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The committee's recommendations include lowering barriers to entry for new businesses into Canada and strengthening competition laws regarding mergers.
Article Author:
Canadian Press
Rosa Saba
Published on May 24, 2024 • Last updated 4 hours ago • 4 minute read
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Produce at a Metro Grocery store in Toronto. Photo: Cole Burston/The Canadian Press
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In its latest report, a House of Commons committee investigating food prices said the federal government should consider policies to tackle “excessive net profits” in the food industry.
The committee recommended the government look at ways to address the interests of “monopoly and oligopoly sectors in the food supply chain” that are driving up prices for farmers and consumers.
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In its report tabled Thursday, the committee detailed its investigation into the causes of food inflation and food insecurity in Canada, including high-profile testimony from grocery executives over the past few months.
The leaders of Loblaw, Metro, Empire which owns Sobeys, Walmart Canada and Costco have all been questioned by lawmakers about how much they are profiting from high food prices, but the grocers deny they are making unfair profits.
The committee's report made numerous recommendations, ranging from lowering barriers to entry for new businesses into Canada to legislative changes to strengthen competition laws regarding mergers.
The committee also recommended that the government consult on state and territory legislation to make grocery codes of conduct mandatory.
This comes shortly after Loblaw, the nation's largest grocer, announced it would sign the code after months of urging it to join.
The industry-led code aims to ensure a level playing field for small and medium-sized enterprises in the industry.
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It is voluntary in nature but not all major grocers are on board, and there has been growing pressure in recent months for the government to turn it into law.
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In December, Loblaw and Walmart told the committee they were concerned about higher prices for Canadians, and earlier this year the committee wrote to the two grocers saying it would recommend making the rules mandatory if they didn't sign on.
Last week, Loblaw announced that after months of discussions, it was ready to sign up to the code, as long as all stakeholders agreed.
“The current provisions are fair and will not lead to higher prices,” Par Bank president and CEO said.
At the time, Walmart said the company was reviewing the latest draft of the code.
The grocers did not immediately respond to requests for comment, nor did Costco.
The Canadian Retail Association declined to comment on the report.
Michael Graydon, CEO of the Canadian Food, Health and Consumer Products Association and chair of the code's interim board of directors, said the association is “very supportive” of all of the committee's recommendations.
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Regarding the code, “what our industry wants is a fully inclusive code that involves all stakeholders. That is our goal and I am hopeful we will achieve it,” he said in an email.
Frances Chechill, a spokesman for Agriculture Minister Laurence MacAulay, said the government was clear it supported the industry-led code but that after years of work, “it is long past time for all major retailers to join the code”.
In a statement, Chetil said the government was calling on the remaining major retailers to sign up to the code as their participation is vital to its success.
“In the meantime, we are considering all available federal options, including legislation, and because significant aspects of the code fall under provincial jurisdiction, we encourage provincial and territorial governments to do the same.”
The committee's report cited a study released last year by the Competition Bureau which noted that Canada's grocery industry has become increasingly concentrated in recent decades through a series of mergers and acquisitions.
The Competition Bureau is currently investigating the use of restrictive clauses in lease agreements in the grocery sector, alleging that they are hindering competition in the industry.
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Industry Minister François-Philippe Champagne also said the government is looking for foreign grocers to increase competition in the Canadian market.
The report's recommendations include giving the government the power to the Competition Tribunal to dissolve or block mergers if they result in excessive market share, and it also recommended strengthening the law by putting the onus on merging companies to prove that the deal will not harm competition.
A spokesperson for Champagne's office highlighted recent changes the government has made to competition law, saying Bills C-56 and C-59 “already address concerns such as curbing excessive profits, strengthening competition law and promoting fair market access.”
The best way to lower prices and support small businesses is to increase competition, spokeswoman Audrey Millett said in a statement, adding that bringing more businesses into the market is one way to put downward pressure on prices.
“We will continue to stand up for Canadians, working with our provincial and territorial partners to keep the cost of living low and hold businesses accountable.”
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While food inflation has eased significantly from its peak, to just 1.4 percent in April, prices have risen 21.4 percent over the past three years. The result is a squeeze on consumers' wallets and rising interest rates, which has led to growing public pressure on governments and grocers to act. Some consumers have begun a boycott of Loblaw, Canada's largest grocer, to express their dissatisfaction.
Grocery stores, particularly Loblaw, have been increasing the number of discount grocery stores in their portfolio to meet Canadians' growing demand for lower prices, with discounters becoming a big driver of overall sales growth as a result.
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