Industry Committee on June 12th, 2024

[Dr. Sylvain Charlebois]

I haven't seen the evaluation today, unfortunately, but I would say that I'm surprised that this hasn't come up before. We did hear from other groups in the economy.

However, to suggest that this change affects only a minimal number of Canadians, I think, is misleading. I think it actually affects a lot of businesses, including in the agri-food sector, and I would start with farmers. Therefore, I'm not surprised to hear what I'm hearing right now.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Tell me what you've heard, then, in terms of these tax changes. Will they affect farmers, then? Are they going to affect manufacturers? Tell us what you're hearing in terms of how these capital gains tax changes will affect other Canadians.

[Dr. Sylvain Charlebois]

It affects planning for businesses and farmers. They have to think about the next generation.

We've had issues with farming and the next generation and how we get more people involved in farming, so that's certainly not something you want to do. You're discouraging investments. You're discouraging people from considering farming. As well, of course, you have to look at processing.

The thing about the agri-food sector is that we have a lot of family businesses, and this is what's unique about the agri-food sector compared to other sectors. A lot of family businesses would look at this capital gains tax as detrimental to their own wealth and to their next generation as well.

I'm not sure that we've discussed this enough since the introduction of this new bill by Parliament.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Given the fact that it's going to affect families and family farms and that a lot of them are, of course, concerned about prices already, and given that—through the Grain Growers of Canada—they're saying that these prices are going to be added to the food bill, in your experience, is that going to potentially result in increased costs to consumers?

[Dr. Sylvain Charlebois]

As I said, I haven't seen the evaluation from the Grain Growers of Canada, unfortunately, but to suggest that this could actually have an impact on food prices would be premature at this point. We haven't done the evaluation. However, I would consider that it may actually be the same argument given for the carbon tax, for example, where it's very difficult to really narrow down that one factor and how that one factor can impact. It will actually impact the productivity of our agri-food sector and the competitiveness of our food sector, but retail is always difficult.

Over time, this could have an impact on our food security because we could actually see fewer farms or fewer players in the industry.

[Ryan Williams, Conservative, Bay of Quinte, ON]

You've talked about bread price-fixing. Given that the Competition Bureau's investigation into bread price-fixing has been ongoing for over nine years with limited action, resulting in only Canada Bread receiving a fine, how do you view the Liberal government's inaction in addressing this issue?

As well, what do we need to do and make changes on to ensure that this doesn't happen again and be prolonged for nine years, especially given the fact that the U.S. seems to have made arrests and had bigger fines compared to Canada?

[Dr. Sylvain Charlebois]

That's right. For example, just to compare what's going on in the U.S. versus Canada, in the U.S., they had one case involving canned tuna. The CEO of Bumble Bee Foods was jailed for 40 months because he was found guilty of fixing prices for three years.

In Canada with bread, allegedly the scheme was running for 14 years, from 2001 to 2015. The investigation started in 2015 with Loblaw's disclosure. In 2017, we all learned about what went on, and we didn't hear anything about the investigation until last year when Canada Bread admitted guilt and paid a fine.

This is just not acceptable, and that's why a lot of people are skeptical of the Competition Bureau's ability to solve anything. With this property controls investigation, my hope is to see the bureau act very quickly on this issue—because I think it's a real issue—and provide public recommendations so that people can feel more reassured about what's going on.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Thank you.

[The Vice-Chair, Conservative, Rick Perkins]

Thank you, MP Williams.

We go now to MP Turnbull for five minutes, please.

[Ryan Turnbull, Liberal, Whitby, ON]

Thanks, Chair.

Just following up on my last line of questioning, I'd like to focus my remaining time on two other lines of questions. Two other pieces of Bill C-352, which is the private member's bill we're talking about, have not been addressed.

What I think we heard from witnesses is that about 98% or 99% of all the things that are in Mr. Singh's private member's bill have already been dealt with in Bill C-19, Bill C-56 and Bill C-59, which have made successive rounds of changes—I would call it a comprehensive package of amendments—over time, in three different bills, to our competition laws. I could go through all those changes, but we would run out of time very quickly.

I want to focus on two points.

One is that the fines that are being introduced in Bill C-352 put an upper limit on the fines.

We heard from the lawyers who were here earlier in the week that, in fact, allowing the discretion of the courts to basically determine a maximum fine is better—to have harsher penalties—than actually including a maximum upper limit to the fines people could be ordered to pay.

Mr. Charlebois, would you agree with the expertise of the lawyers that we shouldn't be reintroducing an upper limit?

Most legal proceedings that happen don't end up starting at a maximum penalty and over time, the courts could decide, if there's repeated behaviour, to surpass any upper limit we might conceive of here today.

What would you say about that, Mr. Charlebois?

[Dr. Sylvain Charlebois]

Absolutely. I think you raise a good point, Mr. Turnbull.

