The federal government has hired a company to “closely monitor” whether retailers are passing price cuts the Conservatives first outlined in this year’s budget on to consumers.
In a statement issued Wednesday, Finance Minister Jim Flaherty said global market research company Nielsen will watch for price reductions on sporting goods and other household items whose tariffs Ottawa cut in April.
“Over the next year, Nielsen will be systematically verifying prices of a variety of products on which tariffs were eliminated,” the statement said.
The Conservative government estimates the tariff removal on items from ice skates to baby clothing has the “potential” to shave $79 million off Canadian households’ combined annual expenses.
Lower prices are far from a certainty however, and could be tricky to monitor, experts say.
For one, retailers aren’t being forced to lower prices but simply account for the removal of the tariffs in their costs. In theory, companies could elect to keep their prices at current levels and tell Nielsen their purchasing costs have gone up.
Stephen Gordon, an economist at Université Laval said companies will reduce prices on the affected goods if others move in that direction.
“We would expect prices would be forced down by competitive pressures,” he said.
A spokesperson for the federal department said Nielsen would “capture the price trend” for items affected by the tariff cuts as well other items that were not “to test the link between tariff elimination and consumer prices.”
Laval’s Gordon also noted however monitoring of retail prices is something that Statistics Canada does already with the consumer price index, which is used to determine inflation.
“They don’t really have to outsource this at all. Statistics Canada routinely surveys retailers for prices of certain things. This would not be extra work for them,” the professor said.
“So it’s not clear why they have to haul in Nielsen on this.”
The cost for the contract with Nielsen, disclosed in public documents, is between $50,001 and $100,000.
The savings from the current tariff reductions will also be more than wiped out if the Conservatives follow through on a plan to lift import costs on hundreds of other goods beginning in 2015.
Buried in the same budget, the Conservatives said they plan to raise tariffs on general imports from 72 countries that Ottawa has deemed no longer “developing”, including China, Thailand, South Korea and Brazil.
New import fees on items like running shoes and kitchen appliances could see $330 million more spent on the items annually, a sum several times more than the savings Ottawa hopes to pass along to Canadians under the current tariff cuts.
Finance Minister Jim Flaherty was focused on the present Wednesday.
A comment from the minister said his department will “closely monitor how retailers and businesses will pass these savings on to consumers.”
Prices for items such as ice skates could fall by nearly a fifth if retailers flow the full savings from not paying the tariff on to buyers. Others, like golf clubs, should see a more modest reduction in price of between 2.5 and seven per cent.
The Retail Council of Canada and Consumer’ Association of Canada each expressed support for the plan.
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