Go to the Globe and Mail homepage

Jump to main navigationJump to main content

AdChoices
People shop at the Loblaws at Maple Leaf Gardens in Toronto. (Matthew Sherwood For The Globe and Mail)
People shop at the Loblaws at Maple Leaf Gardens in Toronto. (Matthew Sherwood For The Globe and Mail)

Watchdog probes alleged ‘restrictive trade practices’ at Loblaw Add to ...

The Competition Bureau is investigating Loblaw Cos. Ltd. pricing strategies in a probe that is demanding that some of the chain’s key suppliers hand over secret records about their dealings with the grocery giant.

The bureau is looking into allegations that Loblaw engaged in “restrictive trade practices” that could lessen competition substantially in the sale of grocery products, according to documents filed with the Federal Court.

The moves come eight months after Loblaw got the green light from the bureau to close its $12.4-billion takeover of Shoppers Drug Mart Corp. At the time, the bureau raised the curtain on sensitive pricing negotiations between Loblaw and its suppliers. The bureau placed some restrictions on Loblaw’s dealings with suppliers to help prevent vendors and grocery rivals from getting squeezed in an increasingly consolidated market. And the federal agency said it would continue investigating the grocer.

As Canada’s $88-billion grocery sector becomes more competitive with more discount rivals, it also is dominated by fewer large retailers. The shifts have raised concerns among suppliers and small grocers that they will increasingly feel the brunt of big players’ demands for more payments.

Loblaw spokesman Kevin Groh said on Monday that the investigation is “not new news” but simply the latest step in the bureau’s review of its Shoppers takeover.

“Given it’s the nation’s largest-ever retail acquisition, we understand the Bureau’s interest in maintaining competition in the marketplace,” he said in an e-mail. “This includes looking at some of our supplier practices. In our relationship with suppliers, we are an active advocate for customers – providing Canadians with the best value possible.”

He said Loblaw doesn’t believe its “practices are inconsistent with a competitive market.” The company continues to co-operate with the bureau, he said.

Small grocers argue that they’re caught in the middle, sometimes pressured by suppliers to pay up for items as a way to offset the low prices for goods attained by larger retailers.

“For us, this is connecting the dots between this issue and the consumer,” said Gary Sands, vice-president of the Canadian Federation of Independent Grocers. “I would see that as a big win.”

He said federal politicians now have no alternative but to look at the rising power of fewer big grocers. His group and supplier representatives have called for a code of conduct, similar to one in other jurisdictions such as Britain, that would regulate the relations between grocers and suppliers.

In its investigation, the bureau on Nov. 12 filed applications in Federal Court demanding that 12 major grocery suppliers to Loblaw – including Danone Inc., S.C. Johnson & Son Ltd. and General Mills Canada Corp. – hand over documents to the agency. None of the suppliers, the bureau says, are facing any “allegation of wrongdoing.”

Other suppliers facing court applications to produce documents include Smucker Foods of Canada Corp., David Chapman’s Ice Cream Ltd., Ferrero Canada Ltd., Con-Agra Foods Canada Inc., Sun-Rype Products Ltd., Sofina Foods Inc. and Reckitt Benckiser Canada Inc.

Spokespersons for some of the companies would not comment or could not be reached. The Food & Consumer Products of Canada group, which represents major suppliers, also would not comment.

Among other things, the bureau is searching for information about potential “reprisals or repercussions” from Loblaw, the court documents say.

The bureau is looking for signs of programs such as those called “ad match” or “ad collision.” In the former, Loblaw matches prices in a competitor’s flyer and requires “financial compensation from a supplier via a margin-protection agreement ... or otherwise,” court documents say. In an “ad collision,” Loblaw asks suppliers for money on the basis the grocer has identified a product in another retailer’s flyer’s promotional materials that is advertised at a lower price than the same product is promoted for in Loblaw’s flyer in the same period.

“Such terms may raise rivals’ costs and ultimately increase the prices Canadian consumers pay for grocery products in Canada,” court documents say.

The bureau’s probe is seeking information back to 2011. Suppliers have complained of some past practices. For example, on Oct. 1, 2012, Loblaw wrote to vendors to say it “will not accept increases in costs from our suppliers effective immediately through calendar year 2013.” It cited its adoption of a new SAP system.

When it approved Loblaw’s acquisition of Shoppers, the bureau imposed conditions that included limits on the supermarket chain’s ability to squeeze some of the drugstore’s suppliers, in addition to demanding the selloff of a small number of stores.

Just months before the takeover, Sobeys Inc., the country’s second-largest supermarket chain, got bureau approval to snap up Safeway Canada for $5.8-billion. Soon after, Sobeys quietly asked its suppliers for retroactive price cuts and no increases in 2014, touching off a storm among vendors.

Report Typo/Error

Follow us on Twitter: @jeffreybgray, @MarinaStrauss

Next story

loading

Trending

loading

Most popular videos »

More from The Globe and Mail

Most popular