On December 9, 2014, the Minister of Industry announced changes
to the Competition Act that would authorize the
Commissioner of Competition (the Commissioner) to determine why
products have selling prices in Canada that are higher than they
are in the United States.
Under the proposed legislation, the Commissioner will be:
authorized to obtain court orders requiring companies and
individuals to produce documents and other information relevant to
an inquiry; and
required to issue a report outlining findings within a year of
obtaining this information.
According to some media reports, the Commissioner intends to
start an inquiry immediately after the legislation enters into
The amendments represent an apparent shift from the
government's initial proposal to introduce legislation to
"prohibit unjustified cross-border price discrimination."
Price differentials would not be prohibited under the new
legislation, merely subject to investigation and publicity through
the Commissioner's report.
An outright prohibition on cross-border price discrimination
would have been unworkable and fraught with challenges for many
reasons. The freedom of retailers to determine the prices charged
for their products is a fundamental market mechanism in any open
economy. Regulation could have led to significant government
intervention in the economy. The practical challenges of
implementing an effective scheme for the regulation of cross-border
price discrepancies would have been considerable.
However, the Commissioner will still face challenges under the
proposed legislation. The reasons for international differentials
in pricing can be complex and unclear: as the Standing Senate
Committee on National Finance and other observers have pointed out,
considerations can include import tariffs, operating costs, product
safety standards and competitive conditions in local markets.
Fluctuations in exchange rates and other conditions of sale can
also account for differences and make "apples to apples"
comparisons difficult. The complexity of these issues means that
meaningful reviews will be time-consuming and expensive, and
conclusions may be ambiguous or out-dated by the time they are made
public in the Commissioner's report.
Despite the challenges the Commissioner will face in
meaningfully implementing the legislation, to most observers, it
should be viewed as welcome compared to alternatives which could
have had the potential to take us back to an era of price
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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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