The Competition Bureau‘s investigation into minimum advertised pricing in Canada’s grocery sector has exposed a complicated question about retail competition. Rules that can make it harder for a discount grocer to promote lower prices may also provide some protection to smaller retailers competing against national chains with considerably greater purchasing power.
As Retail Insider reported last week, the Bureau is investigating whether minimum advertised pricing policies are making deals harder for consumers to find, reducing price competition, creating barriers for discount and new grocers, or making it easier for retailers to coordinate prices.
Independent grocers see another potential effect. The Canadian Federation of Independent Grocers argues that removing advertised price restrictions could strengthen the largest retailers by allowing them to use their scale and supplier relationships to promote prices smaller competitors cannot economically match.
The competing arguments illustrate why the effect of minimum advertised pricing, or MAP, depends heavily on who holds market power and how the restrictions are being used.
A Discount Can Exist Without Being Advertised
MAP establishes a price below which a retailer cannot advertise a product. Depending on the arrangement, the retailer may still be permitted to sell it for less.
The Competition Bureau uses the example of a package of pasta with a minimum advertised price of $2.99. A retailer could potentially sell it for $1.99 while being unable to advertise the lower price. For a customer already inside the store, the distinction may make little difference. Someone comparing flyers, websites or apps before deciding where to shop may never know the lower price exists.
That is one reason competition authorities are interested in the practice. Advertised prices are part of how retailers compete for customers, particularly for businesses trying to establish themselves as lower-price alternatives.
MAP is not automatically unlawful in Canada. Certain forms of price maintenance can be challenged under section 76 of the Competition Act when they adversely affect competition, but suppliers can also have legitimate reasons for establishing advertised pricing policies. These can include encouraging retailers to invest in service, inventory and product knowledge, protecting brand positioning and preventing retailers from benefiting from marketing investments made by competitors.
The question facing the Bureau is therefore whether particular policies are materially weakening competition.
Why Discount Grocers Could Be Hurt
For a retailer built around lower operating costs, smaller margins or aggressive pricing, the ability to advertise those advantages can be central to its business model. A retailer might be capable of selling a product below its competitors but gain relatively little competitive benefit if it cannot tell consumers about the lower price.
The Bureau’s competition guidance recognizes this possibility. Price maintenance can, in some circumstances, impede the entry of discount retailers or prevent more efficient operators from using lower prices to gain market share.
Keldon Bester, executive director of the Canadian Anti-Monopoly Project, has also argued that MAP can weaken the price signals that drive retail competition and contribute to greater uniformity in advertised prices.
There are limits to that argument in grocery. If a supplier prevents a retailer from advertising one brand below a particular price, the retailer may be able to promote another brand or a private-label alternative instead. Competition between suppliers can therefore limit the impact of MAP in categories where shoppers have numerous substitutes.
Independent Grocers See a Different Risk
The Canadian Federation of Independent Grocers is approaching the investigation from almost the opposite direction.
Gary Sands, the organization’s senior vice-president of public policy and advocacy, argues that MAP can provide some protection to independent retailers that do not have the purchasing volume or negotiating leverage of Canada’s largest chains. Removing those restrictions, CFIG contends, could allow large retailers to use their scale to advertise branded products at prices smaller competitors cannot afford to match.
Sands has warned that independents could be overwhelmed in the resulting “race to the bottom,” with particular implications for stores serving smaller and remote communities.
The underlying disparity in buying power is well documented, even if the competitive effect of MAP remains under investigation. The Competition Bureau’s 2023 grocery market study found that some independent grocers lack the scale to operate warehouses or purchase directly from suppliers. Some instead buy wholesale from operations connected to major grocery companies, including Loblaw and Empire.
Independent retailers told the Bureau that these arrangements can make competing on price more difficult. CFIG has similarly argued for years that independents lack the supplier negotiating leverage available to the country’s largest chains.
That does not establish that MAP is necessary to preserve independent grocers or that eliminating it would drive smaller retailers out of business. There is limited Canadian empirical evidence demonstrating such an outcome. It does explain why some independent retailers view the Bureau’s investigation differently from proponents of unrestricted advertised-price competition.
Discount and Independent Grocers May Want Different Things
The competing positions highlight an important distinction in Canada’s grocery market. A discount entrant and an independent grocer are not necessarily pursuing the same business model or operating with the same economics.
A new discount operator with an efficient cost structure may want complete freedom to advertise prices below established competitors. MAP could make it more difficult for that retailer to communicate its advantage and attract customers.
A smaller independent purchasing products on less favourable terms may have a different interest. A supplier’s MAP policy could prevent a national chain from advertising the same branded product at a price the independent cannot economically match.
The same restriction could therefore constrain one competitor while providing some protection to another. That makes market structure central to determining whether MAP ultimately strengthens or weakens competition.
Not Every Grocery Product Is Equally Affected
MAP also does not necessarily operate uniformly across a grocery store.
University of Guelph food economist Mike von Massow has noted that advertised pricing restrictions are more likely to be relevant to recognizable or premium brands than commodity products such as produce or milk. For branded suppliers, maintaining a particular price position can form part of how a product is marketed.
Retailers may also respond to MAP by shifting promotional activity to another supplier. A grocer prevented from advertising one national brand at a sufficiently attractive price could promote a competing brand or its own private-label product.
Those alternatives matter when assessing competitive effects. A MAP policy covering a product with numerous substitutes may have a different impact from one affecting a product or brand with considerable market power.
The Bureau Investigated Grocery MAP Concerns Years Ago
The relationship between advertised prices, supplier policies and retailer buying power has previously attracted scrutiny in Canada’s grocery sector.
