On Price, Who's Naughty? Who's Nice?
Ask Canadians whether retail prices are lower in the United States than they are here in Canada and you are likely to hear a resounding yes. Many people would tell you that’s just how it is.
But it doesn’t have to be.
Earlier this month, the Government of Canada introduced proposed legislation aimed squarely at the root of the problem. The Price Transparency Act will help identify those situations where some manufacturers and wholesalers charge significantly more for their goods sold in Canada simply because we live north of the border.
There can of course be legitimate reasons for price differences, whether at the wholesale or retail levels. Higher transportation, distribution and labour costs can be important factors. Customs duties aren't uniform between the two countries and those differences show up in the price on the shelf.
In some cases, there are valid regulatory differences on matters like product safety and language that can mean additional production costs for goods sold into Canada.
Those who seem to want to give the manufacturers a free pass point to the fluctuating level of the dollar. But this isn’t about exchange rates. If it were, we would see price reductions whenever the Canadian dollar appreciates in value against the US dollar.
Even correcting for the exchange rate, there are manufacturers who engage in what is called “country pricing”, that is the practice of charging Canadians simply because they believe that we are willing to pay more, or that because of typical sole-supplier arrangements, we have little choice but to do so.
Well, Canadians do have a choice. We can choose to purchase brands that treat Canadians fairly over those that engage in price-gouging.
But we are only going to be able to do so if we have all of the information in front of us. That’s where the Price Transparency Act comes in. The Act empowers the Competition Bureau to closely examine and report on those situations where there is no good reason for the gap between Canadian and US prices on the same items.
Some of the early commentary on the Price Transparency Act has mis-characterized it as being a price-regulation regime. It is very far from being that. This is about identifying the factors which contribute to price differences and calling out those parties who are engaging in unjustifiable country pricing. It also provides government and businesses with an important tool of moral suasion when dealing with manufacturers who are engaging in this practice.
Those who have called this legislation an overreach miss the point of the Competition Act and the purpose of the Competition Bureau. Whether it be on price-maintenance, anti-dumping or other competition concerns, the goal of the Competition Act is to address unacceptable business practices that make prices higher than they otherwise would be. Seen in this light, the new powers of investigation proposed by the Price Transparency Act are a logical extension of competition policy in Canada.
Canadians will continue to make their own spending decisions and that's as it should be. Let’s make sure that those are well-informed decisions, so that next holiday season, you’ll know exactly who is being naughty and nice when it comes to treating Canadians fairly.
- Diane J. Brisebois
President and Chief Executive Officer
Retail Council of Canada