Canada-U.S. price gap complaints could soon trigger investigations

The federal government is unveiling legislation to give the Competition Bureau new power to investigate cases of price gouging in Canada.

Industry Minister James Moore, speaking at a Toronto toy store, says the proposed price transparency act follows through on the Conservatives’ promise to end unjustified price differences between Canada and the United States, for the same items.

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Canadian consumers have long complained that they pay higher prices than Americans on a wide range of items, including toys, books, electronics and cars. The Conservatives responded in the February budget, vowing to narrow the so-called price gap between the two countries as part of their consumer-first agenda.

"It's called geographic price discrimination. A more blunt way of putting it is to call it ... price gouging of Canadian consumers because of where Canadians live," Moore said.

"These price differences are real, they hurt the bottom line of hard-working families, and they hurt Canadian retailers who have to absorb this cost of unfair pricing."

The bill, tabled in the Commons today, will:

• give the commissioner of competition the power to investigate suspected cases of price discrimination.
• give the commissioner of competition the power to obtain court orders compelling companies to produce documents to prove the difference in what they charge is reasonable.

While higher labour costs, tariffs and the cost of transporting goods to Canada are some of the reasons goods can cost more here than in the U.S., Moore said the bill takes aim at country pricing, the practice of charging different prices depending on the country in which the good is sold.

Plan unworkable, industry groups say

Moore says the bill has the support of the Retail Council of Canada, as well as the country's largest consumer groups.

The promise is likely to go over well with consumers tired of paying more or of having to drive to the U.S. for bargains. 

But other industry groups say the government’s plan is unworkable.

They argue the Competition Bureau will need to go on a hiring spree to be able to investigate every link in the supply chain — manufacturers, distributors, retailers — and to determine who, if anyone, is responsible for inflating prices.

And with more and more Canadian shopping online, it may have little effect.

In an op-ed piece published in August, the president of the Canadian Chamber of Commerce, Perrin Beatty, also questioned how the commissioner’s decisions would be made.

"The budget did nothing to explain what 'unjustified price discrimination' is, or why it would be illegal," Beatty wrote.

"No doubt many Canadians are rubbing their hands eagerly at the thought of the government bringing them bargains. They should think again. This cure is worse than the disease."

Legitimate reasons for higher prices

The government acknowledged in the budget that there are legitimate reasons for higher prices in Canada than the U.S., including higher labour costs, excise duties and shipping fees in a bigger, more sparsely populated country.

Those can account for as much as 10 per cent price difference, sources say.

Another complicating factor is that the value of the Canadian dollar has steadily lost value against the U.S. greenback this year, closing Monday at 87 cents US.

Sources say the goal of the legislation is to focus on the most obvious cases of price discrimination.

But even here, critics warn, the costs of complying with an investigation will be significant — costs that will likely be passed on to consumers.