“According to the Competition Bureau, Canadian grocery shoppers require additional foreign players like Aldi and Lidl to lower food prices in Canada. But one may wonder why a foreign grocer would choose to invest in Canada, given the presence of an exclusive club of price-fixing executives who have manipulated market conditions for years with impunity.”
The Competition Bureau’s call for increased competition in the Canadian grocery sector is stating the obvious. Canada is home to numerous oligopolies that dominate various industries, with only a few companies holding significant market share. In the grocery sector specifically, five major players control nearly 80 percent of the food retail market. While some oligopolies function more effectively than others, their success depends on the companies behaving ethically, which is precisely the issue plaguing the grocery sector in Canada.
Loblaw, Empire/Sobeys, and Metro hold the reins as dominant grocers in the market. Although these companies are well-managed, the Competition Bureau’s recent report highlights some of their practices aimed at maintaining market dominance. One notable aspect of the report is the endorsement of the Grocer Code of Conduct. While the Code itself is not directly related to the Bureau, it significantly contributes to enhancing competition. By providing a platform to address supply chain disputes, the Code serves as a necessary disciplinary measure against grocers who abuse their market power, granting food manufacturers more influence. Consequently, independent grocers gain access to a wider range of products and increased protection. Ultimately, the Code offers consumers more choices and potentially more stable retail prices, making it a positive development worth applauding.
Additionally, the report emphasizes the need for all levels of government to participate in making the food market in Canada more competitive. This point cannot be stressed enough. Many consumers are unaware of how territorial grocers can be when expanding into small cities and towns across the country. They may acquire plots of land to prevent competitors from opening stores nearby, and shopping mall leases may include terms that restrict the operation of other food retail outlets. While seemingly insignificant to city councils and mall managers, these measures can have a considerable impact on market prices. In contrast to the United States, where the intricacies of mergers, acquisitions, and their effects on consumers are closely scrutinized, Canada lacks a similar level of attention to such matters. This discrepancy needs to be addressed.
The report suggests that Canada should tackle interprovincial barriers to attract external players like Aldi and Lidl, two German-based grocers that have already been operating in the United States for several years. The ways, means, and locations for selling food products vary significantly between provinces, and labour laws also differ. When Walmart entered the Canadian market in 1994, it faced challenges and made mistakes along the way. Walmart Canada now has over 400 stores across the country, but it took years. On the other hand, Target’s entrance into the Canadian market in 2014 failed miserably due to the intricacies of our market, and this experience has served as a lesson for many companies worldwide, including Aldi and Lidl.
Entering the United States is considerably easier, even for Canadian businesses. This fact is exemplified by Canada’s own T&T, operated by Loblaw, which is currently expanding into the American market where competition is even more intense. Greater opportunities, less bureaucracy, and a more flexible fiscal regime contribute to this favorable environment. However, the most significant aspect is America’s clear understanding of competition as a concept, with an unwavering commitment to eliminating monopolies and oligopolies. Americans view competition as an essential aspect of the market and are vehemently opposed to excessive consolidation, philosophically.
In Canada, too much competition can indeed become an issue. Our love-hate relationship with the concept has resulted in the establishment of crown corporations and “legal cartels” in various sectors, including dairy, eggs, poultry, and maple syrup, to name a few. We have grown accustomed to these marketing mechanisms, at least until prices become a problem for consumers. At that point, we expect the government to intervene. This conflicting attitude towards competition poses one of the greatest challenges for the Competition Bureau.
The desire for increased competition and the attraction of more players to the grocery sector necessitate that the Competition Bureau takes effective action. The food industry is currently grappling with a genuine problem of a price-fixing culture, which erodes consumer trust. We are now discovering that the bread scandal is about more than just bread. These revelations are making Canada a less appealing place to invest. Executives at Aldi and Lidl can read the headlines. Instead of granting immunity to executives or waiting for companies to confess, it is time to investigate and pursue legal action against companies that choose to violate the law. In the United States, engaging in collusion can result in imprisonment. It’s that simple.