Does the Competition Bureau have Canada’s grocers in its sights?

November 30, 2020 | By Julius Melnitzer

Canada’s Competition Bureau may be seeking new authority to curb major grocers’ inordinate bargaining power with their suppliers.

In a speech to the Canadian Federation of Independent Grocers (CFIG) last Wednesday, Commissioner of Competition Matthew Boswell referenced the current debate over the need for a code of conduct “to discourage unfair behaviour on the part of major retailers”.

Picture of Joshua Krane
Joshua Krane believes the Competition Bureau is seeking increased powers.

Boswell’s remarks come as major grocers continue to pass on in-store and digital operations improvement costs to suppliers. The initiatives by Loblaw, Walmart and Metro (Sobeys criticized the action and called for industry regulation), critics say, could weaken the food manufacturing sector, lead to the disappearance of independent grocers, and ultimately contribute to food price increases.

But because Canada’s competition laws do not regulate imbalances in bargaining power, the Bureau cannot develop or enforce a code of conduct for any industry.

“What the Bureau can do, however, is provide a procompetitive perspective to policy-makers at all levels of government, and we continue to do so, as needed,” Boswell told his audience.

Especially notable was the Commissioner’s reference to the Bureau’s 2017 investigation into allegations that Loblaw had offended the abuse of dominance prohibitions in the Competition Act. The inquiry focused on allegedly anticompetitive policies enforced by Loblaw against its suppliers.

Loblaw ended a number of the practices during the inquiry. Still, the Bureau concluded that there was insufficient evidence that the grocery giant’s practices met the standard for anticompetitive conduct.

Yet the Commissioner made it clear that, so far as the industry in general was concerned, the Loblaw inquiry was not necessarily the end of the matter.

“While the evidence did not sufficiently support the allegations, completing the inquiry was necessary to reach an informed conclusion and be fully transparent to the marketplace regarding our findings,” he told his audience. “That being said, we know that even in the same market, the facts may be very different in the future, and may warrant an inquiry.”

Boswell’s remarks to the CFIG came on the same day that he told Toronto’s Canadian Club that industry concentration in the economy generally was increasing as COVID-19 forced more and more businesses to exit their markets.

“In times of economic crisis, it is tempting for some to lobby that the long-established principles for healthy competition be relaxed and claim that doing so will ease stressors to Canada’s markets and aid in economic recovery,” he said. “However, history has shown us that the opposite is true.”

Joshua Krane, a competition law partner in McMillan LLP’s Toronto office, notes a common theme in both addresses.

“The Commissioner may be laying the groundwork for more authority to investigate markets that are concentrated or have high entry barriers,” Krane said. “His focus on the imbalance in bargaining power could be significant if he gets it on the government’s agenda.”

And, given the high profile of competition issues these days, he well might.

In his remarks to the Canadian Club, Boswell reiterated the Bureau’s previously expressed concerns about the dangers posed by “digital global giants” and a lack of competition in the country’s telecommunications markets.

OECD research, he observed, confirmed that Canada was ill-positioned to deal with these issues or with issues related to the re-entry of firms to the market post COVID-19. Indeed, the country stood second to last in an OECD study ranking pro-competitive market regulation measures among Canada and its peers.

Boswell’s “foremost priority”, therefore, was to “ensure that the Bureau had the tools and resources it needed to safeguard competition in the digital age”.

Forewarned is forearmed.

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