Legislation that, in part, targets country pricing – when Canadians pay more for the same goods as Americans – is finding support from some retailers. One of the biggest price gaps has been in car tires.Ariana Lindquist/Bloomberg
Ottawa's proposal to give competition investigators the power to probe prices in Canada got a nod from retailers but was shot down by other business representatives as being ineffective or contrary to a free market.
Industry Minister James Moore confirmed on Tuesday that he tabled legislation to discourage companies from "price gouging" consumers by giving the Competition Bureau the authority to investigate price discrepancies – when goods in Canada cost more than in the U.S. The reforms would allow the competition commissioner to get court orders to force company officials to testify and produce confidential pricing documents.
Still, the legislation has no penalties attached to it, something that critics said makes it ineffective but that Mr. Moore defended as a way to sway companies to lower their prices without actually regulating them.
"I think it will have an immediate downward pressure on prices," Mr. Moore said. "There's an influence on the market here and there's an influence on business behaviour that I think will protect consumers just by the fact that the commissioner has these powers."
The issue of higher prices in Canada was a hot one a few years ago when the Canadian dollar was at par with the greenback or above. However, today, with the loonie worth only about 87 cents (U.S), price gaps aren't as jarring although discrepancies remain in some retail sectors, such as tires, automobiles and running shoes.
Mr. Moore gave a few examples of higher prices here: a 1/-1/2 litre bottle of shampoo about 30 per cent higher; a 46-inch LED television 13 per cent higher and an 81 mg container of aspirins roughly double the price.
The Retail Council of Canada, which supports Ottawa's latest moves, argues that much of the blame for higher prices here are suppliers' so-called country pricing: charging retailers in Canada higher wholesale rates than their counterparts south of the border. The suppliers counter they need to cover heavier operating costs in Canada than in the U.S., including shipping longer distances to a smaller population with fewer economies of scale and higher tax, tariff and labour expenses.
Supplier groups are unimpressed by the federal Conservative government's attempt to use legislative pressures to sway companies to drop prices.
"From what I gather, I don't think this effort will make any difference," said Bob Kirke, executive director of the Canadian Apparel Federation.
He estimated that apparel prices are about 5 to 10 per cent higher in Canadian than in U.S. stores. "I don't believe this is a substantial problem."
Douglas Porter, chief economist at Bank of Montreal, said the big drop in the value of the loonie against the U.S. dollar has "all but made the topic moot. With the Canadian dollar near 87 cents, the gap is almost gone."
His last price differential survey in 2013 found Canadian prices were about 10 per cent higher than those in the U.S., after adjusting for the exchange rate. The loonie was worth more than 96 cents (U.S.) at the time and, since then, has dropped about 10 per cent "almost completely wiping out the price differential."
As an example of how today's exchange rate weighs in, he cited a product that costs $13.99 (U.S.) in the United States that is now effectively the same price as something selling for $15.99 (Canadian) here.
One of the biggest price gaps has been in the car tire segment, and the Tire Dealers Association of Canada had lobbied tire makers to get rid of Canadian country pricing. Still, Bob Bignell, executive director of the association, said the issue isn't a burning one any more, partly because the weaker Canadian dollar makes it less affordable for consumers to cross-border shop and the price gap has shrunk.
Aside from that, tire merchants are enjoying one of their best selling seasons in decades, helped by early snowfalls in many parts of Canada that revved up winter tire sales. He estimated that the price differential between tires in Canada and the U.S. has narrowed substantially and "there's a certain elasticity that people will put up with."
He also questioned how effective the proposed legislation will be. "Can you dictate pricing and do we want to have pricing dictated?" he asked rhetorically.
Perrin Beatty, president of the Canadian Chamber of Commerce and a former Conservative cabinet minister, called the bill simply "theatre" that won't solve price gap problems. The Competition Bureau is too small and overworked, without enough resources, to carry out the task, he said.
Ottawa hasn't been able to explain what "unjustified price discrimination" is or why it would be illegal, he said.
"But beyond the costs and the impracticality of the scheme, there's a bedrock principle at stake," Mr. Beatty said. "Canadians are not accountable to the government for how they conduct their business, as long as they follow the law.
"No bureaucracy should have the right to demand an explanation as to why you asked the extra $5,000 when you sold your house, or why the last copy of a hot Christmas toy costs so much. It's called a free market."