The federal government should consider policies to tackle “excessive net profits” in the food industry, the House of Commons committee studying food prices said in its latest report.
The committee recommended the government look into ways to address these profits in "monopolistic and oligopolistic sectors in the food supply chain," which it says are driving up prices for farmers and consumers.
In a report presented on Thursday, the committee detailed its research into the causes of food inflation and insecurity in Canada, including the high-profile testimony of grocery executives over the past several months.
The leaders of Loblaw, Metro, Sobeys-owner Empire, Walmart Canada and Costco have all faced questions from MPs over the size of their profits amid high food inflation, which the grocers say they haven't unduly profited from.
The committee report offered a number of recommendations that range from lowering the barriers to entry for new companies to Canada, to making legislative changes to strengthen competition law regarding mergers.
The committee also recommended that the government discuss with the provinces and territories legislation to make the grocery code of conduct mandatory.
It comes on the heels of an announcement from Loblaw that it plans to sign on to the code after months of pressure on the country's largest grocer to participate.
The industry-led code is intended to help level the playing field for smaller companies in the industry.
It's meant to be voluntary, but in recent months pressure has grown on the government to make it law instead as not all of the major grocers appeared to be willing to sign on.
In December, Loblaw and Walmart told the committee they were concerned it would increase prices for Canadians. And earlier this year, the committee wrote a letter to those two grocers, saying if they didn't sign on, it would recommend that the code be made mandatory.
Last week, Loblaw announced that after months of discussions it was ready to sign on to the code as long as all stakeholders do.
"The code now is fair, and it will not lead to higher prices," said president and CEO Per Bank.
At the time, Walmart said the company is reviewing the latest draft of the code.
The grocer did not immediately respond to a request for comment. Neither did Costco.
The Retail Council of Canada declined to comment on the report.
Michael Graydon, CEO of the Food, Health & Consumer Products of Canada association and chairman of the interim board for the code, said the group is "very supportive" of all the committee's recommendations.
When it comes to the code, "our industry's desire is a fully inclusive code that involves all stakeholders. That remains our goal and so (I) am hopeful that can be achieved," he wrote in an email.
Francis Chechile, a spokesman for Agriculture Minister Lawrence MacAulay, said the government has been clear that it supports an industry-led code, but that after years of work, "it's well past (time) that all major retailers join the Code."
The government is calling on the remaining large retailers to sign on to the code as their participation is vital to its success, Chechile said in a statement.
"In the meantime, we are exploring all available federal options, including legislation. As key aspects of the Code would fall under provincial jurisdiction, we have encouraged provincial and territorial governments to do the same.”
The committee's report references research the Competition Bureau released last year that noted the Canadian grocery sector has become increasingly concentrated through a series of mergers and acquisitions in recent decades.
The Competition Bureau is currently investigating the use of restrictive clauses in the grocery sector, controls in lease agreements that it claims hamper competition in the industry.
And industry minister François-Philippe Champagne has said he’s seeking a foreign grocer to strengthen competition in the Canadian market.
The report's recommendations include that the government should empower the Competition Tribunal to dissolve or prohibit a merger if that merger would result in excessive combined market share. It also recommends that the law be strengthened by shifting the burden onto merging companies to prove that their deal won't hurt competition.
A spokeswoman for Champagne's office highlighted recent changes the government has made to the Competition Act, saying bills C-56 and C-59 "have already addressed concerns such as curbing excessive profits, strengthening competition law, and facilitating fair market access."
The best way to lower prices and help smaller players is to increase competition, spokeswoman Audrey Milette said in a statement, adding that having more players in the market is one way to put downward pressure on prices.
"We will continue to stand up for Canadians by working with provincial and territorial partners to make life more affordable and continue to hold corporations accountable."
Though grocery inflation has moderated significantly from its highs, reaching just 1.4 per cent in April, prices have risen 21.4 per cent over the past three years. The resulting squeeze on consumers' wallets combined with higher interest rates has led to public pressure for the government — and the grocers — to act. Some consumers have launched a boycott of Loblaw, the biggest of the Canadian grocers, to voice their frustrations.
