OTTAWA — Ever wonder why gas prices at service stations in certain markets track one other so closely? The Competition Bureau says it suspects an analytics company may be “guiding” pump prices for over 1,700 fuel stations in Canada creating potentially “anticompetitive” markets.
Court documents obtained by National Post reveal that competition commissioner Matthew Boswell is concerned that Kalibrate Canada, a fuel and convenience retail analytics company, uses data collected from hundreds of gas stations in Canada to suggest pump prices to its customers.
The court documents show that the Competition Bureau believes Kalibrate collects pricing, cost and output information from gas stations across Canada and then uses “artificial intelligence, machine learning, algorithms and bespoke consulting services” to offer “pricing guidance” to gas station operators.
The commissioner suspects the result is “substantially prevented or lessened” competition in markets across the country as gas retailers are able to maintain higher prices without fear of losing customers. He suggests some of Kalibrate’s services are “anticompetitive.”
“While Kalibrate denies it is engaging in anticompetitive conduct, it urges gas retailers to resist lowering their prices to attempt to win market share and promotes its fuel pricing services as a way for gas stations to increase their margins and avoid price wars,” the bureau wrote in its July 11 application to the Federal Court.
The commissioner is asking the court to compel Kalibrate to provide it with a significant trove of information to advance the inquiry it launched in February. The commissioner has not made any findings of wrongdoing against Kalibrate at this time.
In a statement, Kalibrate’s lawyer, Denes Rothschild, said the commissioner’s request is a routine part of an investigation and is in no way a finding that Kalibrate “has engaged in any problematic, anti-competitive or illegal conduct.”
In an affidavit filed to court, the Competition Bureau’s senior competition law officer Alexandre Jokic, said that Kalibrate does a pump price survey of retail gas prices in “at least” 70 cities across Canada every weekday. He says the company counts three of Canada’s five biggest gas station operators among its clients.
Through products such as “fuel pricing management” and “fuel price optimization”, Kalibrate offers services that help gas stations determine and automatically implement price changes, Jokic alleged.
“Kalibrate’s marketing often suggests gas stations can increase prices while avoiding competitive responses,” reads the affidavit.
It added: “A matter of serious concern is that Kalibrate’s incentive to increase its customers’ profits gives it an incentive to reduce price competition between competing gas retailers.”
In a letter to the commissioner dated June 28 and included in the court filings, Rothschild denied that his client sold anticompetitive products, argued that the commissioner misunderstood Kalibrate’s services, and said that the information request is “overbroad, excessive, and unnecessarily burdensome.”
Rothschild, a partner at Borden Ladner Gervais in Toronto, wrote that the only services the company provides that relate to gas prices are Kalibrate Fuel Pricing products and their “price recommendation features,” known as KPR.
“There is absolutely no sharing of data between separate customers of KPR’s products (or other Kalibrate customers),” Rothschild wrote.
“As such, it is difficult to conceive of how any use of KPR could have the effect of preventing or lessening competition substantially in any market.”
Rothschild noted that “only five customers” representing 15 per cent of gas stations in Canada use KPR products, and the largest of them recently announced it was ending that contract.
He also noted the firm has only one customer for its “PriceTracker” service for which “field personnel” are sent to survey prices at competitors’ gas stations chosen by the client.
He added that there is “no reasonable basis” to conclude that the company’s products prevent or lessen competition “substantially” and argued that the commissioner’s request should either be dropped or circumscribed.
In the Competition Bureau’s court filings, the commissioner cast doubt on the company’s assertions and said he wanted to check those claims for himself.
“Kalibrate makes representations (e.g., in blog posts, its website, white papers, and videos) that when a retailer partners with Kalibrate it benefits not only from software, but Kalibrate’s deep human expertise in retail gas pricing, from Kalibrate’s unique datasets, and from Kalibrate’s ability to relate price strategy to market share, market position and ‘difference to competition’,” reads Jokic’s affidavit.
In June, the Federal Court granted a similar order to the Competition Commissioner as part of his inquiry into if Amazon is “wilfully” turning a blind eye to fake reviews on its various platforms.
National Post
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