I didn't comment on the amounts presented in the bill, but I did question why we would put an actual sum there.

In the agri-food sector in particular, not all firms are created equal and penalties would vary greatly. I would argue that for Grupo Bimbo, the owner of Canada Bread, $50 million is not very much.

That's why I would say that if you really want to send a clear message, I certainly would advocate for not putting an exact sum there and allow the discretion of the court to decide what is the appropriate penalty for certain circumstances.

[Ryan Turnbull, Liberal, Whitby, ON]

Thank you.

My last question is around is another point of debate that is left over, I think.

In previous rounds and consultations that were done after Bill C-19 was passed, in the lead-up to Bill C-56 and Bill C-59, and those rounds of changes there were lots of conversations about what are called structural presumptions and the idea that within a merger review, we're looking at a number of different factors.

I think a lot of what we heard in the consultation was that market share could be an indicator of a substantial lessening of competition, but is not sufficient in itself to determine whether a merger should be blocked or not.

Bill C-352, the private member's bill that we're discussing, reinserts that into the bill. We repealed that, on the one hand, in Bill C-59. We repealed the section of the Competition Act that expressly prohibits the tribunal from concluding that a merger is likely to harm competition “solely on the basis of evidence of concentration or market share.”

The reason is that most of the experts say that market share isn't sufficient in itself because there are contextual factors. There are times where market share or concentration may increase slightly with a merger, but that doesn't necessarily harm competition in every case. The point is that the tribunal can still consider any factors. It's the same with the efficiencies defence. The tribunal can still consider efficiencies within its merger review process and it can still consider market share and concentration, but we don't want to reinsert that as a structural presumption that is the only factor that determines their decisions.

Mr. Charlebois, maybe I could ask you if you concur with that finding as well.

Should we stick with the things we heard in the consultation, which led to the change that Bill C-59 introduced or should we go backwards and reintroduce market share back into it?

[Dr. Sylvain Charlebois]

I'm afraid, Mr. Turnbull, that we won't have a debate, because I still agree with you. I actually do think that using market share as a sole metric is misleading.

Loblaw is a good example of that. Loblaw has 29% of the market when it comes to food retail in Canada. The 29% is a bit misleading because Loblaw is a heavily vertically integrated company. It has President's Choice and No Name, and hundreds of companies revolve around Loblaw, which gives it tremendous power in the agri-food sector. Not dealing with Loblaw.... For most companies, Loblaw is their number one customer because of that. That's why it's extremely reckless and dangerous to only look at that one metric. You have to look at many other metrics, including vertical integration, in my view.

[Ryan Turnbull, Liberal, Whitby, ON]

Thank you.

That's all the questions I had. I appreciate it.

[The Vice-Chair, Conservative, Rick Perkins]

Thank you, MP Turnbull.

For two and a half minutes, we'll go to MP Garon.

[Jean-Denis Garon, Bloc, Mirabel, QC]

Thank you, Mr. Chair.

Dr. Charlebois, earlier, my colleague Mr. Vis asked you about excess profit, a concept taught in first‑year economics. Excess profit is a level of profit that, if taxed, would prevent investors from moving their capital to another sector at equal risk.

The witnesses we've heard from so far, including Professor Ross from the University of British Columbia, have told us that there isn't necessarily an excess profit problem in the grocery sector; rather, we have a competition problem. This is demonstrated by the fact that, between 1984 and today, we have gone from 13 major chains to five, including Walmart and Costco, which share 80% of the market.

Dr. Charlebois, you talked to us about a number of interesting points, which is why I'm addressing you. What has been raised by some witnesses is that regulatory barriers to investment make foreign retail businesses reluctant to come to Canada.

Anecdotally, the Minister of Innovation, Science and Industry is very active, but he goes across the border to try to persuade grocery distributors to invest in Canada, when, on average, the margin is 5% in Canada and 2% in the United States. There must be barriers that make these companies not want to come to Canada.

What are those barriers?

[Dr. Sylvain Charlebois]

First, stop inviting grocery CEOs to Ottawa to ask them why they're making too much money. The Lidls and Aldis of the world read the headlines, like everyone else.

Second, I think it's important to recognize that the companies currently in Canada are very well managed. They're very market savvy. Metro, Empire, Sobeys and Loblaws are very well‑run companies. They're taking advantage of the fact that the market is letting them grow. We must not forget that Empire, Metro and Loblaws responded to the American threat 30 years ago, with the arrival of Walmart and Costco. That's why we've seen a lot of consolidation.

Since we weren't able to regulate or stop transactions, we ended up with a high concentration in the market. What we're seeing now is that Mr. Champagne wants to recreate the same phenomenon.

Personally, I've always believed that, at the national level, the priority should be to create conditions that allow a grocer to achieve better results. Interprovincial barriers and taxation levels are examples. We tax a lot of retail products. For example, at Loblaws, 4,600 products are taxed at the retail level. Many are taxed as a result of shrinkflation. People realize that. It makes groceries less competitive and more expensive for everyone.

