent with the laws of some significant trade partners. As
opposed to this exercise in price regulation, reducing tariffs
would seem to be a simple step which could alleviate the
The release of the actual amendments in the coming months will
indicate the mechanisms through which the government intends to
implement its goal of narrowing the geographic price gap between
Canada and the United States. The prohibitions and any exemptions
will provide a fuller picture of how the Competition Bureau will
police illegitimate higher prices in Canada.
The foregoing provides only an overview and does not constitute
legal advice. Readers are cautioned against making any decisions
based on this material alone. Rather, specific legal advice should
The Canadian Competition Bureau issued a template document for use as a form of Consent Agreement, to be filed with the Competition Tribunal to resolve concerns the Bureau may have with proposed mergers.
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