The federal government should consider policies to combat “excessive net profits” in the food industry, the House of Commons committee investigating food prices has said in its latest report.
The committee recommended that the government explore ways to manage these profits in “monopolistic and oligopolistic sectors of the food supply chain”, which it said drive up prices for farmers and consumers.
In a report presented Thursday, the committee detailed its research into the causes of food inflation and food insecurity in Canada, including high-profile testimony from grocery store executives in recent months.
Executives from Loblaw, Metro, Empire, owner of Sobeys, Walmart Canada and Costco, all faced questions from MPs about the size of their profits amid high food inflation, which grocers say not have taken unfair advantage.
The committee’s report proposed a number of recommendations ranging from lowering barriers to entry for new businesses in Canada to making legislative changes to strengthen competition law in merger cases.
The committee also recommended that the government discuss legislation with the provinces and territories to make the Code of Conduct mandatory for the grocery sector.
This follows Loblaw’s announcement that it plans to join the Code after months of pressure on the country’s largest grocer to participate.
The objective of this code would be to level the playing field for small businesses in the sector.
Participation of major grocers
Membership was supposed to be voluntary, but in recent months pressure has increased on the government to make it law, as not all major grocers appeared willing to sign up.
In December, Loblaw and Walmart told the committee they were concerned it would increase prices for Canadians. And earlier this year, the committee wrote a letter to these two grocers, saying that if they did not sign, it would recommend that the Code become mandatory.
Last week, Loblaw announced that after months of discussions, it was prepared to adhere to the Code provided all stakeholders did so.
“The Code is now fair and it will not lead to a rise in prices,” said its chairman and CEO Per Bank.
At the time, Walmart said the company was reviewing the latest version of the Code.
The grocer did not immediately respond to a request for comment. Neither does Costco.
The Retail Council of Canada declined to comment on the report.
Michael Graydon, CEO of the Food, Health and Consumer Products Association of Canada and chair of the Code’s interim board, said the group was “very supportive” of all of the committee’s recommendations.
Regarding the Code, “our industry wants it to be fully inclusive, involving all stakeholders. This remains our goal and I am therefore hopeful that it can be achieved,” he commented by email.
Francis Chechile, spokesperson for Agriculture Minister Lawrence MacAulay, said the government has made it clear it supports an industry-led Code, but after years of work, “it is high time that all major retailers adhere to the Code.”
The government is calling on remaining large retailers to sign up to the Code, as their participation is essential to its success, Chechile said in a statement.
“In the meantime, we are exploring all available federal options, including proposed legislation. As key aspects of the Code would fall under provincial jurisdiction, we encouraged provincial and territorial governments to do the same. »
Encourage competition
The committee’s report refers to a study released last year by the Competition Bureau which found that Canada’s food sector has become increasingly concentrated following a series of mergers and acquisitions over the recent decades.
The Competition Bureau is currently investigating the grocery sector’s use of restrictive covenants and controls in leasing contracts that it says hinder competition in the industry.
And Industry Minister François-Philippe Champagne said he was looking for a foreign grocer to bolster competition in the Canadian market.
The report’s recommendations include that the government should allow the Competition Tribunal to dissolve or prohibit a merger if it results in excessive combined market share. It also recommends that the law be strengthened by shifting the burden to merging companies to prove that their deal will not harm competition.
Although food inflation has eased significantly from its peaks, reaching just 1.4% in April, prices have risen 21.4% over the past three years.