Remarks by John Pecman, Commissioner of Competition

Grocery Showcase West of the Canadian Federation of Independent Grocers (CFIG)

Vancouver, British Columbia

April 7, 2014

(Check against delivery)


Thank you for the opportunity to join you today and for this opportunity to speak to you about the Competition Bureau and our work as it relates to the grocery industry in Canada.

You know, when you’re speaking to an audience of lawyers or economists, as I often do, it’s pretty easy to come up with a witty jab that pokes fun at the stereotype. It’s not so easy to do that for folks who work in the grocery industry.

But here is what I would like to share with you — it’s something that one of the world’s most famous (and Canadian) economists, John Kenneth Galbraith, said about the grocery business.

He said: "A person buying ordinary products in a supermarket is in touch with his deepest emotions."

I think this really captures the significance of the relationship between Canadians and your industry.

The average Canadian interacts with you on a weekly — and in some cases daily — basis, and when they do, they’re connecting with their most basic needs and simplest desires as consumers.

The relationship you have with consumers is, in fact, a very personal one, and the role you play in the Canadian economy is a very important one.

And, for these reasons, I’m very pleased to be here today speaking to you.

I’m going to start by talking about what, from our perspective, is the most important work we do, which is enforcing and promoting compliance with the Competition Act and the other laws we enforce. Specifically, I’ll provide you with an update on some of the work we’ve been doing in the area of compliance and a description of the role that businesses play in promoting compliance. I’m then going to touch on some of our recent enforcement work in the grocery industry.

But first, I want to give you a bit of context about the lens through which the Bureau conducts its work.

I had the privilege of being appointed Commissioner of Competition just under a year ago. Since that time, I’ve adopted what I believe to be a balanced approach to delivering the Bureau’s mandate, which includes enforcement, advocacy and outreach.

We deliver our mandate through what I like to call the "four Cs", which include compliance, communication, collaboration and Canadians.

I’ve spoken about the "four Cs" many times over the last few months, so I’m not planning to discuss them in detail today. I do, however, want to say a few words about compliance.

On this page

Shared compliance

The term "shared compliance" comes from the recognition that we all — the Bureau, the business community and the legal community — have a role to play in promoting compliance.

The Bureau promotes compliance through enforcement, publications, advocacy and suasion.

The legal community promotes compliance by making their clients aware of their obligations under the laws we enforce.

The business community promotes compliance by developing and adhering to corporate compliance programs.

By working together, through a shared compliance model, we can accomplish more than we ever could alone in ensuring an efficient, competitive and open marketplace — a marketplace that benefits Canadian consumers and businesses, including those in this room.

Compliance has been, and will continue to be, a strong focus for the Bureau, and it is our goal to continue to work with our partners to promote conformity with the law and, through this, an efficient marketplace.

I want to take a moment to emphasize for you how important compliance is and how important it is that we work together to ensure that the market functions efficiently.

I like to think about compliance as preventative medicine. For example, we all know that we need to exercise and eat well if we want to prevent illness. If we don’t do these things, we put ourselves at risk for what can be devastating illnesses — things like heart attacks and strokes.

Compliance — and more specifically ensuring that you have a credible compliance program in place — is like preventative medicine. Such a program can help minimize the risk of going offside with the law. On the flip side, the failure to put in place or to follow through with a credible compliance program can expose you and your business to significant financial and reputational risks, not to mention the possibility of administrative monetary penalties, fines and even jail time.

As I said earlier, the Bureau has placed a strong focus on compliance and compliance promotion. We have engaged an expert to help us determine how we can best promote voluntary compliance and ensure that we have the right incentives in place to support this objective.

We also recently launched our first annual anti-cartel day, which was aimed at increasing awareness among businesses about how to avoid engaging in anti‑competitive behaviour, such as price-fixing and bid-rigging.

In conjunction with anti-cartel day, we released and provided links to a variety of pamphlets and other documents on compliance and compliance-related subjects. We also produced a video that outlines the importance of compliance.

We are really proud of this video. It’s available on our website and on the Bureau’s YouTube channel. I would encourage you to share it with any of your partners or colleagues who aren’t with us today.

It highlights just how important it is for businesses to develop and maintain effective compliance programs that allow them to keep abreast of developments in and comply with the law.

It also highlights something else that I think it important to emphasize — the nature of the Bureau’s role in the marketplace.

Our role is to protect open markets and ensure fair competition — it is not to protect competitors. We’re not there to ensure that particular businesses continue to exist — we’re there to ensure that everyone is able to compete on a level playing field.

To borrow a hockey analogy, we’re effectively a referee for the marketplace — and referees don’t pick winners. Rather, their role is to ensure fair play and call out misconduct — which is exactly what we do.

Code of conduct

I want a take a minute to talk about grocery codes of conducts, as I’m aware that there have been a number of groups calling for the establishment of a Grocery Code of Conduct in Canada aimed at addressing certain practices in the grocery sector.

I’m also aware that there are a number of antitrust agencies in other jurisdictions that are either looking at or have introduced such codes. I know that the European Union is examining this possibility and that the United Kingdom has established a code and put in place a full-time Grocery Ombudsman to enforce it.