Between 2014 and 2017, the Competition Bureau conducted an extensive investigation into several supplier policies used by Loblaw Companies Ltd. Investigators gathered information from Loblaw, approximately 60 suppliers, competing retailers, industry associations, experts and foreign competition authorities.
Among the practices examined were policies intended to protect Loblaw’s margins when competitors advertised products at lower prices. Under Loblaw’s former Active Ad Match Policy, the retailer could seek compensation from a supplier after reducing its price to match a competitor’s advertisement.
The Bureau illustrated the arrangement using a product normally sold by Loblaw for $2. If a competitor advertised the product for $1.50 and Loblaw matched the price, selling 20,000 units during the promotion, the supplier could face a $10,000 deduction covering the 50-cent difference.
The Bureau also examined Threshold Deals, under which suppliers could compensate Loblaw when margins fell below agreed levels following an advertised price match, along with other supplier policies. Investigators considered whether these arrangements created incentives for suppliers to limit price competition elsewhere.
Specifically, the Bureau examined whether suppliers introduced minimum advertised pricing policies that restricted other retailers’ ability to offer products below Loblaw’s price, encouraged adherence to suggested retail prices or encouraged other retailers to increase advertised or shelf prices.
What the Loblaw Investigation Found
The earlier investigation did not establish that Loblaw caused suppliers to impose MAP policies across the grocery industry. After approximately three years, the Bureau concluded there was insufficient evidence to establish that Loblaw’s policies had substantially lessened or prevented competition and discontinued its inquiry in 2017.
Its position statement nevertheless identified potential risks associated with margin-protection arrangements. The Bureau said such policies could create incentives for suppliers to protect a retailer from competition, including by reducing promotions available to competing retailers, removing lower-margin products or implementing minimum advertised pricing.
It said it would take action if compelling evidence subsequently showed those incentives resulting in anti-competitive conduct.
The 2017 findings are not evidence of wrongdoing in the current investigation, and the Bureau has not established a connection between Loblaw’s former policies and the MAP practices it is examining today. The earlier case does show that the relationship between retailer buying power, supplier incentives and advertised prices has been on the regulator’s radar for years.
Who Holds the Market Power Matters
Minimum advertised pricing is generally associated with policies established by suppliers, but the competitive analysis becomes more complicated when large retailers have substantial purchasing power.
Competition Bureau guidance recognizes circumstances in which a retailer may induce a supplier to restrict pricing by competing retailers. In that situation, a policy appearing to originate with the supplier could potentially protect the retailer from price competition.
Independent grocers are raising a different concern today. They contend that supplier-imposed MAP can restrain the ability of a dominant retailer to use its purchasing advantages against smaller competitors.
Economic research supports treating MAP as a case-specific competition question. Economists John Asker and Heski Bar-Isaac have examined MAP as an information restraint that can increase consumer search costs and soften retail price competition. Their work also recognizes circumstances in which the practice can support retailer services and investment, meaning its overall effects depend on the characteristics of the market.
That is broadly consistent with Canada’s approach to price maintenance, which focuses on competitive effects instead of treating the practice as inherently unlawful.
Supplier Funding Adds Another Layer
Supplier funding can make the distinction between a formal pricing restriction and a commercial incentive less obvious.
Consumer packaged goods companies routinely support retailer advertising and promotions. Competition Bureau guidance specifically addresses co-operative advertising arrangements in which financial support can be connected with adherence to MAP.
A retailer might remain technically free to advertise below a supplier’s preferred price but lose advertising reimbursement by doing so. Depending on the economics involved, that can provide a meaningful incentive to comply without an outright prohibition on discounting.
Food, Health & Consumer Products of Canada, which represents manufacturers, has argued in submissions to the Competition Bureau that concentration among Canada’s major grocers gives large retailers significant bargaining power in negotiations with suppliers. The organization has also pointed to the substantial share of supplier revenue devoted to trade spending and retailer programs.
Those claims reflect the supplier industry’s position and do not establish anti-competitive conduct by retailers. They illustrate why conditions attached to advertising allowances, promotions and other supplier funding can have significant financial consequences.
The Larger Question Is Grocery Competition
The MAP investigation arrives as the Competition Bureau examines several structural features of Canada’s grocery market. Most grocery purchases continue to flow through five major companies: Loblaw, Empire, Metro, Costco and Walmart. The Bureau has repeatedly called for conditions that make it easier for international grocers, independent retailers and other competitors to enter the market and expand.
In June, it launched “Behind the Price Tag,” an examination of competition throughout Canada’s food supply chain, including production, processing, transportation, distribution and retail pricing. That market examination is separate from the MAP investigation and is not itself an investigation into specific alleged wrongdoing. Findings are expected in spring 2027.
Against that backdrop, MAP presents an unusual competition problem. Policies that restrict advertised prices could make it harder for an efficient discount entrant to challenge established retailers, while removing those restrictions could give consumers access to more aggressive advertised prices.
Independent grocers argue that the same change could increase the advantage of national retailers capable of securing better supplier economics and absorbing promotions that smaller competitors cannot match. Whether one effect outweighs the other cannot be determined simply by establishing that MAP is being used.
The Bureau will need to understand which products are affected, who initiates the policies, how they are enforced, whether supplier funding is tied to compliance and how frequently retailers actually sell products below the advertised floor. It will also need to consider whether retailers can readily substitute competing brands, whether MAP materially prevents efficient discounters from gaining market share and whether the policies provide meaningful protection to independent retailers facing competitors with greater purchasing power.
The investigation may therefore ultimately turn less on whether minimum advertised pricing is inherently good or bad for consumers than on who holds market power, how that power is being exercised and whether the resulting restrictions strengthen or weaken grocery competition in Canada.
