Prices at the Gas Pump

What Is the Competition Bureau?

The Competition Bureau is an independent law enforcement agency responsible for the administration and enforcement of the Competition Act, the Consumer Packaging and Labelling Act, the Textile Labelling Act and the Precious Metals Marking Act. Its role is to promote and maintain fair competition so that Canadians can benefit from competitive prices, product choice and quality services. Headed by the Commissioner of Competition, the organization investigates anti-competitive practices and promotes compliance with the laws under its jurisdiction.

What Is the Competition Act?

The Competition Act is a federal law governing most business conduct in Canada. It contains both criminal and civil provisions aimed at preventing anti-competitive practices in the marketplace.

Many Canadians believe that gasoline prices are too high. They want the federal government to do something

What Can be Done About Gasoline Prices?

The federal government does not control the price or distribution of most goods and services sold in Canada, including gasoline. Except in an emergency the federal government does not have the constitutional jurisdiction to regulate retail gasoline prices. Regulation of retail gasoline prices is a provincial responsibility. Gasoline retailers must compete with one another in the marketplace. And, just like other business people, gasoline retailers want to increase their sales, expand their market share and improve their profitability.

However, price-fixing and other anti-competitive activities are illegal under the Competition Act.

What Role Does the Bureau Play?

Each year, the Bureau receives numerous complaints about gasoline prices. Complaints are examined to determine whether the provisions of the Competition Act have been violated.

The Bureau investigates anti-competitive activities and promotes competition. It does not set prices or regulate businesses.

The Bureau investigates suspected anti-competitive behaviour which may violate the Competition Act. If, after investigation of a criminal matter, the Commissioner decides that there is enough evidence, cases are turned over to the Director of Public Prosecutions who decides whether to prosecute in the criminal courts. In the case of civil law matters, such as mergers and abuse of dominant position, the matter may be brought by the Commissioner before the Competition Tribunal, an administrative tribunal.

What Kinds of Activities are Illegal Under the Act?

It is illegal for gasoline retailers:

• to agree among themselves to set common prices that may lessen or prevent competition in a serious way;
• to try to influence another retailer's prices by agreement, threat or promise; or
• to persuade wholesalers to cut off gasoline supplies to discount retailers, because of the discounters' low prices.

It is illegal for gasoline wholesalers:

• to try to influence a retailer's prices by agreement, threat or promise; or
• to refuse to supply a gasoline retailer just because that retailer charges low prices.

All of these activities are illegal under the criminal provisions of the Competition Act. To convict someone for such an offence, the evidence must be convincing "beyond a reasonable doubt", it must meet the standard criminal law test.

Franchise retailers who sell gas on consignment often change their prices on instructions from their head offices. This is not illegal under the Competition Act.

What Information Does the Bureau Need Before it Can Begin a Formal Inquiry?

The Bureau needs information about an agreement among competitors to charge common prices, or evidence that competitors have communicated, in private, about the prices they charge.

What About Similar Gas Prices?

Many motorists base their choice of gasoline on price alone - they consider that gasoline brands differ in few, if any, other ways.

Retailers usually post their prices on large street-side signs. Since retailers know that the majority of consumers are very sensitive to price, gas stations often strive to meet or beat their competitors' prices. As a result of this situation, competing retailers frequently charge similar or identical prices.

The fact that retailers might charge similar prices does not in itself constitute an offence under the Competition Act - there must be evidence that competitors have made an illegal agreement to set those prices.

What Causes Price Swings?

The fact that gasoline prices swing or fluctuate can be an indication that competition is working. Prices fluctuate as retailers compete, and each tries to match what the other is charging. Changes in the cost components of gasoline such as the cost of crude oil can also cause price swings.

Why are Gasoline Prices Higher in Some Parts of Canada?

• All provinces and territories charge different taxes on gasoline.
• Retailers in large cities usually sell more gasoline. This allows them to operate at a lower profit margin on every litre sold.
• Some Canadian cities are close to the American border. When gasoline is cheaper in the United States, prices in the neighbouring regions of Canada are frequently forced down.
• Local demand for gasoline, and local supply conditions, vary from area to area.
• It costs more to transport gasoline to the pumps in some areas of Canada. Higher expenses show up in the final retail price.

What About Heating Oil and Diesel Fuel Prices?

The demand for home heating oil is seasonal, and the product is usually bought under contract from a supplier for an entire season, at prices that tend to be consistent. The demand for diesel fuel is also relatively constant; it comes, for the most part, from truckers and farmers. Trucking fleets typically negotiate their contracts on an annual basis.

What Can I Do?

If you have questions about how gasoline prices are set, or if you believe that gasoline prices are too high, get in touch with your local retailer, or your retailer's head office. For industry explanations of gasoline pricing, you can call the Canadian Centre for Energy Information 1-877-606-4636 (toll free) or visit their Web site. You can also contact the Canadian Petroleum Products Institute at 613-232-3709 or visit their Web site.

If you have information which suggests that gasoline retailers have broken the law, inform the Information Centre of the Competition Bureau.

If you are an employee of a company which you believe may be engaged in a criminal offence under the Act, the whistleblowing provisions of the Act will protect your identity and guard you against retaliation by your employer. Any information provided will be kept strictly confidential.

If you are involved in conduct which you believe may be contrary to the Act and you wish to disclose that fact but are afraid of being prosecuted, the Immunity Program may provide you with immunity from prosecution or favourable treatment in return for cooperation.

The Bureau produces CD-ROMS and publications on various aspects of the Competition Act, the Consumer Packaging and Labelling Act, the Textile Labelling Act and the Precious Metals Marking Act. To find out more about our CD-ROMs and publications, contact the Information Centre:

Information Centre
Competition Bureau
50 Victoria Street
Gatineau QC K1A 0C9

Toll-free: 1-800-348-5358
National Capital Region: 819-997-4282
TDD (for hearing impaired): 1-800-642-3844
Fax: 819-997-0324
E-mail: compbureau@cb-bc.gc.ca
Web site: www.competitionbureau.gc.ca

This publication is only a guide. It provides basic information about the Competition Bureau and the acts it administers. For further information, you should refer to the full text of the acts or contact the Competition Bureau at one of the numbers listed above.

Cat. No. RG52-29/7-2003
ISBN 0-662-67743-9