17 Jan Loblaw ending 50% discount on some food items raises concerns about anti-competitive behaviour
The revelation that Loblaw will end its 50 per cent discount on perishable foods like meat, fruit and vegetables as they near their best-before dates should attract the attention of Canada’s Competition Bureau, says one industry expert.
Prof. Sylvain Charlebois, the director of Dalhousie University’s Agri-food Analytics Lab, believes the action taken by the grocery chain to align its policy with other food retailers might be considered anti-competitive behaviour.
In an email to Charlebois Monday, Loblaw spokesperson Catherine Thomas said the company is moving away from offering a range of discounts between 30 and 50 per cent on “serve-tonight” products and toward “a more predictable and consistent offering, including more consistency with our competitors.”
“If this is not collusion, it certainly appears to be very close to it,” Charlebois wrote in a column for the Toronto Sun, describing the practice as “discount fixing.”
Meanwhile, NDP MP Alistair McGregor has written to the commissioner of the Competition Bureau asking for a “thorough investigation.” In the letter, he stated that he believed Loblaw’s “co-ordination raises suspicions of possible collusion or anti-competitive business practices within the Canadian grocery retail sector.”
While such a move to scrap the popular discount may anger some consumers, some experts say there’s nothing to suggest it runs afoul of competition laws.
Loblaw-owned grocery stores will lower the discount on perishable foods like meat, fruit, and vegetables near their expiration date from 50 to 30 per cent.
‘Conscious parallelism’
Instead, what Loblaw appears to be doing is known as “conscious parallelism” — the ability of competitors to watch what others are doing in order to copy them, according to Jennifer Quaid, an associate professor of law who specializes in competition and business regulation at the University of Ottawa.
“It’s not illegal,” she said. “The fact that you watch what’s going on in the market and you copy your competitors is not a criminal collaboration because there’s no decision to get together and do something.”
Until recently, Loblaw Cos. Ltd. — which owns grocery brands including Loblaws, No Frills, Zehrs and Valu-Mart — offered last-day discounts of up to 50 per cent on items nearing their best-before dates. But now, discounts on perishable goods will range between 30 to 50 per cent.
The CBC’s Preston Mulligan spoke to people in Nova Scotia on Loblaws’s decision to reduce the markdowns on food that’s about to expire.
It’s a move that has angered some, in particular vulnerable Canadians who have come to rely on the 50 per cent discount.
Chalebois says that in the free market, Canadians expect grocers to remain innovative and creative when it comes to discounting.
“When you have this attitude, saying that ‘We’re just doing this because we’re aligning our policy with our competition,’ that’s not a free market,” he told CBC News in an interview.
“Loblaws can do whatever it wants with its discounting policy. When the motive is about copycatting, like being a copycat to the competition, that’s not on. I think people are expecting something different.”
Section 45 of the Competition Act makes it illegal for competitors to conspire, agree or arrange to “fix, maintain, increase or control the price for the supply of the product.”
If the grocery retailers got together and all agreed to remove a discount, that probably would be a form or price fixing, Quaid said.
“But there doesn’t appear to be any evidence of that,” she said, noting there doesn’t seem to be anything happening that would necessitate an investigation by the Competition Bureau, the federal agency that is mandated to boost fair competition.
Competition Bureau involvement not needed, expert says
Ambarish Chandra, an associate professor of economics at the University of Toronto’s Rotman School of Management, says he doesn’t believe Loblaw was engaging in anti-competitive practices by removing the discount and says it shouldn’t require the Competition Bureau to get involved.
“This is way down the list,” said Chandra, who has spoken critically of Canada’s grocery industry. “They’re not going to do it, nor should they, given the other pressing issues that they should be focusing on.”
Chandra said they should be focusing on their investigation into grocers’ roles in the alleged bread price fixing scheme.
Some claim changes to Canada’s Competition Act, as well as the proposed grocery code of conduct, as the latest controls that will help lower food prices in the grocery sector.
In an email to CBC News, Emmanuel Morin, a spokesperson for the Competition Bureau of Canada, said the organization was aware of the Loblaw announcement regarding its discount, but that it would be “inappropriate to comment or provide opinions on specific conduct in the marketplace.”
Quaid said people need to remember that companies exist to make profits.
“We may wish they made other choices,” she said, but noted that if people are to trust in the market and don’t want too much government interference in business, then they have to be careful about when they decide they don’t like the choices businesses are making.