People shop in a grocery store in Montreal, Nov. 16, 2022.Graham Hughes/The Canadian Press
That groceries are expensive these days or that the grocery market is controlled by a few large companies isn’t breaking news. So it verges on stating the obvious when the Competition Bureau on Tuesday declared that more competition is necessary in the sector.
The bureau’s industry study makes useful recommendations – such as the need for stronger independent grocers and drawing international companies to Canada – but there is more to be learned about the state of competition in what the bureau hasn’t been able to do, such as compel disclosures when it examines the grocery business.
The Competition Act is a creation of the 1980s, when the middling size of domestic companies and their perceived inability to succeed beyond the country’s borders was a policy concern. Rules were drawn up to favour companies that merged, even if it came at the expense of Canadians and weakened competition. It’s no coincidence that in 1986 there were eight leading grocers and today there are five.
A review of the law is under way, a process that started last fall. In its outline of a potential overhaul, Ottawa covered an array of possible changes. They centred on the question of giving the bureau more powers.
The biggest proponent of change is the bureau itself – led by former prosecutor Matthew Boswell. The bureau in March handed Ottawa a long list and Mr. Boswell argues the current law “lags far behind” peers such as the United States and Europe.
One easy change is the ability to conduct market studies. The bureau relies on co-operation from industry. When the bureau started work on grocers, it said this constraint would make it “a tough study for us to do.” On Tuesday, the bureau said co-operation from grocers was “not fulsome” and it wasn’t able to get “complete and precise” financial data. The bureau should have, as it has proposed, formal information-gathering powers, which is standard elsewhere.
Another central area of change is the efficiencies defence. This is a vestige of the 1980s. The way the law works is two companies can cite “efficiencies” – cost cutting, including lost jobs – as reason to justify lessened competition. Competition law elsewhere doesn’t have such a primary clause. In a submission to Ottawa solicited by the Competition Bureau about the experiences of U.S. law, from Lina Khan, chair of the U.S. Federal Trade Commission, it was observed: “Efficiencies are often claimed but rarely proved.”
The bureau and other experts want the efficiencies defence scrapped. Ottawa sees change here as a key part of competition reform. And, in a rare moment of federal bipartisan agreement, the Conservatives support it. The party in June put forward a private member’s bill that seeks to repeal the efficiencies defence, calling it “a relic.”
Ms. Khan is a top global voice in rethinking competition policy, after decades of bigger is better led to oligopolies across the economy. Low prices had been viewed as proof of competition thriving. But if the likes of Google and Amazon dominate, even with low prices, is competition really thriving? Another big question of reform is looking at mergers in which a large company buys a smaller firm or an upstart but where lessened competition isn’t obvious. Large companies can snuff out future competitors.
Look at groceries. It wasn’t one big deal but a series over years. Or look at the spate of small internet providers being bought up by the likes of Bell and Telus. Or look at WestJet buying Sunwing and soon after shutting it down. “Our laws,” the bureau said in its grocery report, “need to address harm to consumers from increasing concentration.”
This lack of competition costs Canadians, in the form of high prices. In banking, where the No. 1 company, Royal Bank, is buying the No. 7 firm, HSBC Bank Canada, high fees for individuals and small businesses are a standard part of life. Similarly high prices compared with elsewhere are common, from telecom to air travel. All this pinches Canadians and also ups the cost of doing business, a quiet, corrosive effect throughout the economy.
There are broader questions of competition, too. Interprovincial trade barriers remain a problem and foreign ownership rules could use another look. There’s too much coziness in the clubby world of big business in Canada.
A moment of change is at hand. An overhaul of the Competition Act is the first major step and must be a priority for Parliament this fall.