We need to look at these kinds of changes to give Canadians a little more breathing room.

[Jean-Denis Garon, Bloc, Mirabel, QC]

Thank you very much.

[The Vice-Chair, Conservative, Rick Perkins]

Thank you, MP Garon.

For two and a half minutes, we'll go to MP Masse.

[Brian Masse, NDP, Windsor West, ON]

I couldn't hear, so I'm assuming I have the floor, I hope.

[The Vice-Chair, Conservative, Rick Perkins]

Yes, you do, MP Masse.

[Brian Masse, NDP, Windsor West, ON]

With regard to the discussion, I want to add something for the record here. For “excess profit tax”, “greedflation”, or “windfall tax”, they have different connotations, but often those are the three that are mentioned. They're actually very familiar here in North America.

What the U.S. implemented in 1917, 1935, 1933, 1940, 1943, 1950 and 1953 all dealt with the fact that profits to large corporations were excessive, because they weren't from the work they were doing: They were the benefactors of economic and social conditions during those times. That's why the United States has actually done that.

In fact, when you look across the ocean, with regard to the United Kingdom and Great Britain, the Conservative PM has actually put in place a 25% energy profits levy, and that's also been raised, with him as prime minister now, the Conservative prime minister, to 35% on energy profits. That will stay in place. He announced most recently that up until 2029 that will be in place.

When you look at the other countries in the world that are looking at this issue, a quick review of that would be Austria, which actually has implemented a windfall profit tax on electricity and oil and gas companies; Belgium, which is doing it for electricity producers; Bulgaria, which is doing it for electricity and refining industries; Croatia, which is doing it for electricity and also doing it for other companies as well; and the Czech Republic, which is doing electricity and also the banks and other energy fossil fuels, similar to many of the other European states.

Finland is doing this for electricity, gas and oil companies. France is doing it for electricity producers, mining, refining of petroleum and manufacturing of coke products. Germany is doing it for electricity producers. In Greece, they're doing certain energy sectors as well. You also have Hungary, which is doing petroleum producers, pharmaceutical distributors, mining royalties, airline companies, credit and financial institutions. They are all included. You have Ireland doing it for electricity producers. As well, you have Italy doing this for the sale of electricity and oil and gas and the distribution of products in the banking sector. You also have Latvia, which is doing it for the banks and energy sector companies, and Lithuania, which is doing it for domestic banks and branches of foreign members licensed in the United States and the European Economic Area.

You have Luxembourg, which is doing this for electricity producers. You have the Netherlands—electricity again—and in Norway, wind farms are actually getting the excise profit tax. Poland is doing coal and mining companies. Portugal is doing oil and refining of gas and, also, interestingly enough, food distribution. Romania is doing it for oil, natural gas, coal and refining companies, and Slovakia for electricity producers, natural gas and refining companies.

I'll conclude with this, Mr. Chair. The fact is that the issue of having an excise profit tax is not foreign with regard to public policy in North America and it is actually the public policy of the European Union. I would conclude with this. If we look at our history that we've gone through just recently with regard to the excess amount of corporate tax cuts/reductions that were done from the year 2000 to 2020, on top of that we had the financial mess and had the Harper administration do a rescue plan for many different industries, including the banking sector, which actually received a significant amount of public money.

Lastly, we had COVID-19. The actual amount of money that was spent by the public on that created the profit margins that are now being abused in terms of Canadian consumers. I'll conclude by saying that this is not a concept foreign to North America or to the European Union, and other countries are dealing with it because people are suffering.

The profit margins that they actually got from these profits were not from their business practices but because of public and social policy.

Thank you.

[The Vice-Chair, Conservative, Rick Perkins]

Thank you, MP Masse.

Before I go to the next five-minute round and MP Vis, maybe the committee could indulge me.

Since we have one of the premier—if not the premier—business leaders in Quebec before our committee on that question, I'm just wondering, Mr. Péladeau, if you got charged a special tax, would you absorb it or would you pass it on to the consumer, like I understand—from my time of writing strategic plans for businesses—we always do? It's just the cost of business, is it not?

[Pierre Karl Péladeau]

Well, you know what? I would say, Chairman, that, again, we introduced competition, and since it's there, it will remain competitive. At the end of the day, if you pass on the tax or not, the market will be that people will be interested in having the product at the lowest price as possible and for the highest quality. I would say that it doesn't really matter if all the conditions are together, are assembled, to make sure that the competitive environment will remain and will be strong and viable.

[The Vice-Chair, Conservative, Rick Perkins]

Thank you, committee and Monsieur Péladeau, for the indulgence.

We have MP Vis for five minutes.

I would say that we have 15 minutes. There is another round for the government side if they wish, after that. We can have an open round, too. I'm in the committee's hands.