Why James Moore’s Quixotic quest against the cross-border price gap deserves to be cheered

Share

You'd never take James Moore, the button-down Industry Minister, for a modern-day Canadian Don Quixote. But his current mission, unmasking cross-border price discrimination, carries some of the same futility as tilting at windmills.

Still, let's give him a cheer for his quest, aimed at one of those things that bugs us all: companies charging more for their products in Canada than they do in the United States. And a raspberry for promising a lot and delivering little.

The issue, to recap, is price discrimination between goods sold on either side of the border. Think of a book with marked $24.95, but $29.95 in Canada. Or flat-screen TVs selling for 25 per cent less in New York. Or the iPad that goes for $60 more in Canada.

That has always provoked Canadian suspicions of discrimination, but when Canadian dollars were trading roughly at parity, it was downright infuriating. There was a vein of consumer anger.

The Conservatives, being shrewd politicians, decided to tap that sentiment. They promised action. They'd stop the price gougers.

So yesterday, at a Toys R Us in Etobicoke, Mr. Moore boldly announced legislation to kind of allow the Competition Bureau to look into it and maybe figure out there's discrimination, and if so, subject the perpetrator to having their name in a report.

Or more precisely, he has tabled legislation to give the Competition Bureau more powers to subpoena documents and seek court orders for company records, to allow it to investigate allegations of price discrimination. If he finds a company guilty of such practices, the Commissioner of Competition can publish his findings. How Canadian: if you're guilty of price-gouging, we'll politely ask you to stop.

At this point, it's obvious that Mr. Moore had to do something, anything, to provide some nod to all the past rhetoric.

And it's not easy. Sometimes prices are higher than in the U.S. because of transportation costs, or regulation, or uncompetitive retailers, or the risk of fluctuating currency. (Mr. Moore's bill comes after the Canadian dollar has fallen, too.)

Economists and experts, like the Competition Policy Council convened by the C.D. Howe Institute, warned that proving geographic discrimination – charging more purely because it's Canada – would be hard. And they argued that trying to regulate prices would do more harm than good.

Besides, it was, in their view, meddling in the market. Finn Poschmann, vice-president of the C.D. Howe Institute, noted that product managers set prices based on what the market will bear, and what will allow their firm to sell product. At least the meek measures proposed by Mr. Moore are "relatively harmless," he said. Mr. Moore, meanwhile, argues that he has now proposed a conservative method to tackle the problem, one that doesn't mess up free markers.

The Competition Bureau already has powers to seek documents from companies, but the new law expands them to a new type of investigation. The new ones will probably be used rarely.

Paul Collins, a competition lawyer with Stikeman Elliott and a former senior official in the Competition Bureau, said it's going to be a "challenge" to show price differences are because of discrimination and not some other factor. And then the penalty is only being outed in public. It's not clear the Competition Bureau will find the whole thing an effective use of its resources. "I'm a little skeptical," he said.

So it's mostly futile. It's pandering to public discontent. It will, according to Mr. Poschmann, cost government and business money, and maybe even discourage a few companies from doing business in Canada.

So why give this Quixotic quest any cheer at all? Because markets don't always work like perfect theory. Some companies have strong brand power, and engage in less-than-perfect-competitive practices like dictating retail prices, country by country. Yes, they are charging what the market can bear. But looking into country-pricing once or twice might just encourage a few to think the market can bear a little less. Most of us would like to hear a few companies explain themselves. So go ahead, Mr. Moore. Just don't promise results.