Yesterday, the Minister of Industry announced that the Canadian Government had introduced Bill C-49 (Price Transparency Act) which would grant the Commissioner of Competition (the “Commissioner”) enhanced powers to investigate unjustified cross-border price discrimination. This legislation is part of the Harper government’s “consumer first” agenda, which included a commitment to address the Canada/US price differential, in particular where it flows from a company’s use of country-specific pricing strategies (i.e., where a company charges higher prices in Canada than in the US and the higher Canadian prices are not associated with the costs of doing business in Canada).
More Powers to the Commissioner?
The Price Transparency Act, if passed, would enhance the Commissioner’s formal investigative powers (e.g., the ability seek court orders to compel the production of confidential evidence relevant to the differential pricing between Canada and the United States). The legislation would also allow the Commissioner to compel witnesses for examination, the production of records and written returns of information (which could include internal strategic documents and e-mails). Additionally, the expanded investigative powers would apply to Canadians and non-Canadian affiliates of the company being investigated by the Commissioner. While the Commissioner currently has the ability to compel information from the foreign affiliates of Canadian companies (including foreign parent companies), the attempt to do so has raised jurisdictional issues and it is unclear whether the proposed language addresses this issue.
While the Price Transparency Act provides the Commissioner enhanced investigative powers, it does not provide for any enforcement mechanisms. The proposed bill simply requires the Commissioner to issue a public report on the findings of his investigation – he does not have the ability to issue any administrative monetary penalties (“AMPs”), seek a court order requiring a company to cease price discrimination practices or to otherwise compel a business engaged in unjustified geographic price discrimination to cease the practice.
The Price Transparency Act clearly signals that price differences between Canada and the United States is a priority issue for the Harper government and a key piece in its “consumer first” agenda.
We anticipate that, if the bill is passed in its current form, the Commissioner will look to conduct an inquiry into sectors where there appears to be a significant difference in Canada/US pricing that does not appear justified – meaning the higher Canadian price is not related to any increased costs of doing business in Canada. The results of this initial price-gap inquiry will likely determine whether the Canadian Government believes it is appropriate to add some remedy provisions to this law or take other steps to address a Canada/US price gap that is found by the Commissioner to be unjustified.
While it is too early to tell what impact the proposed bill will have (assuming it is passed in its current form), companies who sell into both Canada and the US and who employ a country pricing strategy (in particular in sectors where there is a large differential between Canadian and US pricing) should consider how best to develop and document their Canadian pricing strategy. While there are no proposed enforcement mechanisms, it is assumed that the results of any price-gap inquiry will be made public and that companies found to have engaged in geographic price discrimination will face significant reputational harm and possible consumer backlash.
Please click for a copy of the Price Transparency Act here.