Price gap policy headed for ‘costly failure’: report

The C.D. Howe Institute’s Competition Policy Council says the federal government should abandon plans to regulate the “price gap” on similar products sold in Canada and the United States...

The federal government announced the price gap crackdown in the last federal budget. The plan is one of several steps the Conservative government is taking to advance a “consumer friendly” economic agenda.

The council, which consists of economists, academics and lawyers who specialize in competition matters, met on April 25 to consider the matter. The result of their meeting is a four-page document, Cross-Border Price Regulation: Anti-Competition Policy?, released Thursday, that condemns the move...

The federal government has said the Competition Bureau would be responsible for enforcing the price gap policy. The council concludes that this would be a huge problem because, as they see it, the Conservative government proposal is unenforceable.

One of the biggest problems with the policy would be defining what actually constitutes an “unjustified” price difference. Rapidly fluctuating exchange rates make it difficult to pin down a comparable price between like products. Exchange rates also shift manufacturing and distribution costs so often that it would be impossible for a Canadian retailer to base its retail price on consistent input costs.

The council believes that other practical steps, such as eliminating or lowering import tariffs, reducing inter-provincial trade barriers or easing away from supply management quotas, could achieve the objective of lowering costs for consumers.

This has been excerpted from the 8 May 2014 article by the Financial Post, and is available in its entirety at http://business.financialpost.com/2014/05/08/price-gap-policy-headed-for-costly-failure-report/.