Competition Policy and Canada's Grocers

  • March 15, 2023
  • Amy Hill, articling student, The Public Interest Advocacy Centre

The first employment condition that I ever negotiated was in a grocery store: I would take the job, but I refused to kill any of the crabs or lobsters. I had that job at a grocery store seafood counter for almost five years. I fileted massive halibut. I scrubbed smelly fish displays. I shelled prawns and I shucked oysters. Three years into the job, Sobeys offered me one of ten national awards, which included summer internships at their subsidiary’s head office.

Before my first summer interning, I met one of the directors at a local coffee shop. After a thirty-minute impassioned account of the grocery industry, he said to me “at the end of the day, all we really do is sell groceries,” putting up his hands and shrugging his shoulders. But, it’s so much more than that. I have spent the last six years studying the food supply chain, with two published articles on global food innovation and the pricing of local food. Food supply impacts everyone. We are seeing that impact emphasized on the national stage right now, as the large grocers come under scrutiny from not one but two federal institutions: the Competition Bureau and the House of Commons.

The public is furious and for good reason. Everyone is impacted by high food prices, but these high prices disproportionately impact our most vulnerable. Food Banks Canada reported the “toughest” summer in their 41-year history last year, and disproportionate food bank usage by children, single-parent households and single-adult households. Consumers are not expected to see relief any time soon. Canada’s Food Price Report has forecasted food prices to increase between 5 and 7% in 2023.

Canada’s full-service grocery market has been characterized as a market with significant concentration. The USDA Foreign Agricultural Services estimated that the market shares of five large retailers accounted for almost 62% of annual retail food sales in Canada in 2019: Loblaws (23.6%), Sobeys (16.9%), Metro (9%), Costco (6.6%) and Walmart (6.2%).  Another estimate prepared for the Federal-Provincial-Territorial Working Group on Retail Fees estimated that the five full-service grocers held a cumulative 80% share of the grocery market in 2021.  

On October 24, the Competition Bureau announced that it would be undertaking a market study of the grocery industry. Submissions on the proposed market study’s scope were due in December 2022. The submissions have since been published publicly on the Bureau’s website. The Public Interest Advocacy Centre (“PIAC”), where I am currently an articling student, was the only consumer advocacy group to comment publicly on the study’s scope.

PIAC’s submission focused on several issues. Our submission emphasized the impacts of restrictive covenants on competition and access to physical stores, especially in low-income communities. We called for a study on the impacts of past merger decisions on current market concentration. Our submission raised questions about the private label offerings in Canada, and the homogeneity of these offerings across Canada’s large grocers. We also questioned the decision to exclude grocer-supplier relationships from the study due to the current code of conduct development process. After blowing past two government-imposed deadlines, there still is no grocery-supplier code and the development of the code thus far has been a very private process. The code development process has been ongoing since 2019. We also asked the Bureau to consider regional competition, including grocery competition in the North, a region often understudied and which experiences significant food supply and affordability challenges. Finally, we commented on issues related to data and privacy law when considering the vast amounts of consumer data that the grocers have amassed through their loyalty programs and pharmacy businesses. Access to large amounts of consumer data is a significant competitive advantage in today’s markets.

While the market study is exciting, the Competition Bureau does not have the power to compel information from any of the grocers. The American Federal Trade Commission (“FTC”), by contrast, does. On November 29, 2021, the FTC announced an inquiry into supply chain disruptions and coinciding orders for information from their largest grocers.

While Canada’s Bureau might not have powers to compel the grocers to provide information right now, they could in the future as the Competition Act is currently under review. The Competition Bureau’s discussion paper for the Competition Act Review is available online, and includes a section on the collection of information outside of enforcement activities, including market studies. Submissions on the Act’s review are due by March 31, 2023.

Canada is seeing some of the highest inflation in decades which is creating affordability challenges disproportionately impacting our most vulnerable. The spotlight has also been put on some of Canada’s most concentrated and essential industries with recently proposed mergers, including telecommunications and banking. Questions on the role of competition and competition law in Canada – not only in Canada’s grocery sector – are timely.

The Competition Act review will take some time, but the Bureau is expected to release a public report on its grocery market study in June. Everyone should be watching for this report because it poses an interesting challenge to the Bureau. Competition law and policy in Canada has been careful in the past to focus exclusively on competition issues. Food supply and groceries, however, are not so black and white. The impacts of many of the issues that this study could consider reach into areas of social policy, data privacy and even the constitutional division of powers. As legislative competition policy is under review, the grocery market study and nature of food supply provides an interesting challenge to the question of competition law’s very purpose in Canada and its ability to complement other areas of policy and law.

Any article or other information or content expressed or made available in this Section is that of the respective author(s) and not of the OBA.