Brian Brownlee Public Hearing Testimony

Someone once said, I think wisely, that the purpose of competition is to eliminate competition. I think in many ways that's what is happening all across this province and perhaps the world. The mechanisms that the government has to deal with that are perhaps becoming more limited.

LegislativeAssemblyofOntarioCostofArms.jpg

Legislative Assembly of Ontario
March 7, 2000

Public Hearing Testimony
Sault Ste. Marie, Ontario, Canada
Mr. Brian Brownlee and Mr. Rene Robert, farmers

Standing Committee on Regulations and Private Bills
1st session, 37th Parliament

FRANCHISE DISCLOSURE ACT, 1999
Consideration of Bill 33, An Act to require fair dealing between parties to franchise agreements, to ensure that franchisees have the right to associate and to impose disclosure obligations on franchisors

FERME A VICOLE ROBERT LTEE

The Acting Chair (Mr Ted Chudleigh): Next we have Mr Robert and Mr Brownlee. Welcome to the standing committee, gentlemen.

*Mr Brian Brownlee*: Thank you, Mr Chairman and members. I'm Brian Brownlee and this is Mr Robert. He's an egg producer in Timiskaming. I was at a TFA meeting. He was there with some concerns about what was going on with his production and he told me about it. I learned about these hearings and I thought this was a really specific example of what is happening to the producers in the north. I had him draft up a letter and got him out here today. I'll read you the letter of his concerns and what has happened in his situation, and he'll be here to answer questions.

As others have stated, the bill is there, and what we're looking for is going further to preventing large companies from disabling local producers from getting on the store shelves.

We would like to introduce ourselves as Ferme Avicole Robert Ltée. On October 1, 1997, we acquired a poultry business producing fresh eggs. We had a grading station and were delivering the eggs to the local market every week around our area in Timiskaming. People were very happy that we were supplying our nearby stores for two reasons: The first one is that they were able to buy locally. Our customers appreciated the fact that they were helping out the local agricultural community. The second and more important reason is the freshness of the eggs. These eggs were made available to the customer the same week they were produced by the chickens.

Personally, we think it makes a lot of sense to us and also to the customers we were supplying. Each week was going by and we were constantly fighting and working hard to keep our customers happy. This turned into a big problem as time went on because bigger companies, for example, Gray Ridge and Son Ltd, kept moving into our territories and cutting our necks in the store and making deals with franchisors to keep us off the shelves. These companies wanted to supply all of northern Ontario, which we think should not be happening. In some cases, they were dropping their price when it came to selling the eggs on the market and it forced us to get out of the grading business.

We went to another store, My-T-Fresh, out of Iron Bridge. We were able to get them to grade our eggs. We were still able to compete. So we decided we would buy graded eggs from Iron Bridge. The deal was working well. We would send our eggs down one week, they would be graded and we would receive them back the following week in our containers, with our name on them, and therefore we would be able to keep our customers happy. However, then Gray Ridge came along and bought up My-T-Fresh, as we heard earlier tonight, closing that grading station down. We were then forced to send our eggs to Gray's grading station in St Mary's. There was no way he could guarantee it would be our eggs that would be returned. To make matters worse, it was only a matter of a couple of months and we were receiving rotten eggs in our containers, which were delivered to the store and sold to our customers. This caused the stores to no longer accept eggs with our label on them.

We are now forced to sell all of our eggs to Gray Ridge at quota price and can no longer approach grocery stores. We find we can no longer make a living off a business on which we once could. We feel we should be able to. What is happening now is not only unfair to us, but also the customers are getting cheated as well. They are forced into purchasing older eggs and, even though they know that, they have no choice. This is why we're writing this letter and getting involved, to make you realize what people are going through in the north.

For solutions to our problems, we need regions in which a producer may be able to sell their eggs. An egg producer would be applied a zone or have a certain area. They would have to fill up the demand in that area and perhaps get more eggs, if needed, or vice versa. This way everyone would be helping each other and everyone would be happy creating a few jobs in the north as well as in the south.

Thank you for being comprehensive and taking the time to listen to these concerns.

The Acting Chair: Thank you very much. That leaves us about four minutes for each caucus for questions.

