Achi news desk-
The federal government should consider policies to deal with “excessive net profits” in the food industry, the House of Representatives committee investigating food prices said in its latest report.
The committee recommended that the government look into ways to deal with these profits in “monopolistic and oligopolistic sectors of the food supply chain,” which it says are driving up prices for farmers and consumers.
In a report presented Thursday, the commission detailed its research into the causes of food inflation and insecurity in Canada, including the highly publicized testimony of grocery executives over the past few months.
The leaders of Loblaw, Metro, Sobeys-owner Empire, Walmart Canada and Costco have all faced questions from MPs about the size of their profits amid high food inflation, which the grocers say they have not profited too much from.
The committee’s report offered a number of recommendations starting from lowering the entry barriers for new companies to Canada, to making legislative changes to strengthen competition laws regarding mergers.
The committee also recommended that the government discuss with the provinces and territories legislation to make the grocer’s code of conduct mandatory.
It follows Loblaw’s announcement that it plans to sign the code after months of pressuring the nation’s largest grocer to participate.
The industry-led code is designed to help level the playing field for smaller companies in the industry.
It’s supposed to be voluntary, but in recent months pressure has mounted on the government to make it law instead, as not all major grocers seem willing to sign up.
In December, Loblaw and Walmart told the commission they were concerned it would raise prices for Canadians. And earlier this year, the commission wrote a letter to the two grocers, saying that if they didn’t sign, it would recommend making the code mandatory.
Last week, Loblaw announced that after months of discussions, it was willing to sign the code as long as all stakeholders did so.
“The code is now fair, and it will not lead to an increase in prices,” said Per Bank President and CEO.
At the time, Walmart said the company was reviewing the latest draft of the code.
The grocer did not immediately respond to a request for comment. Neither does Costco.
The Retail Council of Canada declined to comment on the report.
Michael Graydon, executive director of the Food, Health and Consumer Products Association of Canada and chair of the code’s interim board, said the group is “strongly supportive” of all the committee’s recommendations.
As for the code, “the desire of our industry is an inclusive code that includes all stakeholders. That remains our goal and so (I) hope it can be achieved,” he wrote in an email.
Francis Chechila, a spokesman for Agriculture Minister Lawrence Macaulay, said the government had been clear it supported the industry-led code, but that after years of work, “it’s long overdue for all the major retailers to join the code”.
The government is calling on the remaining major retailers to sign the code because their participation is essential to its success, Chechila said in a statement.
“In the meantime, we are exploring all available federal options, including legislation. As key aspects of the code will be under provincial jurisdiction, we have encouraged provincial and territorial governments to do the same.”
The commission’s report refers to research published by the Competition Bureau last year, which noted that 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 harm competition in the industry.
And Industry Minister Francois-Philippe Champagne said he is looking to foreign grocers to strengthen competition in the Canadian market.
The report’s recommendations include that the government empower the Competition Tribunal to break up or prohibit a merger if that merger would result in excessive combined market share. It also recommends strengthening the law by shifting the burden to merging companies to prove that their deal will not harm competition.
A spokeswoman for the Champaign office emphasized the recent changes the government made to the competition law, saying Bills C-56 and C-59 “already addressed concerns such as curbing excessive profits, strengthening competition laws and facilitating fair access to the market.”
The best way to lower prices and help smaller players is to increase competition, spokeswoman Audrey Maillet 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.”
Although grocery inflation has moderated significantly from its highs, reaching just 1.4% in April, prices have risen 21.4% over the past three years. The resulting pressure on consumers’ wallets combined with higher interest rates has led to public pressure on the government – and the grocer – to act. Some consumers have launched a boycott of Loblaw, Canada’s largest grocer, to express their frustrations.
Grocers, especially Loblaw, have expanded the number of discount grocers in their portfolio to meet the growing demand from Canadians for lower prices. In turn, their discount stores were the main drivers of overall sales growth.
This report by The Canadian Press was first published on May 24, 2024.
