Canada: US versus local product price gap to narrow

James Moore, Industry Minister, will announce details of legislation in the near future, giving the Commissioner of Competition, who helms the federal Competition Bureau, tools that can be used to pressure companies to decrease the price on items sold in Canada.

The bill will also give the commissioner the authority to compel businesses to disclose the confidential agreements between international suppliers and Canadian distributors.

The bill is aimed at helping determine whether there are legitimate reasons for significant price differences between goods sold in Canada and the US Global manufacturers say they need to charge retailers more in Canada than in the US to cover higher shipping, taxes and other costs.

In the 2014 budget, the Conservatives cited independent studies saying Canadians were paying anywhere from 10 to 25% more than US citizens for most goods in 2011, even after adjusting for the exchange rate and higher Canadian sales taxes.

The Competition Bureau will be able to compel testimony from executives of all retailers operating in Canada, among others, and gain access to the confidential agreements with multinational suppliers that the government believes will include the price the distributor and retailer have contractually agreed to. The testimony would likely be delivered in private as part of an investigation, as opposed to a public courtroom setting.

The changes will authorize the commissioner to seek court orders to compel the production of confidential evidence relevant to differential pricing between Canada and the US. The commissioner will be empowered, for the purposes of such inquiries, to seek court orders to compel witnesses for examination, the production of records and written returns of information.

A 2013 Senate report on the price gap blamed a lack of competition between retailers and said that the Canadian government should cut tariffs to give consumers a break. The report also called for a harmonization of product safety standards between Canada and the US, cutting the 10% mark-up on imported books and raising the USD 20 limit on cross-border goods that are exempt from customs fees charged by couriers.

The government targeted cross-border price differences in the 2013 budget when it eliminated tariffs on baby clothing and sports equipment, rates as high as 18% for skates, to try to narrow the gap.