Questions

Mr Gill: I don't have too many questions. This seems to be a basic rule that's happening in the marketplace right now. I'm not trying to see it as a franchisee-franchisor problem. It's more of a big guy-small guy problem. To be honest, I'm not sure how we can try and help you. Perhaps you can lead us on that. We are trying to address Bill 33 in today's agenda. Some of the other members of the committee can perhaps shed more light on it. I think it's a situation which is happening in every business. I know it's terrible from the standpoint of small business being gobbled up by larger business, but to be honest, I'm not sure what we can do in terms of Bill 33. I don't want to hold out hope falsely. I just wanted to make that comment.

Mr O'Toole: If I may pick up from Mr Gill's point, we have heard the concerns with respect to the supply side of this issue. For me, specifically in the agricultural sector, it's very important because my riding has the same issues really: size and also access. You've got the federation of agriculture plus you're a supply-managed business, as were the dairy people. You have some issues internally to look at with respect to the board, the quota, the numbers within the region.

I suspect it's more than appropriate to listen to your producer group, commodity group, and their solution to this. I've heard what you've said here, the regional aspect of it, that it's an appropriate type of activity to regulate. I think there is some motive for the government to consider that; that is, looking at the economic development of Ontario and indeed regions of Ontario is a responsibility, I suspect, to some extent, of the government to facilitate. Mining, pulp and agriculture come into that whole resource sector kind of commodity. I'd be very happy to entertain how it could be done, because the moment you cap a market you sort of say: "You're the big guy. You've got all the business. So there's two egg producers. Blow away all the little egg producers." Do you understand? It's a very complicated monopoly kind of regulation. You're suggesting that a government that's supposed to facilitate competition is going to end up being responsible. You're going to get everybody coming to you saying, "Give me a little piece of the northern market," or the eastern, whatever. Do you understand? It would be nice to sit down and write a rule and say it's going to keep everybody - it would keep you happy, and the other 19 egg farmers are going, "Well, where's - " you know? Do you understand? I'm prepared to listen, for sure.

Mr Brownlee: You see, what's happening more is that they are going to the store and they are going to the franchisor, and there are lots of stores where you couldn't put eggs.

Mr René Robert: They wouldn't take the eggs.

Mr O'Toole: Poor quality too?

Mr Robert: At one point, but at one time it was fresh eggs from the week.

Mr O'Toole: I understand completely. Thank you.

Mr Robert: But all of a sudden what's going to happen is, they are going to go up the other way. There's another one quitting up there. He's got a grading station, so he's going to service that right up to the north there. The quota from there is going to go to Ottawa, and he is going to service the grading right up to there. One guy is going to service all the north, so suddenly we're going to be out too; I'm going to be out someday. It's going to happen. He's going to throw me out; I'm only a drop in the water. He's got 300,000 birds; I've only got 12,000, so I'm a drop in the water.

Mr Brownlee: And you're saying you can't have individual areas where there are groups, because you're kind of supporting that guy. You're supporting a local farmer here, you're supporting a local farmer in the next area and the next area, and if you don't do that, this is what's happening. One big guy comes and takes the whole area, and then who's to say down the road? Right now he's selling eggs at whatever, but when there's no competition there—

Mr O'Toole: I believe I'd be prepared to listen to the marketing board's solution to this, looking at regions and regionalized outcomes, because it is more than just that the government can't tell the marketing boards, who have made these decisions. I really do appreciate more than ever before the supply-side issues on this particular disclosure requirement. Let's put it that way.

Mr Brown: Someone once said, I think wisely, that the purpose of competition is to eliminate competition. I think in many ways that's what is happening all across this province and perhaps the world. The mechanisms that the government has to deal with that are perhaps becoming more limited. That does not mean we should not be trying.

I think in many ways - I was reflecting on this a while ago - the turn of this century is much like the turn of the last century, in that the turn of last century in North America was focused on anti-trust, breaking up large companies, providing that there was true competition in the marketplace. What we are seeing, unfortunately, with dairy products being frozen out of certain retailers, eggs being frozen out, is that the real competition within the marketplace is gone, which means consumers don't have the choice of price, quality etc, or supporting their local industry, if that is what they choose to do.

I'm perplexed, though, at trying to come to the solution to the questions you've posed. They are real problems.

Mr Brownlee: If I could just say this: There were certain stores he couldn't put his eggs in, but there were stores where he still could. But then in terms of the big guy getting bigger and pushing out more and more—

Mr Brown: And the marketing power of the big guy to promote his particular product, where you are more limited in your ability.