Here are my thoughts on this — and there are two things that I want to say at the outset.

First, the Competition Act does not provide the Bureau with the authority to seek an enforceable Code of Conduct.

Second, a voluntary Code of Conduct would not provide the Bureau with the authority to compel participation in, or to enforce, such a code. There would be no ability for us to implement or enforce remedies. In short, there would be no accountability.

One of the tools that the Bureau has available right now to address anti‑competitive practices in the grocery industry is enforcement, and enforcement, as we know, is dependent on evidence.

We will, where appropriate, continue to vigorously enforce the provisions of the Competition Act to deal with firms that engage in anti‑competitive behavior in the grocery sector — or in any other sector of the economy for that matter.

If the Government expresses a desire to move in the direction of a Code of Conduct, and if we are asked to participate, we would certainly implement it and include it as another tool in our enforcement kit.

Retail Price Maintenance Guidelines

As you may be aware, on March 20 of this year, the Bureau published its Enforcement Guidelines on Price Maintenance for public consultation.

These draft guidelines describe the Bureau’s general approach to enforcing section 76 of the Competition Act, including with respect to common business practices, such as minimum resale pricing, manufacturer-suggested resale pricing and minimum advertised pricing.

The issuance of these guidelines supports the Bureau’s Action Plan on Transparency, which aims to promote the development of a more cost-effective, efficient and responsive agency, while providing Canadians with more opportunities to learn about the Bureau’s work.

I would encourage all interested parties — and I know that many of you in this room would fall into that category — to provide comments on the draft guidelines by email, fax or regular mail no later than June 2.

As part of our commitment to openness and transparency, we will be posting these comments on our website, unless a participant has requested confidentiality.

Price gap

I know that many of you in this room are anxiously awaiting the Government’s next move on the price parity file.

As you are no doubt aware, the Bureau’s legislative framework and mandate are determined by Parliament, and currently there are no specific provisions in the Competition Act allowing the Bureau to properly examine cross-border price parity issues.

That being said, the Bureau can take action where there is evidence of anti‑competitive behaviour that is contrary to the Competition Act.

If the Bureau becomes aware that Canadian prices are being affected as a result of anti‑competitive behaviour, we will not hesitate to use the investigative tools at our disposal and to take the enforcement action where appropriate.

We’re looking forward to seeing the Government’s final plans and we will have more to say about this once legislation has been introduced and passed by Parliament.

Loblaw/Shoppers

I’m going to wrap-up with a subject that I know is top of mind for you — the Bureau’s review of the Loblaw/Shoppers transaction.

Following an extensive examination, which included relevant document review, industry contacts and econometric analysis, and advice from experts, the Bureau concluded that the proposed transaction would likely result in a substantial lessening or prevention of competition in respect of the retail sale of pharmacy products and drugstore-type merchandise in a number of local markets and in respect of certain Loblaw programs and agreements with suppliers.

As most of you will know, late last month, the Bureau entered into a Consent Agreement with Loblaw to remedy these competition concerns.

The Consent Agreement requires the sale of 18 retail stores and 9 pharmacies within a Loblaw store to an independent operator.

The Consent Agreement also includes behavioural restrictions on certain Loblaw programs and agreements on the supply of products for retail sale lasting as long as five years from the date of closing of the proposed transaction.

We believe that the Consent Agreement addresses the most significant negative competitive effects arising from the merger and that it will ensure that consumers continue to benefit from competitive prices in the retail sale of drugstore and pharmacy products in Canada.

The Bureau regularly resolves competition concerns through negotiated Consent Agreements. We prefer to address anti‑competitive mergers and other conduct by mutual agreement rather than proceeding on a contested basis to the Competition Tribunal; however, the Bureau will not compromise its responsibility to preserve competition in the marketplace.

Civil case

There is something else I would like to raise. As some of you will be aware, through the analysis of the Loblaw/Shoppers transaction, the Bureau has become aware of certain conduct by Loblaw with respect to its suppliers that could raise concerns under the Competition Act.

The Bureau is looking at these supplier practices and the impact that they could have on competition in the marketplace.

As you know, the Bureau conducts investigations confidentially, so I cannot offer any further comment apart from encouraging individuals or organizations with information on these practices to share them with the Bureau. Enforcement, as I mentioned earlier, is dependent on evidence — and the Bureau can only pursue cases based on the evidence available to us.

Using the hockey analogy again, although we function as the marketplace referee, the Bureau is not on the ice to witness misconduct. So, we must rely upon the video tape brought to us by the market players to enable us to make our ruling.

Conclusion

In conclusion, I want to go back to where I started at the beginning of this speech and with what John Kenneth Galbraith said about the relationship between people and their supermarkets.

People who are shopping are connecting with their most basic needs and simplest desires as consumers. You play an important role for them, and an important role for our economy.

And, if I may add, your important relationship with consumers and the significant role you play in the Canadian economy makes it all the more important that you understand and comply with the laws governing competition.

The Bureau understands how important compliance is to ensuring a fair and open marketplace. We look forward to continuing to work with you and other partners in the business community under the tent of shared compliance in order to ensure that the Canadian marketplace functions efficiently.

Thank you.

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