Gasoline prices: Illegal activity versus normal competition — Our role
When you notice that two gas stations always seem to sell gas at the same price, or when you see sudden price jumps on a Friday before a long weekend, you might be tempted to think there is something illegal happening.
In fact, gas prices that rise and fall in step can actually be evidence of healthy competition. However, under the Competition Act, behaviour such as price-fixing, which is when competitors mutually agree to set prices, is against the law.
Other types of illegal activity under the Act include allocating markets, such as when two or more competitors divvy up sales, territories, customers, or markets among themselves. Restricting supply, which is when two or more competitors agree to control or limit the supply of goods and services, is also against the law.
Individuals and corporations that are convicted of price-fixing, allocating markets, or restricting supply can receive fines of up to $25 million. Individuals can also be sentenced to a jail term of up to 14 years.
Our role: Investigate
The Competition Bureau does not regulate gasoline prices. However, if we find evidence of price-fixing, market allocation, restricting supply, or other anti-competitive behaviour in a gasoline market, we will investigate and take action.
A complex and lengthy price-fixing investigation that began in 2004 led to guilty pleas or verdicts against 33 individuals and 7 companies for their role in a gasoline price-fixing conspiracy in four towns in Quebec: Victoriaville, Thetford Mines, Magog, and Sherbrooke. The guilty parties received fines totalling over $4 million and prison terms totalling 54 months.
In another case, Pioneer Energy, Canadian Tire Corporation, and Mr. Gas pleaded guilty to fixing gasoline prices in Kingston and Brockville, Ontario. The companies were fined a total of $2 million.
In addition to conducting investigations of potential wrongdoing, the Bureau also reviews mergers to ensure they do not substantially harm competition. Therefore, when two or more gasoline-related companies (or any businesses) combine operations through a merger or acquisition, we will review the transaction to determine whether it could have a substantial impact on competition, which could result in higher prices or less product choice for consumers. This typically involves analyzing large amounts of information from different sources, such as from market participants or the merging parties. We also do a detailed economic analysis.
If we find the merger is likely to harm competition, the Bureau may negotiate a remedy with the merging parties. If one cannot be reached, we may apply to the Competition Tribunal (a specialized court) to stop the merger from proceeding in whole or in part, or we may ask the Tribunal to prohibit certain actions by the merging parties.
Examples of negotiated remedies
In 2017, Alimentation Couche-Tard Inc. sought to buy CST Brands Inc., whose operations included selling gasoline under the Ultramar banner. After a review, we concluded the proposed purchase would likely result in a substantial lessening of competition in many local markets in eastern Canada. To address this concern, Couche-Tard agreed to sell 366 gas stations and gasoline supply contracts.
In 2016, Parkland Fuel Corporation wanted to buy Pioneer Energy. Because we were concerned this would substantially lessen competition in a number of local markets, we filed an application with the Competition Tribunal to stop part of the merger from proceeding. Ultimately, the Bureau and Parkland reached an agreement in which Parkland would sell a number of gas stations and gasoline supply agreements in six markets in Ontario and Manitoba. The company also agreed that, for a six-year period, it would not increase the margin it earned on wholesale gasoline sales in two markets in Manitoba.
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