The other thing, and I've had this conversation with some people, is that it may very well be worse before it's better. I'm familiar, and I think most people are, that the major auto companies are now going to Internet auctions to buy the parts for their vehicles. If that is happening in the automobile industry, you can almost guarantee that it will happen in every other industry as it comes along, and for a small guy to compete in that kind of situation is something I think government is going to have to address.

Mrs Boyer: I just had one or two points. I sympathize with your problem, and I can see, like everybody, that it doesn't really pertain to Bill 33, but there's only one question I want to ask. When you talk about Gray Ridge and Son and the other company, My-T-Fresh, were they franchisors?

Mr Robert: They were two grading stations.

Mrs Boyer: Yes, but they were privately owned?

Mr Robert: Yes. But you see, being that I—

Mme Boyer: Vous pouvez parler français, si vous voulez.

M. Robert: Moi, j'envoyais mes oeufs à My-T-Fresh. En envoyant mes oeufs à My-T-Fresh, si lui passe puis achète la grading station à My-T-Fresh - il est sûr qu'ils vendent mes oeufs à My-T-Fresh. En effet, là il y a deux poulailleries. Ils ramassent les deux poulailleries en s'en venant -

Mme Boyer: Ils se mettent ensemble.

M. Robert: Oui, ils entrent ensemble. Là, il s'en va sur l'autre bord, là-bas, et il y a un autre qui lâche au mois de juin. Lui, il va s'en aller là-bas et le quota s'en va dans le bout d'Ottawa. C'est certain qu'il va avoir encore d'autres marchés là. En fait, c'est le gros qui grossit et le petit qui crève. Les autres ont crevé. Quand on s'en va à des magasins, on n'a pas de chance. Il y en a des magasins qui ne veulent même pas nous donner la chance de seulement mettre notre produit là. Ça fait que, qu'est-ce que tu fais ?

Mme Boyer: Vous auriez peut-être—on vous suggère d'aller à un palier du gouvernement, à un autre comité. Thank you.

Mr Martin: I'm a little bit disappointed that the members of the committee still haven't heard that in part V of Bill 35 there is a provision that calls for allowing franchisees to source product wherever they can get it at a competitive price as long as it's not a trademark issue. That would give these folks what they're looking for.

So I'm going to be tabling, Raminder, an amendment - you can bet on this - at some point in this proceeding that will call for us to move beyond Bill 33 to resolve the issue that we are hearing. We've heard over and over again here today of local producers not being able to get their product onto the shelf of some of the bigger stores in their areas so they can be in the market and customers have some choice. That's all they are asking for. They are not asking for preferential treatment or to enter into an anti-trust legal debate or whatever. Simply put, they want the franchisee to have the freedom, if he or she chooses, to go to you and say: "I want your eggs in my store. I'll buy them from you at a good price and I'll sell them, and we'll both make money," and the economy of the north will be better served when that happens.

I'm hoping that the rest of you, having heard today so intimately and in such an articulate way from the folks who are directly affected, will recognize that we need to do that, because if we don't, there will be a few more—as a matter of fact, I suspect that even before we get to considering the amendment, which will be in April or May sometime, there will be a few more small producers in northern Ontario put out of business. That will be really unfortunate. What I'm saying to you here today is that that is my intention, to table that section as an amendment to Bill 33.

You know that there is discussion about to begin at the federal level regarding the Competition Act which will hopefully have some impact on this, but it's a way down the road. That's going to take a year or two or three to unfold, and who knows what's going to happen at the end? There will be an election in between, and if they elect Reform - that's political, and we won't get into that; this isn't a political forum here - we're done like dinner. But we have an opportunity here at this time to go assistance to resolve your issue if the committee will accept as part of this bill part V of my bill, which says that franchisees, where it's not a trademark issue, should be allowed to purchase product where they can get it at a competitive price.

The Acting Chair: Thank you very much. We appreciate your coming and bringing this issue to the table.

This document is a verbatim copy of this witness’ oral testimony. To review the original transcript: http://www.ontla.on.ca/web/committee-proceedings/committee_transcripts_details.do?locale=en&Date=2000-03-07&ParlCommID=1&BillID=&Business=Bill+33%2C+Franchise+Disclosure+Act%2C+1999&DocumentID=19726#P493_180129

Copyright (c) 2000
Office of the Legislative Assembly of Ontario
Toronto, Ontario, Canada


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