WATCH: Ted Chernecki on the new federal legislation that would force companies to explain why their prices are higher in Canada than in the U.S.
Anyone who has travelled south of the border has noticed that just about everything seems cheaper in the U.S. than in Canada. The federal government says they want to do something about it.
The feds have introduced the Price Transparency Act, which would give Canada’s Commissioner of Competition the power to force companies to justify why their prices are higher in Canada than in the United States.
Industry Minister James Moore says the aim is to protect Canadian consumers, not regulate prices.
“It’s called geographical price discrimination or a more blunt way of putting it is price gouging of consumers, price gouging Canadian consumers because of where they live,” said Moore.
Under the Price Transparency Act, the Competition Bureau would be able to compel companies to explain their strategies and how they determine Canadian prices.
The bureau would then publicize its findings but could not impose sanctions unless anti-competitive practices were uncovered.
A couple of years ago when the Canadian dollar was at par with the U.S. greenback, British Columbians lined up to cross the border for better deals. The price gap then was approximately 25 per cent. Today, with the loonie down to 87 cents US, the gap has narrowed to 10 per cent.
Critics wonder if the proposed legislation would be the most effective way to help Canadian consumers. SFU Professor of Marketing Lindsay Meredith thinks he has a simpler solution.
“Just tell Canadians they can bring back as much loot from the United States back into Canada–tax-free, duty-free-as they want,” he says. “Boy, will you see some margins get adjusted in one hell of a hurry.”
With the lower dollar, one economist says the price gap isn’t that wide when compared to countries other than the U.S.
“It’s really the U.S. that’s a bit of an outlier here,” says Doug Porter, Chief Economist of BMO Capital Markets. “The U.S. is a very, very competitive market. Retailers, wholesalers, producers will tend to underprice in the U.S. to win market share.”
George Addy, a Toronto-based lawyer with competition expertise, says cross-border pricing is a highly complex issue dependent on “almost an infinite number of factors.”
-with files from Ted Chernecki and Canadian Press
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