2014 Budget Targets "Unjustified" Cross-Border Price Discrimination

In its newly announced 2014 budget, the Conservative Government continued with its consumer focussed initiatives of the last few years. The budget contains numerous measures which are intended to be consumer friendly, including plans for new legislation to prohibit price discrimination between the United States and Canada for identical goods, that cannot be "justified by higher operating costs in Canada". The budget cites several studies to claim that Canadian consumers pay significantly more for identical products than their American counterparts. The new rules will apparently be aimed at companies which use their "market power to charge higher prices in Canada that are not reflective of legitimate higher costs". Other than stating that the Commissioner of Competition will have the power to enforce the new rules, no further information is provided. Details are to be announced in the coming months.

The proposed framework raises a variety of concerns, including its constitutional validity and the practicalities of enforcement and compliance, such as how to define and accurately determine when higher prices in Canada are due to "legitimate higher costs" (and not market power). Moreover, it may be difficult to justify embarking on what appears to be wide spread price regulation for consumer goods. It remains to be seen whether these and other concerns will be addressed by the Government in the coming months.

On a separate note, there were two other competition law related proposals in the budget: (i) in light of the Competition Tribunal’s Visa/MasterCard price maintenance decision last year1, the Government plans to "work with stakeholders" to lower credit card acceptance fees that merchants pay in the hope that such reductions will be passed onto consumers; and (ii) citing the Competition Bureau’s submission on domestic wholesale wireless roaming rates charged by wireless companies to new entrants, the Government plans to cap such rates until the Canadian Radio-television and Telecommunications Commission concludes its investigation and issues a decision in this area.

See http://www.budget.gc.ca/2014/docs/plan/ch3-4-eng.html  for references in the 2014 budget regarding the areas discussed above.


1 See Reasons in Commissioner of Competition v. Visa

For more information, please contact:

CALGARY
Rick W. Pawluk
403-206-5522
[email protected]

MONTRÉAL
Madeleine Renaud, Ad.E.
514-397-4252
[email protected]

TORONTO
Oliver J. Borgers
416-601-7654
[email protected]

Donald B. Houston
416-601-7506
[email protected]