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 supply chains/distributors.
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 anti-competitive conduct."
We will continue to monitor developments related to this announcement.
For a copy of the 2014 Federal Budget, please click here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
