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Flaherty Takes Centre Stage in Pricing Backlash

By Heather Scoffied, Steven Chase and Marina Strauss, Globe and Mail Update

WASHINGTON, OTTAWA AND TORONTO - Finance Minister Jim Flaherty says it's his job to pressure retailers into lowering their prices and passing on the savings generated by a stronger Canadian dollar.

He said he has been putting the heat on retailers for the past couple of weeks, and plans a further meeting on Tuesday to encourage store-owners, big and small, to either cut their prices or explain loud and clear why they can't.

"Prices should go down over all. Now, it won't all happen overnight. It'll happen over time, and different sectors of the retail economy have different realities in terms of pricing," Mr. Flaherty told reporters on the way into a Group of Seven meeting in Washington, D.C. "But [retailers] should explain that, and that should help consumers be more informed."

It's not the first time Mr. Flaherty has assumed the role of persuader in chief and put public pressure on free market participants to change their behaviour. Last December he launched a personal campaign to convince banks to lower automated banking machine fees, an effort that yielded debatable results.

Mr. Flaherty denied yesterday that he was trying to impose price controls or interfere with a free market.

"It's an opportunity for us, on behalf of the Canadian people, to encourage retailers to reflect [on] their prices [and] the fact that they have an advantage with respect to costs right now," he said. "Their costs go down because of the increased value of our currency, and that should be reflected in prices. And the sooner the better."

BMO Nesbitt Burns deputy chief economist Douglas Porter, who was among the first to raise public concerns about Canadian retail prices, acknowledged it's "debatable" whether it's the job of the finance minister to tell firms to adjust their behaviour, but he said he's not bothered by it.

"Jawboning isn't stepping in [to the market]. I would have a problem if it went beyond cajoling and the government actually started to weigh in with legislation," he said.

Yesterday Mr. Flaherty said consumers also have a key part to play in encouraging retailers to cut their prices.

The currency surged to 103.55 cents (U.S.) yesterday, up from 102.70 cents on Thursday, and an increase of more than 20 per cent since the beginning of the year, with most of that gain in the past two months.

At the same time, pricing data from Statistics Canada yesterday suggested some retail prices are climbing higher, not coming down. Consumer prices rose 2.5 per cent in September compared with a year earlier, led by a big jump in gas prices.

Separately, Hudson's Bay Co. announced that it was going to renegotiate import contracts to cut retail prices by between 5 and 25 per cent. The lower prices should start coming into effect by Friday at the company's Zeller's stores.

Mr. Flaherty lauded the Bay's move, saying it's exactly what he's asking of retailers.

"This is good news for consumers in Canada, that some of the retailers have started to be responsive the need to reduce their prices, given the increased purchasing power of the Canadian dollar," he said.

Retailers say Tuesday's meeting was planned weeks in advance as part of a lobby day for the industry on Parliament Hill, but acknowledged Mr. Flaherty has recast the event, making it longer and adding other firms to the meeting list. Companies expected to be represented at the meeting include Toys "R" Us Inc., Forzani Group Ltd., Staples Inc., Canadian Tire Corp. Ltd., Wal-Mart Canada Corp., Hudson's Bay Co. and Sears Canada Inc.

Diane Brisebois, Retail Council of Canada president, said the true culprit behind high prices is not the retailers but the suppliers of big recognizable national brands. She said she hopes she can set Mr. Flaherty - and Canadians - straight about why prices in Canada are generally higher than those in the United States.

Suppliers of national or global brands charge Canadian retailers 20 to 50 per cent more than they charge a U.S. retailer for the same item, she said.