House of Commons committee recommends feds crack down on ‘excessive’ profits in food sector

The federal government should consider policies to tackle the problem of “excessive net profits” in the food industry, a House of Commons committee investigating food prices said in its latest report.

The commission recommended that the government investigate how these profits could be used in “monopolistic and oligopolistic sectors of the food supply chain”, which it said were driving up prices for farmers and consumers.

In a report presented Thursday, the commission detailed its investigation into the causes of inflation and food insecurity in Canada, including high-profile testimony it has collected from grocery store executives over the past few months.

Leaders of Loblaw, Metro, Empire, the owner of Sobeys, Walmart Canada and Costco all faced questions from MPs about the size of their profits in the face of high food price inflation, from which grocery store owners say they have not profited excessively.

The committee’s report included a number of recommendations, ranging from lowering the barrier to entry for new businesses in Canada to introducing legislative changes to strengthen competition law regarding mergers.

The committee also recommended that the government discuss with provinces and territories legislation to make the Code of Conduct for Foodstuffs mandatory.

It comes after Loblaw announced it plans to join the code after months of pressure on the country’s largest food manufacturer to take part.

The code developed by the industry is intended to help level the playing field for smaller companies in the industry.

This was supposed to be voluntary, but pressure on the government to introduce such a law instead has increased in recent months as not all major food producers were willing to sign up.

In December, Loblaw and Walmart told the committee they were concerned about rising prices for Canadians. Earlier this year, the committee wrote a letter to the two grocery stores saying that if they did not sign up, it would recommend making use of the code mandatory.

Last week, Loblaw announced that after months of discussions, it was ready to sign up to the code if all interested parties did so.

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“The current code is fair and will not lead to higher prices,” said Per Bank president and CEO.

Walmart said at the time that the company was reviewing the latest version of the code.

The seller 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 & Consumer Products Association of Canada and chair of the interim code board, said the group is “very supportive” of all of the committee’s recommendations.

Regarding the code, “our industry’s desire is for a code that is fully inclusive, involving all stakeholders. “This remains our goal and I hope we can achieve it,” he wrote in an email.

The Competition Bureau is currently investigating the use of restrictive clauses in the food sector, controls in lease agreements which it says hamper competition in the industry.

Industry Minister François-Philippe Champagne said he is seeking a foreign grocery retailer to boost competition in the Canadian market.

While grocery inflation has fallen significantly from peak levels, reaching just 1.4 percent in April, prices have risen 21.4 percent over the past three years. The resulting strain on consumers’ wallets, combined with higher interest rates, has led to public pressure on the government – and grocery stores – to act. Some consumers have begun boycotting Loblaw, Canada’s largest grocery chain, to express their frustrations.

This report by The Canadian Press was first published May 24, 2024.

Rosa Saba, Canadian Press