Ottawa unveils new legislation to narrow Canada-U.S. price gap
Marlene Leung and Andrea Janus, CTVNews.ca
Published Tuesday, December 9, 2014 10:27AM EST
Last Updated Tuesday, December 9, 2014 7:23PM EST
The federal government has unveiled new legislation aimed at narrowing the price gap between items sold in Canada and the United States, but critics say it will likely have little to no impact on the cost of goods.
Federal Industry Minister James Moore announced the "Price Transparency Act" Tuesday, which grants new powers to the head of the Competition Bureau.
Under the new legislation, the Commissioner of Competition will be able to investigate alleged cases of suspected price discrimination and publicly report situations where Canadian consumers are targeted with higher prices.
As well, the commissioner will also be able to authorize court documents forcing retailers to disclose details on how they arrived at their pricing scheme, and to provide evidence that their price difference is justified. The commissioner will report any findings from those documents to the public.
Moore said the new act, which will be tabled in Parliament Tuesday, will help ensure Canadians pay "comparable prices for comparable goods."
The commissioner will not be able to set or regulate prices, he added.
But Perrin Beatty, president of the Canadian Chamber of Commerce, said that is exactly what the federal government is proposing by letting the commissioner poke around private businesses and ask about pricing schemes.
“What is it you’re doing when you say, ‘Okay, this price is okay, that price isn’t okay, so change your price or we will name and shame you publicly?’” Beatty said Tuesday during an interview on CTV’s Power Play.
“If that’s not setting prices, I’m not sure what is.”
Beatty called the announcement “cross-border Kabuki Theatre.”
“They’re trying to convince Canadians that they can trash-talk businesses into lowering prices. What it will do is it will result in more bureaucrats going out into legitimate businesses, subpoenaing documents, subpoenaing testimony from individuals, and then in some cases trash-talking the companies afterward, as well,” Beatty said.
“Will it have a significant impact on prices? Probably not.”
Mel Fruitman of the Consumer Association of Canada agreed, calling the legislation “a feel-good announcement that will probably not have any effect at all.”
International companies have indicated that they charge Canadians higher prices in order to cover higher taxes and shipping costs. Therefore, the government should consider its own policies and the effect they have on prices, Fruitman said.
"There are many products we buy in this country that have tariffs on them to protect Canadian manufacturing, which in most cases no longer exists,” he said.
Both Beatty and Fruitman say the government could make more productive moves, including removing unnecessary tariffs, and dismantling regulatory systems that are incompatible with other countries.
The minister acknowledged that there are legitimate costs of doing business in Canada which result in higher prices for certain goods. However, some retailers are practicing “price discrimination,” he said Tuesday.
"Geographic price discrimination is real and it's a significant burden to the bottom line of hard working families and retailers," Moore said. "Ultimately, consumers should know whether the differences in Canadian and U.S. prices are justified."
David Wilkes of the Retail Council of Canada said the bill is an important first step toward understanding the factors that lead to price differences.
While those differences may be justified in some instances, “in certain cases there may be unjustified reasons,” Wilkes said, “and we look forward to working with the government to understanding what those cost differences are and bringing them into line.”
In recent years, Canadian consumers have noted the higher prices they pay compared to Americans for the same items, particularly as the loonie reached parity with the U.S. dollar.
Statistics Canada estimates from 2011 found that Canadian prices were about 25 per cent higher than U.S. prices for many goods.
Retailers have said that several factors including transport costs, market size, and tariffs and fees are behind the increased Canadian prices. A 2013 Senate report found that the pricing practices of a particular country, the volatility of the exchange rate and customs tariffs all contributed to the inflated prices.
But with the Canadian dollar currently worth only about 87 cents against the U.S. greenback, the price disparity shrinks. This usually has a dampening effect on cross-border shopping and on price differentials, Beatty noted.
Critics say that makes Tuesday’s announcement too little, too late.
“Really, I think the big question for Canadians is whether this bill is pre-election smoke-and-mirrors, or whether it’s actually going to make a difference for Canadian consumers,” NDP critic Peggy Nash said in Ottawa.
'Immediate downward pressure on prices'
Moore said that while the act will not regulate prices, granting the commissioner the power to expose cases of unfair pricing will have an immediate effect on retailers.
"We think this is an effective tool that makes sense now," he said. "Upon enactment of this legislation coming into force, I think it will have an immediate downward pressure on prices which will help Canadian families.
"There's an influence on the market and there's an influence on business behaviour that I think will protect consumers just by the fact that the commissioner has these powers as a result of this bill."
He said that after the commissioner reports cases of price discrimination to the public, it's ultimately up to Canadians to decide if they want to continue supporting a particular company.
"This is about informing the consumer by empowering the (Commissioner of Competition) so that the marketplace can react. So this is, in that sense, a tool for the free market," he said.
Lower prices are not likely to be the main outcome of the bill, Wilkes said. However, companies place the highest value on their brand’s reputation with customers, and so they will do what they can to maintain a strong relationship with consumers.
“So if it brings to light certain practices that aren’t in the best interest of Canadian retailers or Canadian consumers, I think those will change,” he said.
But Beatty noted that with the advent of online shopping, Canadians are not just comparing prices with goods south of the border.
“Today with the Internet, you’re price-comparing not simply with the United States, but with China, with Germany, with Britain, with everywhere in the world,” Beatty said.
“And if Canadian businesses can’t compete, people are able to shop the world and have it delivered to them at home. The Internet’s arrived, somebody has to tell the government.”
With a report from CTV’s Peter Akman