The grocers, especially Loblaw, have been expanding the number of discount grocery stores in their portfolios to meet increasing demand from Canadians for lower prices. In turn, their discount stores have been major drivers of overall sales growth.
This report by The Canadian Press was first published May 24, 2024.
Canada's Competition Bureau has launched investigations into the parent companies of grocery chains Loblaws and Sobeys for alleged anticompetitive conduct, court documents reveal, with Sobeys' owner calling the inquiry "unlawful."
The Federal Court documents show the Commissioner of Competition launched the probes on March 1, saying there's reason to believe the firms' use of so-called property controls limits retail grocery competition.
The commissioner claims the controls that the grocery giants have baked into lease agreements are designed to restrict other potential tenants and their activities and are hampering competition in the grocery market.
The Competition Bureau revealed its investigation into the use of property controls in the grocery sector in February.
At the time, deputy commissioner Anthony Durocher told a House of Commons committee that property controls can be a barrier both for independent grocery stores and chains looking to expand, as well as for foreign players looking to enter Canada.
That’s why in a report last June, the bureau recommended the government limit their use in the grocery sector in order to help boost competition and make it easier for new supermarkets to open.
Industry minister François-Philippe Champagne has said he’s seeking a foreign grocer to strengthen competition in the Canadian market.
Loblaw Cos. Ltd. and Sobeys parent Empire Co. Ltd. are two of the three major Canadian grocery companies and each owns a number of grocery chains across the country.
Details of the investigations are contained in a pair of court applications lodged by the commissioner on May 6.
Sobeys owner Empire has pushed back against the investigation, saying in a separate court application that the probe gave the commissioner "the appearance of a lack of independence" amid public criticism from federal politicians over grocery pricing and retailers' conduct.
Loblaws' parent company is co-operating with the bureau's review, said spokeswoman Catherine Thomas on behalf of George Weston Ltd.
"Restrictive covenants are very common in many industries, including retail. They help support property development investments, encouraging opening of new stores and capital risk-taking," she said.
The commissioner applied in the Federal Court to order Empire and George Weston to hand over records about real estate holdings, lease agreements, customer data and other records.
In the court documents, the commissioner describes Empire and George Weston’s holdings in real estate investment trusts, or REITs. In both cases, the companies’ own grocery banners are significant tenants for the real estate companies.
Through a subsidiary, Empire holds a 41.5 per cent interest in Crombie Real Estate Investment Trust, and Empire is an anchor tenant in the majority of Crombie’s properties, the documents say, adding that Empire’s ownership interest in Crombie puts it in a position to exercise influence over the REIT.
George Weston has a controlling ownership interest of 61.7 per cent in Choice Properties Real Estate Investment Trust, and Loblaw accounted for more than half of Choice Properties’ rental revenue in 2023, the documents say — and Choice Properties and Loblaw have a strategic alliance under which the REIT has agreed to “significant restrictions” limiting “its ability to enter into leases with supermarket tenants other than Loblaw.”
The commissioner's probe is focused on the companies' operations in Halifax, but also more broadly across the country.
The documents show the inquiries are zeroing in on two types of property controls in contracts and commercial leases used by the grocery retailers "in many markets in Canada."
Restrictive covenants in private contracts, the commissioner says, "limit or restrict" how a piece of land can be used and can apply even after changing ownership.
The covenants can "leave restrictions or exclusions on competitors that extend beyond ownership of the land, sometimes for decades," the applications say.
The probes are also looking into "exclusivity clauses" in commercial lease agreements that "limit or restrict" who a landowner can lease to and which products can be sold by other parties close to another leaseholders' business.
"According to market participants, property controls are widespread in the retail grocery sector, impacting where and how businesses can compete in the retail sale of food products," the commissioner claims.
The property controls, the commissioner says, may give the companies "the ability to exclude actual or potential competitors from selling food products within certain geographic areas or to dictate the terms upon which they carry on business."
“This is a novel case,” said Michael Osborne, chair of the Canadian competition practice at law firm Cozen O’Connor.
