Business

Competition Bureau to probe grocery pricing

Canada's Competition Bureau says it is launching a study on competition in the grocery industry as consumers grapple with soaring food prices.

Government agency investigates anti-competititive behaviour

Canada's Competition Bureau says it will launch an investigation into what's happening with the price of food in Canada. (George Frey/Bloomberg)

Canada's Competition Bureau says it is launching a study on competition in the grocery industry.

The agency said in a news release Monday that it plans to investigate various issues in the grocery industry, "with the goal of recommending measures that governments can take to help improve competition in the sector."

The bureau functions as perhaps Canada's most prominent consumer watchdog group by investigating anti-competitive practices that serve to push up prices for consumers, including things like deceptive marketing, price-fixing, and even outright fraud.

The bureau says the move isn't in reaction to any specific allegation of wrongdoing, but it comes as consumers grapple with food prices rising at their fastest pace in more than 40 years.

Last week, new data showed that while Canada's inflation rate eased to 6.9 per cent, the prices of food purchased at stores still rose by more than 11 per cent. The price of food has been going up at a faster pace than the overall inflation rate for 10 months in a row now.

Many factors have been blamed for the rapid escalation in food prices, including extreme weather events, higher input costs and temporary supply chain stresses such as the current invasion of Ukraine. But the bureau says it wants to try to understand if there are any anti-competitive factors at play, so it's seeking answers to three broad questions:

  • To what extent are higher grocery prices a result of changing competitive dynamics?
  • What can we learn from steps that other countries have taken to increase competition in the sector?
  • How can governments lower barriers to entry and expansion to stimulate competition for consumers?

The bureau says that the relationship between grocery chains and their suppliers will not be included in the study, something that professor Mike von Massow at the University of Guelph says is a missed opportunity.

"The Competition Bureau is there to look at competitive behaviour, and to me, that is the one where there is much more indication and clear evidence that there has been some anti-competitive behaviour," he told CBC News in an interview.

"I think they're missing the point by not looking at the relationship with suppliers."

WATCH | Competition bureau to launch study of grocery industry: 

Competition Bureau to study rising grocery prices

3 months ago
Duration 1:53
Canada’s consumer watchdog says it will study competition in the grocery industry and whether having more retail competitors could push back on price increases. But some industry experts say the issue goes deeper than how many grocery chains there are.

The bureau is seeking input from the public on the issue. Anyone wishing to contribute is invited to contact the bureau through its website before Dec. 16.

When its investigation is complete, the bureau says it plans to publish its results, with a list of recommendations of how to fix problems it uncovers, if any. That report is expected next June.

The relatively tight timeline is likely a factor in why the bureau is seemingly limited around how wide and deep of a probe to take, von Massow said.

"Narrowing the scope of the study might increase the probability of getting it done on time," he said.

A previous bureau investigation into food price trends found that some companies had colluded to fix the price of bread and baked goods for years, at the expense of consumers. That investigation is ongoing.

The major retail grocery chains have faced immense pressure of late on the issue, due to the perception that they are increasing their prices more than they need to under cover of high inflation. Loblaw announced recently it would freeze prices on more than 1,500 products under its in-house No Name brand until the end of January, as a way to appease consumers. 

But the move has only added to scrutiny of the industry, with many observers saying it is common for grocery chains to demand price freezes from their own suppliers every year during the busy end-of-year holiday season.

"It is an industry practice to have a price freeze from Nov. 1 to Feb. 5 for all private label and national brand grocery products and this will be the case again this year in all of Metro banners," a spokesperson for Montreal-based grocery chain Metro told CBC News this week.

Supply and demand issues

The Canadian Federation of Independent Grocers, which represents more than 6,000 independently-owned and operated grocery stores across Canada, supports the probe, spokesperson Gary Sands said in an interview.

Unlike the big chains, smaller grocery stores are often at the mercy of major suppliers, which in some cases are controlled by the major chains. 

"Their leverage in the marketplace — both at the retail and supplier levels — has sometimes put independent grocers at a disadvantage, particularly around the issues of supply," he said.

"People need to understand … the challenges for independent grocers around that kind of consolidation."

The major grocery chains, for their part, also say they welcome the bureau's attempts to investigate all facets of the industry.

The Retail Council of Canada, which speaks on behalf of Canada's large grocery chains, told CBC News in a statement Monday that price increases in the grocery aisle "are coming from the manufacturers and processors and they are not unique to Canada or to the grocery aisle."

"The rising cost of essentials is a real problem for Canadians and we strongly believe that they would benefit from authentically sought answers on how to tackle inflation, rather than repeated false claims from opportunists," spokesperson Michelle Wasylyshen said.

"Canadians are facing increasing prices because of a variety of increasing costs across the supply chain, especially those caused by the invasion of Ukraine and climatic events."

ABOUT THE AUTHOR

Pete Evans

Senior Business Writer

Pete Evans is the senior business writer for CBCNews.ca. Prior to coming to the CBC, his work has appeared in the Globe & Mail, the Financial Post, the Toronto Star, and Canadian Business Magazine. Twitter: @p_evans Email: pete.evans@cbc.ca

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