FORMER WATCHDOG JOINS WAGE- FIX FIGHT
Legislation ‘gap’ means no help in grocer dispute
Canada’s former competition watchdog says Ottawa needs to look at strengthening rules on wage fixing, echoing an outspoken MP who has been pushing for change ever since the three largest grocers simultaneously cut pandemic pay bonuses for front- line workers this summer.
“There’s just a gap in the legislation in my view,” said John Pecman, the federal competition commissioner until 2018 and now a senior business adviser at Toronto- based law firm Fasken Martineau Dumoulin LLP.
Pecman’s concern comes amid a long and lonesome campaign waged by Liberal MP Nathaniel Erskine-smith, who for months has been calling for blowback against the big grocers.
After Loblaw Cos. Ltd., Sobeys’ parent Empire Co. Ltd. and Metro Inc. each ended their $2-an-hour wage increases on the same day in mid- June, Erskine- Smith clashed with their chief executives in a parliamentary hearing and repeatedly called for the Competition Bureau to launch an investigation.
If there was a legislative obstacle stopping the bureau from investigating, Erskine- Smith wanted the bureau’s commissioner to say what it was, so he could work to change the law.
But this week, after the bureau hinted it was unable to proceed with an investigation, Erskine- Smith said he has accepted that he will likely have to push for a change in the law himself.
“I’ve been kicking the tires on this with ( Industry Minister Navdeep Bains’) office,” he said, adding that he has requested the government mention the issue in next week’s Throne Speech.
“It’s a matter of ensuring that we’re learning the lessons of the pandemic and we’re better protecting workers.”
Protecting workers isn’t currently one of the purposes of the Competition Act. Pecman, who spent 34 years in various positions at the Competition Bureau, said the current law’s focus is on protecting consumers, which can make it tougher to pursue wage fixing and other anticompetitive labour-related conduct since lower wages can lead to lower prices.
“The test, ultimately, is a consumer welfare test,” Pecman said. “That’s one of the underlying issues behind this whole wage- or price-fixing thing: Are consumers worse off ? That’s the challenge for the legislation and the bureau.”
As it stands, the Competition Act treats wage fixing as part of a broader set of civil offences, known as “buy-side” agreements. Such agreements are designed to try to bring down the price of business inputs — the cost of a bag of flour, or the hourly wage of a cashier — rather than driving up the final sale price for consumers.
Because buy- side agreements can end up benefiting consumers with lower prices, the act requires extra proof that conduct by a group of businesses reduced or prevented competition.
“The question becomes: is labour just another input, or is labour something different and special that the government should have different rules for?” said Huy Do, co-leader of the antitrust and competition group at Fasken who also serves as chair of the Competition Law Section of the Canadian Bar Association.
Pecman, who oversaw a high-profile probe into bread price fixing in the grocery industry during his five-year term as commissioner, suggested the wage- fixing issue could be addressed with some fairly simple changes to treat labour separately from other inputs.
Since the Competition Act includes a section that lays out the purpose of the law, Pecman recommended expanding the purpose beyond protecting consumers to include the fair treatment of labour.
“The policy- makers should be looking closely at the Competition Act to deal with this type of issue,” said Pecman.
Currently, only three anticompetitive agreements are considered criminal under the act: price fixing, market allocation and limiting the production of supply.
Those offences — known as hardcore cartel conduct — are considered “per se” illegal, which means agreements that are “so clearly offensive,” prosecutors don’t need to prove it had a harmful impact, said William Wu, a lawyer at Mcmillan LLP in Toronto who defends against criminal cartel cases.
Pecman suggested legislators could change the act to make wage fixing and other labour offences per se illegal, though only in cases where the workers are not already protected by a labour union.
Competition commissioner Matthew Boswell, Pecman’s successor at the bureau, noted in a recent letter to Erskine- Smith that the current requirement to prove an offence has harmed competition made for a high bar.
“Proving a substantial lessening or prevention of competition is not a low threshold,” Boswell wrote on Monday, responding to Erskine- Smith’s August request for an investigation.
To prove a negative impact in wage- fixing cases, Boswell noted the bureau looks at how the agreement affected “competition between employers for similar labour,” he said.
After reviewing Boswell’s letter, Pecman suggested it wasn’t likely the bureau would be proceeding with any investigation.
“That’s the way I would read it,” he said.
The bureau has repeatedly declined to comment on whether or not it is investigating and referred questions about possible gaps in the legislation back to the government.
But Pecman said the bureau during his tenure as commissioner had started to explore issues around labour after the U. S. Federal Trade Commission ( FTC) released guidance on wage fixing in the U. S. Any change in Canada, however, needs to come from legislators, he said.
In the U.S., wage fixing and other labour-related schemes are considered per se illegal and don’t require any proof of a negative impact, according to a comparison of the Canadian and American approaches to wage fixing writ
Are consumers worse off? That’s the challenge for the legislation and the bureau.
ten by Mark Katz, a partner at Davies Ward Phillips & Vineberg LLP.
“The U. S. authorities are also very concerned about employers exchanging information regarding compensation or other terms and conditions of employment,” Katz wrote in 2016, after the FTC released its guidance.
In July, the top executives from Loblaw, Empire and Metro were called to explain their wage cuts in front of a parliamentary committee, where Metro chief executive Eric La Flèche testified that he called competitors on several occasions to ask when they planned to end the pay bonuses for staff.
Empire chief executive Michael Medline told the committee he made sure his legal counsel was also on the call and chose not to give La Flèche an answer. Loblaw president Sarah Davis also said she didn’t provide a definitive answer in two calls with La Flèche.
Davis also testified that she sent a “courtesy email” to her competitors informing them of her decision to cut the bonuses two days in advance. All three companies have denied any wrongdoing.
“There is no reason for such communication, except to collaborate among competitors in order to reduce workers’ wages,” Erskine Smith wrote to Boswell on Aug. 24. “I have no doubt that, based on its 2016 guidance, the FTC would have pursued this matter had it occurred in the U.S.”