Previous cases alleging abuse of dominance involved companies with significantly more market power than George Weston or Empire have individually, said Osborne.
Therefore, the Bureau will have to argue that the companies are jointly dominant because they're using the same tools and together represent a large portion of the market, he said.
“The Bureau has never brought a joint dominance case before.”
Sobeys parent Empire claims the commissioner was wrong to start the inquiry because it doesn't have a "dominant" market position.
In a separate application in Federal Court that has yet to be decided by a judge, the company denies that property controls are anti-competitive and says they "are not unique to the grocery sector, but have been widely used for decades in a range of retail and other sectors across the country."
Empire also claims the inquiry was launched for an "improper purpose," claiming the grocery sector has been the subject of an "inordinate" amount of attention from politicians.
The company says the Competition Commissioner must make decisions independently and "free from political interference and direction."
Empire says the decision to launch an inquiry, amid a wave of criticism over rising grocery prices, raises "at least the appearance of a lack of independence of the Commissioner."
The company's lawyer declined to comment since the matter is still before the courts.
Competition Bureau spokeswoman Sarah Brown confirmed the formal investigations launched March 1 and said the Bureau had filed a motion to strike Empire’s application for judicial review.
She declined to comment further, citing ongoing court proceedings.
The bureau is using new tools it gained from recent amendments to the Competition Act that broaden the scope of the kinds of agreements it can look into.
Canada’s major grocers have recently been under public and political pressure as food prices have risen by double digits over just a handful of years.
The grocers have denied allegations of so-called greedflation, but the government has called on them to take action to stabilize food prices. All three major Canadian grocers have also agreed to participate in an industry-led code of conduct meant to help level the playing field for suppliers and smaller grocery retailers.
This report by The Canadian Press was first published May 24, 2024.
Almost two-thirds of Canadians feel that inflation at the grocery store is getting worse, a new poll suggests, even as food inflation has been steadily cooling.
A new Leger survey found that almost 30 per cent of Canadians believe food inflation has been primarily caused by grocery stores trying to increase profit margins. Another 26 per cent think it’s mostly due to global economic factors, while one in five blame the federal government
Inflation on groceries was 1.4 per cent in April and helped drive overall inflation lower to 2.7 per cent, Statistics Canada said.
However, even low inflation still means prices are going up. And over the past three years, grocery prices have risen 21.4 per cent, according to the agency.
The major grocers have said they did not unduly profit from inflation, amid political and public pressure over the rising cost of food and other necessities.
A group of consumers organized a boycott of Loblaw-owned stores in May over frustrations with higher prices and industry concentration.
Seven out of 10 Canadians polled said they are aware of the ongoing boycott, and 58 per cent said they support it, but only 18 per cent say that they or someone in their household have joined the boycott.
The poll highlights rural and urban residents’ differing views on the boycott, and suggests it’s more difficult for those living outside an urban area to participate in a boycott of Loblaw-owned grocery stores.
Urban residents polled by Leger were more likely to say they support the boycott than suburban and rural residents, and were more likely to be participating in it as well.
About half of Canadians say it seems unfair that the boycott targets only Loblaw, and almost two-thirds of respondents don’t think the boycott will have an effect on grocery prices. Urban residents were more likely to say they think the boycott will help lower prices, with almost three-quarters of rural Canadians polled saying they think the boycott won’t impact prices.
For those taking part in the boycott, 40 per cent say they are turning to a “big box grocery store” such as Costco or Walmart, 31 per cent said they are turning to another national grocery chain like Sobeys or Save on Foods, and 23 per cent said they are shopping at an independent local grocery store.
Rural boycott participants were more likely to be shopping at an independent store than participants in urban and suburban areas.
Leger surveyed 1,519 Canadians between May 17 and May 19, asking about grocery inflation, the Loblaw boycott and grocers’ profits. Online surveys cannot be assigned a margin of error because they do not randomly sample the population.
This report by The Canadian Press was first published May 22, 2024.
This is a corrected story. A previous version misstated the statistic on how many Canadians were boycotting Loblaw in the headline.
