Some blame major retailers like Loblaw, Metro and IGA for ‘greedflation’ phenomenon

With the New Year looming and some especially dark clouds hanging over the Canadian economy, the Competition Bureau of Canada as well as the country’s Parliamentarians are proceeding in 2023 with in-depth investigations into whether Canada’s leading grocery retailers have been colluding to fix food prices.

Who to blame?

Experts are attributing the rising costs of groceries (10.8 per cent in Canada over the past year, according to Statistics Canada) to a number of factors, including the COVID-19 pandemic and the resulting supply chain disruptions, severe weather from climate change, and higher costs for everything from labour to transportation.

And yet, two of Canada’s three major grocery chains posted increased profits in their most recent financial statements. Loblaw reported a quarterly profit of $387 million — an increase of $12 million, or 3.2 per cent, over the same quarter last year.

The Big 3’s profits up

In the meantime, Metro posted a $275 million quarterly profit, up from $252.4 million in the same quarter the year before. While Empire (which runs IGA) reported an increased profit in June, its latest financial statement showed a slight decline in profits.

Although senior officials with the country’s grocery retailers recently told the country’s Parliamentarians they were not to blame for the soaring prices and were only passing on costs, it’s notable that Loblaw (the largest of the three) announced in early October that it was freezing prices on its No Name products until the end of January.

A quick move

As noted by B.C.-based economist Jim Stanford in an October Toronto Star opinion piece, Loblaw’s announcement was made on the same day that month when the House of Commons voted in favour of an NDP motion to open an investigation into the grocery chains’ alleged “greedflation.”

The Conservatives’ newly-elected leader Pierre Poilièvre, whom one might expect would normally be disposed to defend big business, actually sided with the motion, which received unanimous support from MPs. The resulting investigation into Food Price Inflation by the Commons’ Standing Committee on Agriculture and Agri-Food is sure to be a focus of public attention over the coming year.

Working as one?

It’s worth noting that within hours of Loblaw’s price freeze announcement, Metro announced a similar move. While some may attribute this gesture to natural competitiveness in an open economy, others see it as evidence of large corporations working in tandem and effectively being able to fix prices monolithically as suits them best.

Accusations of price fixing are not new in Canada’s food production and retail industries. In 2018, federal business competition investigators opened an inquiry into whether the same three companies now facing scrutiny were colluding to fix the price of bread in the Canadian market. That investigation went nowhere, by the way, although it may now become appended to the larger one unfolding in the coming year.

For its part, the Ottawa-based Competition Bureau said in October that it is launching its study of grocery store competition in Canada in order to examine various issues “with the goal of recommending measures that governments can take” to help improve competition in the sector.

Purchase power down

“With inflation on the rise, Canadian consumers have seen their purchasing power decline,” the bureau said in a statement. “This is especially true when buying groceries. In fact, grocery prices in Canada are increasing at the fastest rate seen in 40 years.”

The bureau agrees with economic experts that many factors are thought to have impacted the price of food, including extreme weather, higher input costs, Russia’s invasion of Ukraine, and supply chain disruptions, while leaving the open question, “Are competition factors also at work?” To find out, the bureau will study the issue until June 2023.

Grocery prices in Canada are increasing at the fastest rate seen in 40 years, says the Canada Competition Bureau

The study will examine three main 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? And how can governments lower barriers to entry and expansion to stimulate competition for consumers?

Limited powers only

The bureau cautions that the study will not be an investigation into specific allegations of wrongdoing. However, if they do find evidence that someone is or may be acting against the law, then they will investigate and take appropriate action.

However, the bureau does not have formal investigative powers to compel information for the purpose of market studies.

Newsfirst Multimedia reached out to Vimy Liberal Member of Parliament Annie Koutrakis for her reaction to the launch of the two investigations. In a texted response, she declined to comment, referring our questions to the Competition Bureau of Canada’s website (cb-bc.gc.ca).