Canada’s competition legislation cannot be used to force dominant firms in the fertilizer industry to lower prices, a senior Competition Bureau official said last week.
During a May 28 appearance before the House of Commons agriculture committee, bureau senior deputy commissioner for mergers Adam Fanaki heard repeated complaints about the impact of large fertilizer companies limiting production to keep prices high.
MPs from all parties asked why the Competition Bureau cannot act.
“What we see here is they (companies) have basically turned down the dial on production to keep the price high and it’s having such an impact that there is a very real concern that farmers will not buy potash or will not buy a lot of potash in this coming season,” said Ontario Conservative Pierre Lemieux, parliamentary secretary to agriculture minister Gerry Ritz.
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He said that while he accepts the right of companies to price their product, “there is a zone where people start feeling they are getting gouged, that the price is too high for what’s going on and that it is actually having a very detrimental impact on their operations as farmers.”
Fanaki said he was sympathetic but there is little he can do.
“The Competition Act is not a vehicle for price regulation and doesn’t make it unlawful for firms to charge high prices,” he said. “I say that with all recognition that high prices have a very significant effect on Canadian farmers and on Canadians generally.”
Lemieux said it is not a question of companies colluding to keep prices high. It is an issue of a company like Potash Corp. having enough market share to affect many producers.
“The market share is held by a few companies and they are throwing their weight around and it’s to the detriment of farmers,” said the Ontario Conservative. “It’s everywhere, this discontent. That’s how I feel they’re in a zone that they shouldn’t be in.”
Similarly, the Competition Bureau official said there was no evidence that the 2005 purchase of Ontario packer Better Beef by Cargill reduced competition because they purchased cattle in different regions of the country.
And the bureau allowed the acquisition of Lakeside Packers by XL Foods because it determined that American packers were competitors for Canadian cattle that would keep the price up.
However, Fanaki said the bureau is watching the impact of American country-of-origin labelling to see if U.S. packers become less of an alternative for Canadian sellers as American plants begin to shun Canadian product.
As well, he said the spring closure of the XL Moose Jaw plant after the merger is a concern for the bureau. For the moment, it accepts the company explanation that the plant is closed temporarily because of an unusual shortage of cull and fed cattle.
But he told MPs that if the bureau finds evidence that the merger has hurt farmers, it can reverse its decision not to intervene.
“I can assure members of this committee that the bureau will not hesitate to take appropriate remedial action should our assessment reveal that the transaction has resulted or is likely to result in a substantial lessening of competition,” said Fanaki.
He also told Liberal Wayne Easter that the issue of packers owning cattle does not create a situation that the bureau finds uncompetitive. In fact, he said it can help farmers and feedlot owners.
“What cattle suppliers we spoke to told us is that these types of arrangements can significantly reduce the risk taken on by feedlots and increase the return to suppliers by locking in profits and allowing suppliers to take advantage of higher yield cattle,” he said. “These types of arrangements provide suppliers with stability that they may need to survive in what are otherwise volatile markets.”
At the end of the meeting, after more than an hour of answers about how the Competition Bureau did not have the power to deal with many farmer complaints, committee chair Larry Miller asked Fanaki to recommend changes to the Competition Act that would give the bureau power to deal with farm economy issues.
