Mr. G. R. GEARY (South Toronto) moved the second reading of Bill No. 6, to amend the Railway Act (investigation of subsidiary of telephone or telegraph companies).
He said: Mr. Speaker, except in its form this bill is similar to one which was introduced last year and which stood on the order paper without advancing beyond, I think, the first reading. It is designed to give to the Board of Railway Commissioners jurisdiction when dealing with an application for an increase of telegraph or telephone tolls to inquire into and investigate the affairs, including, but not so as to limit the generality of the term, the costs, prices, sales, profits and financing of any company, corporation or firm in which any telegraph or telephone company subject to the jurisdiction of the Board has in the opinion of the board a controlling interest as shareholder or partner, or otherwise, or of which such company, corporation or firm in the opinion of the board is a subsidiary, and to examine the books, accounts, vouchers and papers of the said company, corporation or firm.
The Board of Railway Commissioners has, it is granted, complete jurisdiction to inquire into all the affairs of a telephone company which is before that board on an application to revise the rates charged by the company in question to the public. But although the telephone company may be shown to have many millions of dollars of its profits or its moneys invested in another concern, of which concern it has absolute control, the railway board is estopped at that point from investigating as to the reward those moneys invested in the subsidiary company are obtaining, which reward will go to the betterment of the finances of the company under discussion.
I have in mind one case, that of the Bell Telephone Company of Canada, doing business in the provinces of Ontario and Quebec, whose rates were before the railway board for consideration. It transpired during the investigation of the affairs of that company that it controlled, by holding a majority of shares of stock, the Northern Electric Company; that it had invested in that company
Railway Act-Mr. Geary
a great deal of money which came from the coffers of the parent company, and that that company had made enormous amounts of money out of the sale of apparatus, to the extent of fifty per cent of its whole business, to the Bell Telephone Company, its parent. The question was raised whether the prices charged by the subsidiary company to the parent company were fair. The railway board was desirous of ascertaining whether those prices were fair or not, but the board found itself confronted with lack of jurisdiction to make any inquiry at all into the affairs of this subsidiary company. It took list prices, and as far as one can see from a list price, those prices compared favourably with what some other companies might have charged to the Bell Telephone Company. No objection could be made to list prices as such, because they were listed and one could not go beyond that, but it transpired that many elements entered into the business conducted between these two companies. Every hon. member knows well that the elimination of the cost of selling, advertising, sending out travellers, keeping uncertain quantities of stock on hand, and so on, goes to reduce very much the expenses of a company which is 'handling any goods. The board were not allowed to investigate this phase of the matter. Some members of the board said that they were anxious to get further information as to the affairs of the Northern Electric Company, but they found themselves estopped absolutely by the ruling of the chief commissioner that in point of law the board had no right to ask any questions as to the financial operations of that subsidiary or controlled company. I can quote from the record in that particular case what the assistant chief commissioner said when he ruled iagainst the admission of evidence in regard to the affairs of the Northern Electric Company. He said:
I expressed and I think a few members of the board also expressed regret not to_ have that information, but it was clearly left in the discretion of the Bell Telephone Company either to offer information on that point or not to offer it.
As a matter of fact, when that intimation had been made, the Bell Telephone Company in this particular case decided that it would be wise to give information to the board because it had been intimated quite clearly by at least one member of the board that they must bear the onus of not having disclosed information which, in the opinion of that member and other members of the board, it would be most desirable to have in the conduct of the inquiry. But the chairman ruled that under the Railway Act he
could not go into these questions, on which as indicated in that passage, a member or members of the board desired to have information. All that is asked now is that the board be authorized to get that information from a company which is owned by a company at present under the jurisdiction of the board.
I am going into this matter somewhat more fully than I had expected I should be obliged to, because as a rule on the second reading it is either a question of the principle of the bill or nothing,, and it is not quite in order to discuss clauses of the bill. If no objection is raised to the principle of the bill, I understand that as a rule the second reading is given. There can be no question of the government objecting to the principle of the bill, because in the speech from the throne there are put into the mouth of His Excellency words indicating that the government proposes during the present session to bring down legislation authorizing an investigation into the affairs of subsidiary companies. That is a wider provision than this, and if the government has it in mind to put ou the statute book such legislation as is indicated in the speech from the throne, the greater will include the less, the less being the bill now before the house.
It may be urged that the 'bill is discriminatory in this respect, that it lays open to investigation by the board the affairs only of a company which is a subsidiary of a telephone or telegraph company, and not the affairs of a company which may be the subsidiary of any other company, such as a railway company., which is under the jurisdiction of the board. But the government, I believe, proposes to sweep that aside and make its legislation applicable to all companies under the Railway Act, so there can be no question involved as to the intention of this bill and the intentions of the government.
It does seem to me, if I may say so, anomalous that you may investigate the whole, that is, the affairs of say the Bell Telephone company, and you may not investigate the part, that is, the affairs of the Northern Electric Company, owned by the Bell Telephone Company.
The Board of Railway Commissioners found that the prices charged by the one company to the other were fair. I am not for one moment quarrelling with that statement so far as the information which was before the railway board goes, but the difficulty is that the railway board was obliged to consider the question and make a finding without having before it the necessary information
Railway Act-Mr. Geary