The Competition Bureau isn't backing down from its investigation into Loblaw Cos. Ltd.'s pricing practices with its suppliers, even though the grocer plans to discontinue the controversial policies.
Late last week, The Globe and Mail reported that Loblaw told its suppliers it would scrap those supplier pricing rules, starting Jan. 3, as part of an effort to streamline its operations and smooth relations with vendors.
Some suppliers, while pleased with Loblaw's decision, were concerned that the bureau could wind down its inquiry following the grocer's latest move without formulating guidelines on the matter, sources said. Loblaw's practices, such as applying retroactive discounts on orders from vendors in some situations, could lead to higher prices at rival grocers, the bureau has suggested.
"The Competition Bureau is aware that Loblaw has notified its suppliers that it will be eliminating certain alleged anti-competitive practices under investigation by the bureau," Greg Scott, a bureau spokesman, said in an e-mail on Monday.
"The bureau continues to investigate Loblaw's policies related to pricing strategies and programs and their impact on competition in the marketplace."
The investigation, which some industry insiders say is eating up as much as 25 per cent of the bureau's resources, underscores the concerns of many suppliers about the pressure they feel from large retailers to help improve the merchants' profit margins. The practices reflect an increasingly consolidated grocery marketplace, which puts more clout in the hands of big retailers.
Still, suppliers expressed cautious optimism at Loblaw's latest overhaul.
"It's a small step in the right direction," said Steven Uster, co-founder and chief executive officer of FundThrough Inc., which provides bridge loans and other financing to small suppliers.
He said that doing business with Loblaw has sometimes turned into a money-losing situation for suppliers. Sometimes the grocer took "charge backs" on previously paid invoices, resulting in uncertainty for suppliers, he said. "You hold your breath and wait and see how much you're actually going to get paid on an invoice."
He said the problem isn't just with Loblaw but other large retailers, which can use small-business suppliers essentially "as a bank" by forcing them to wait long periods to get invoices paid.
Gary Sands, vice-president of the Canadian Federation of Independent Grocers, welcomed Loblaw's latest moves.
However, he said the pricing practices are industry-wide. "It requires that others be party to lasting changes." Small grocers and suppliers have called for a federal code of conduct to regulate matters between retailers and vendors.
The bureau stepped up its Loblaw inquiry after it approved the grocer's $12.4-billion takeover of Shoppers Drug Mart Corp. in 2014. The previous year, rival Sobeys Inc. acquired Safeway Canada in a $5.8-billion deal.
Peter Chapman, president of grocery consultancy GPS Business Solutions, said suppliers are worried that if the bureau abandons its investigation, "the pendulum will swing the other way and retailers will have the ability to push again."
Last year, Loblaw collected "tens of millions of dollars" from its suppliers using tactics that the bureau has said could be anti-competitive and ultimately lead to higher prices, according to court documents.
"The terms, which appear to be used to protect Loblaw's retail margins, may raise its rivals' costs and increase the prices Canadian consumers pay for grocery products in Canada or have other non-price related effects on competition," the bureau said in a court document this year.
One practice Loblaw says it will drop is its "ad collision" policy. Loblaw requests compensation from its suppliers when it spots products advertised at a lower price in a rival grocer's flyer than advertised in Loblaw's circular during the same period.
Loblaw spokesman Kevin Groh said it "continues to co-operate fully" with the investigation. Its current rules are not anti-competitive, he said. Getting rid of them is part of its push to eliminate "complex, costly and adversarial" practices to create "a simpler organization."