Loblaw’s practices have led to friction with suppliers and bureau allegations the company may have lessened competition by using heavy-handed practicesMark Blinch/Reuters
The Competition Bureau's investigation into Loblaw Cos. Ltd.'s pricing practices with its suppliers has been bogged down because vendors have refused to voluntarily provide detailed information, the head of the bureau says.
Competition commissioner John Pecman said suppliers and rival grocers are concerned they will feel some "retaliation" if they come forward with information against Loblaw. The bureau is investigating whether the grocer abused its dominant position in the grocery market to secure favourable terms from suppliers.
"Companies for the most part are reluctant," Mr. Pecman said in an interview Monday after addressing a Canadian Federation of Independent Grocers conference. "They're concerned that they have to continue to operate in the market. This is common not only to this industry but any investigation we conduct involving alleged abuse of dominance. The concern by smaller players is that there will be some retaliation for co-operating."
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The bureau has been investigating Loblaw's supplier pricing practices since early 2014 when the federal agency approved the grocer's $12.4-billion takeover of Shoppers Drug Mart Corp.
Loblaw's practices have led to friction with suppliers and bureau allegations the company may have lessened competition by using heavy-handed practices, such as applying retroactive discounts on orders from vendors and making cost demands as a result of a rival grocer's pricing. Loblaw early this year ended some of those practices.
Mr. Pecman said he would have liked to have concluded the Loblaw investigation last year but the complexities of the issues as well as the lack of co-operation from suppliers and rival retailers have forced it to take longer. He would not estimate when the inquiry will come to a decision.
The bureau has gone to court to force suppliers to produce information about the allegations and continues to do so, but the process takes time, he said.
He said he asks his deputy commissioner regularly why the investigation is taking so long. "It's the same answer: 'We're not receiving any co-operation.' We have to use formal tools and that all takes time."
Still, he said the inquiry has had positive ripple effects in the grocery industry, making large retailers more sensitive to practices that could potentially abuse their leading positions.
And, he said the bureau's investigation played a role in Loblaw dropping controversial supplier-pricing rules in January, although "there may have been other factors as well."
Starting Jan. 3, the country's largest grocer introduced an overhaul of its pricing and cost practices with suppliers in a bid to simplify the buying and gain more certainty and transparency.
It discontinued practices with internal names such as "active and passive ad-match bill backs" and "ad-collision bill backs" which, for instance, forced suppliers to match lower advertised prices at competing retailers.
Even so, in early July, Loblaw told its major suppliers it would deduct 1.45 per cent from their bills for orders received on or after Sept. 4. The move, which angered many vendors, reverberated through the grocery sector. Other retailers, including Jim Pattison's Overwaitea Food Group of Langley, B.C., asked their suppliers for the same price cut.
Mr. Pecman said the bureau is aware of Loblaw's latest price demand and is "incorporating that into our investigation."
Loblaw spokesman Kevin Groh said in an email: "We have been cooperating fully and transparently with the bureau for three years and we will continue to do so."
Michael Graydon, chief executive officer of the Food & Consumer Products of Canada, representing suppliers, said they have provided information when they've been asked for it under subpoena.
"Part of the hesitation and part of the fear factor is that nobody wants to get singled out as being somebody that has provided information that may be detrimental to Loblaw," he said.
While Loblaw has been targeted by the bureau because of its Shoppers acquisition other retailers also are asking for price breaks, Mr. Graydon said. "The current activity of constant 'asks' for rollbacks is not sustainable."
Tom Barlow, president of the grocers' federation and a former president of Coca-Cola Enterprises Canada, said a challenge is that many suppliers are afraid to step forward and provide concrete evidence. "They don't want to be in a written court document having their name out there and having to deal with the repercussions of that."
Mr. Pecman said his team has conducted more than 100 interviews and meetings with suppliers and retailers. "This is an important issue for us and we are committed to doing a thorough review and making the right decision.