Ottawa Aims to Reduce Geographic Price Discrimination with New Legislation

by Istvan Fekete on December 10, 2014

The government wants to reduce the unexplained and often significant gap between Canadian and US prices for the same products, and the frustration caused by it. To tackle the practice of geographic price discrimination, Industry Minister James Moore announced new legislation yesterday: the Price Transparency Act.

As the Minister highlights in the press release, the legislation aims to help ensure Canadians are not charged higher prices than Americans simply because of where they live. The Price Transparency Act provides the Commissioner of Competition with the tools necessary to investigate alleged cases of price discrimination and to reveal situations where consumers are unfairly forced to pay higher prices than American customers.

The legislation is backed by hard evidence in studies showing that the prices of goods in Canada are, on average, up to 25% higher than they are in the US. Also, in 2013, the Standing Senate Committee on National Finance found that country pricing by manufacturers is one of the key causes of the Canada–US price gap. More recently, the American Economic Review reviewed 4,000 different products and compared their US and Canadian prices.

The study entitled “International Prices, Costs, and Markup Differences” is signed by Gopinath, Gita, Pierre-Oliver Gourinchas, Chang-Tai Hsieh, and Nicholas Li, and was published in the American Economic Review, Vol1. No. 6. It’s important to note, though, that the writers used weekly barcode data as the level of retail prices and wholesale costs for 250 US stores in 19 states and 75 Canadian stores in 5 provinces of a single retail chain between January 2004 and June 2007.

We can notice such “geographic price discrimination” by looking at Apple’s pricing strategy, for example, although we are aware that multiple factors can influence the final price of the products, and the country’s currency strength is one of them.

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Written by: Istvan Fekete. Follow by: RSS, Twitter, Facebook, or YouTube.

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