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A House of Commons committee is recommending that the federal government work with the provinces to develop a code to regulate Canada’s grocery industry.

In a report tabled in Parliament on Tuesday, the Standing Committee on Agriculture and Agri-Food recommended that the government “support the provinces with the implementation of a grocery code of conduct and that it participate in collaboration with the provinces in its development in line with their respective jurisdictions and the Competition Bureau’s guidelines.”

For years, grocery retailers and their product suppliers have butted heads over the fees that stores charge for such things as shelf placement and in-store promotions. Retailers also charge penalties to suppliers for deliveries that are late or short on goods ordered.

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Retailers have mostly resisted calls for regulation, but in March, Sobeys owner Empire Co. Ltd. and Food, Health & Consumer Products of Canada (FHCP) revealed a proposal for a code of conduct that they worked together to develop. That proposal took a cue from regulations already in place in Britain, where an adjudicator has the power to fine retailers who do not comply.

While the report’s recommendation was light on details for how a code should work, it noted that such regulation would fall under the provinces’ jurisdiction. Some witnesses who appeared before the committee recommended that the federal government should “provide a framework” for the provinces and territories to follow.

Pressure has been building for oversight of the industry since last year, when major grocers such as Walmart Canada and Loblaw Cos. Ltd. announced that they would hike supplier fees to offset investments in store upgrades and improvements to e-commerce capabilities.

Suppliers have pointed out that relatively few companies dominate a large portion of Canada’s grocery sector: the five largest control 80 per cent of the market, according to a 2018 report from the U.S. Department of Agriculture. The products they sell come from Canadian farmers and manufacturers, but also from large multinational packaged-goods companies.

Some in the industry have argued that those multinationals are able to leverage their own market power in negotiations, while others maintain that suppliers are not on a level playing field with retailers who control their products’ access to many shoppers.

The federal government has 150 days to table a response to Tuesday’s report.

Separately, Canada’s federal, provincial and territorial agriculture ministers have formed a working group to examine the issue of fees charged by grocery retailers to their suppliers. Federal Agriculture and Agri-food Minister Marie-Claude Bibeau is co-chair of the working group, with Quebec’s Minister of Agriculture, Fisheries and Food, André Lamontagne. That group, which was formed in November, is planning to make its own recommendations in a report by July.

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