Competition Bureau Probes Food Distribution Networks to Tackle Rising Grocery Costs
The Competition Bureau announced a new study on Tuesday aimed at examining the Canadian food supply chain, in what the office is describing as a bid to address mounting grocery prices.
The study will be a “broad examination,” of every step in the food production process, interim commissioner of competition Jeanne Pratt said in an interview. It will look at crop inputs, such as fertilizer and seeds, as well as transportation, distribution and pricing practices at grocers.
“The price at checkout starts a long time before the product gets on the shelves,” she said.
The announcement was made a few days after Prime Minister Mark Carney announced his government’s national food security strategy. The strategy earmarks federal funds to be spent over 10 years to increase competition in the retail sector, reduce reliance on imported food and improve access to locally produced products. It allocated $130-million to the Competition Bureau to investigate and combat anti-competitive business practices.
The study – which will use some of those funds – will allow the bureau to build on its recommendations from a 2023 report that examined concentration of ownership in the grocery business, Ms. Pratt said.
Some retailers welcomed the study’s wide-ranging focus on the entire supply chain.
Because retailers are the last link in the chain, they are often the targets of “consumer angst,” said Gary Sands, vice-president of government relations at the Canadian Federation of Independent Grocers.
But critics said the sweeping mandate raises questions about whether the study will be able to accomplish anything substantive. Recommendations that came out of the 2023 study have yet to be widely adopted.
“This is about as low-impact an approach as you can do,” said Joshua Krane, a competition lawyer and partner at MLT Aikins LLP.
According to Kim Furlong, chief executive officer of the Retail Council of Canada, an industry group, 80 per cent of the cost of a typical item being sold at retail is built in before it hits store shelves. For this reason, she said the association welcomes what she hopes will be a “thoughtful overview and analysis of these costs.”
Marie-Claude Bacon, a spokesperson for grocery-store owner Metro Inc., also welcomed the study’s focus on the entire supply chain.
“Food affordability extends well beyond the retail sector and requires a comprehensive look at all the factors influencing costs,” she said. “We remain available to contribute constructively to this work and to share our perspective as a player involved at every stage, from supplier to consumer.”
Food producers also have to contend with a duopoly railway system, consolidation of manufacturing in Central Canada, a shortage of trucking capacity and infrastructure challenges at ports, said Michael Graydon, CEO of the industry group Food, Health and Consumer Products of Canada. He added that a study that examines these challenges is a good first step.
A broad study from the Competition Bureau would be able to examine the “integrated matrix” of food production and marketing in Canada, said Rachel Wasserman, founder of Wasserman Business Law and fellow at the Canadian Anti-Monopoly Project.
For example, a large-scale retailer not only has an outsized market share, it also often owns its distribution and transportation networks. And the food distribution system in general is geared toward transporting and marketing high volumes, making it even more difficult for independent, small-scale retailers to enter the market.
“Its not just about the supply chain,” Ms. Wasserman said. “But also how the supply chains interact.”
Mike von Massow, an agricultural economist at the University of Guelph, wonders whether the study will be too broad. The meatpacking business alone is a highly consolidated sector worthy of its own investigation, he said, adding that 85 per cent of Canada’s slaughter is done at just three plants.
“This is so unfocused. It’s kind of like casting a big wide net and hoping we catch something.”
The 2023 study recommended changes such as limiting property controls, which have been used by major grocers to restrict what nearby businesses can sell. Investigations into property controls are continuing. Only one province – Manitoba – has banned the practice.
This article was first reported by The Globe and Mail
