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VII  Recommendations

The Committee's objective is to identify the type of environment that will enable the Province's gasoline market to work to the benefit of consumers. The Committee has developed its recommendations mindful of the complexity of the gasoline business and that some gasoline regulatory strategies, particularly those involving the control of prices or margins may work against the consumer interest.

1. The oil industry is undergoing a rationalization process nation-wide. The Maritime region has lost one of three refineries and hundreds of retail outlets since 1990. The Committee shares the concern voiced by some presenters that a continuation of the type of price war activity witnessed in 1996, could reduce the number of players at the retail level to a point where competition will not be sufficiently vigorous to protect the consumer interest. New Brunswick already has a relatively low proportion of independents. In this context, the Committee believes it is important for the government to track the structure of the industry within New Brunswick, including market shares, wholesale and retail prices and the number of competitors in each market area. The Committee recommends that the Government undertake a thorough review of its motor fuel industry and gas tax policy monitoring systems. The current monitoring program which principally entails monthly price surveys in each major market must be expanded. With appropriate, timely and accurate data, the government can be more proactive in protecting the consumer interest and resolving problems with the industry.

The Committee recommends that government continue with the existing price survey program and implement:

  • A retail level reporting system providing by outlet perhaps quarterly, information such as volume, number of pump nozzles, brand, and ownership arrangement.
  • A wholesale level reporting system for information such as volumes and prices.
  • A regular public reporting process comparing prices in New Brunswick to other suitable benchmarks such as the cost of crude, the New York Harbour price of gasoline, or prices in other jurisdictions.

2. The Committee considers the maintenance of competition at all levels of the industry to be the key to protecting consumers. The maintenance of fair competition and efficient markets is a Federal Government responsibility. Since 1935, the Federal Competition Act has had specific provisions making price discrimination and predatory pricing for the purpose of substantially lessening competition or eliminating a competitor, offences under the Act. It is clear, however, that few prosecutions have proceeded under the Act. Representatives of the Competition Bureau reported that there are "one or two cases in both instances that have gone through the courts". One reason for the limited effectiveness of the Act appears to be the strict burden of proof required to establish that an offence has occurred. It is very difficult to establish beyond a reasonable doubt that price discrimination or predatory pricing occurred and substantially lessened competition. The Committee recommends that the government urge the Federal Government to undertake a fundamental review and assessment of the Competition Act to determine whether its criminal law model (i.e. providing for fine, and/or imprisonment with the accompanying burden of proof, beyond a reasonable doubt) effectively serves the public policy goal of preventing discriminatory or predatory pricing to substantially lessen competition. The alternative model of a legislative framework to consider would be based on providing civil remedies to consumers and victims of discriminatory or predatory pricing. We believe that such a system could afford more protection to consumers.

3. It may take time to achieve the amendments to the Federal Competition Act referenced in Recommendation 2. In the interim, there are means within the jurisdiction of the Government to address the risks that predatory pricing or price discrimination could lessen competition to the detriment of consumers. To this end, the Committee recommends that the Government implement provisions that would limit the opportunity for predatory pricing, limit the damage that could be inflicted by discriminatory pricing practices, and restrain the ability of refiner marketers to create arbitrary price zones. Specific provisions the Committee believes might achieve these ends are:

  • prohibiting wholesalers or refiner marketers from charging wholesale prices higher than the retail price at their customer stations in the same area; and,
  • requiring public posting of wholesale price schedules, excluding transportation costs for branded and unbranded customers, and according to purchase volumes and terms at all wholesale racks in the Province.

4. Quebec is in the process of implementing a regulatory regime involving the establishment of minimum margins, aimed at protecting its independent retail sector. The Committee has reviewed numerous reports and analysis on the impacts of regulated prices and below cost selling laws which effectively regulate a minimum retail margin. It is very difficult to establish a regulated margin that will not create some market inefficiency or subsidy for less efficient operators. The Committee concludes that regulating prices or minimum margins creates a risk of causing higher prices to the detriment of consumers. The Committee recommends that the Government closely monitor the mechanics and effectiveness of the Quebec program.




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