Perrin Beatty is the president and chief executive officer of the Canadian Chamber of Commerce
It seems like all our lives, prices have been lower in the United States than at home. People on the border drive across to buy groceries and gas. The rest of us splurge during occasional shopping trips. Even when the Canadian dollar was worth just sixty three cents in the U.S., people still sought bargains across the line.
Tuesday, in announcing legislation, the federal government signalled it has had enough. Canadian consumers are tired of higher prices and now a government bureaucracy is finally going to get into action.
Under the terms of this law the competition bureau would investigate complaints of "price discrimination" which cause Canadian prices to be higher than U.S. prices. If there's no justification, the bureaucrats will have the authority to – is anyone surprised? – impose a fine, payable to the government.
Now, Ottawa insiders recognize this as theatre. The Competition Bureau is a small, overworked agency that has nothing like the resources needed to actually do what the government has promised. The Budget did nothing to explain what "unjustified price discrimination" is, or why it would be illegal (we 'discriminate' prices all the time. Ask any 65 year old lining up for the matinee at the movie theatre.)
In fact, the Senate Finance Committee studied the issue of cross border price discrepancies in early 2013 and came up with a few actions Ottawa could take to address the system. The government took a long look at boring items like 'changing import tariffs' and 'reducing our high regulatory costs' and decided not to do any of them, opting instead for direct intervention.
But just because this isn't a serious effort doesn't mean it's not serious threat. A lot of innocent bystanders will become collateral damage if the government proceeds to legislate.
To determine a "justified" price for any product or service, the Bureau will need to study entire industries, their costs, their expenditures, sales strategies, special incentives…etc. Where is that information going to come from? Well, if you're in the same industry as the company being investigated….it'll come from you. Hire a truck and start boxing up your files.
But beyond the costs and the impracticality of the scheme, there's a bedrock principle at stake; Canadians are not accountable to the government for how they conduct their business, as long as they follow the law.
No bureaucracy should have the right to demand an explanation as to why you asked that extra $5,000 when you sold your house, or why the last copy of a hot Christmas toy costs so much. It's called a free market.
This proposed legislation has an additional danger – it targets only products from the United States. We'll all be free to "price discriminate" when we sell inside Canada, or import products from Europe and Asia for sale here. But when we import from the U.S. we'll be accountable to the government.
This is a very dangerous game to play. Treating U.S. products differently from those of other trading partners seems very likely to violate trade agreements Canada fought hard to establish. We all – consumers especially – have a lot to lose in a trade fight with our biggest partner.
Competition policy is well established in Canada. The government's duty is to make sure consumers have an option. It doesn't have to be as good, or as cheap as the most popular offering, just as long as consumers can do what they do best – exercise choice.
It's never been easier for us to flex our consumer muscles. With Internet sales soaring, we don't even have to get in the car to choose a supplier whose price and service we prefer.
A free market is clumsy and frustrating. But it's infinitely better than state agencies setting prices.
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.