Canada investigates charges of overpricing by oil companies

Four Canadian subsidiaries of major US oil companies face a public inquiry into their pricing and other business practices following the conclusion of an eight-year antitrust investigation by the federal government.

Imperial Oil Ltd., subsidiary of Exxon Corporation, Shell Canada Ltd., Gulf Canada Ltd., and Texaco Canada Inc. were singled out in a report saying oil companies overcharged Canadian consumers by $10 billion between 1958 and 1973.

The massive,seven-volume report, the result of the longest and most expensive anti-trust investigation ever undertaken in Canada, said the big four oil companies and other, smaller petroleum firms acted in a way that reduced competition and increased prices.

Federal investigators concluded that they could not bring charges against the companies under Canada's antitrust laws, which have often been criticized as outdated and ineffective.

Instead, the report will be turned over to the federal restrictive trade practices commission, a quasijudicial agency which will hold public, nationwide hearings on the findings. The commission's inquiry is expected to take up to two years, at which time it can make recommendations to the government to prosecute the oil firms or require structural changes in the industry.

The report issued last week, said, "Excessive costs were imposed on Canadian consumers as a result of overcharges on transfer prices for imported oil levied by foreign parent companies on their Canadian subsidiaries, unduly high prices charged for domestic crude marketed in Ontario and particularly by unnecessarily high marketing costs."

The investigation leading to the 1,148-page report began in 1973 after members of the consumers association of Canada asked the federal government to look into increase of gasoline and heating oil prices in the early 1970s.

Oil industry executives, confronting the prospects of a lengthy public examination of their profits and operating procedures, denied they have conspired to push up prices and questioned the correctness of the government's action in placing the report before a quasijudicial tribunal. One executive said he feared being "tried in the newspapers."

Another, J. G. Livingstone, president of Imperial Oil, said, "In ny view, the allegation of a consumer ripoff will not stand up to inquiry by an impartial body."

The government of Prime Minister Pierre Trudeau drew sharp criticism in the House of Commons for its handling of the report. Opposition parties demanded the oil companies be taken to court if evidence showed they had acted illegally. There were charges that the Trudeau administration was conducting a public relations effort to gain support for its plans to buy out foreign-owned oil companies.

Although the report covered the years from 1958 to 1973, it suggested that changes in worlwide oil company operations since 1973 have further enhanced the companies dominant position in Canada.

"As a result, competition within the Canadian petroleum industry today is at its lowest ebb since 1958," it concluded.

In Canada, according to the findings, the four largest oil companies control about twice the share of the Canadian market that the four largest companies in the US market do -- 64 percent here vs. 31 percent in the US.

Using their market dominance in Canada, the majors followed parallel actions in tacit recognition of their mutual self-interest, most often following Imperial, the acknowledged industry leader, it was reported.

The parent companies of Canadian subsidiaries were blamed for driving up prices in Canada by charging their Canadian affiliates more than open world market prices for crude oil -- up to 63 percent higher in some instances.

Federal investigators concluded the companies used their control of refining in Canada to maintain upward pressure on prices and employed marketing practices "meant to prevent more efficient, lower-cost competitors from expanding and from passing on the benefits of lower prices to consumers."

The report also says that Canadian government policies, by forcing much of eastern Canada to rely on imported oil, put the major petroleum companies in a better position to charge higher prices for oil products sold in Ontario and the western provinces.