Market Study Notice: Competition in Canada’s Grocery Sector

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Notice of Study

  1. The Competition Bureau (Bureau) is commencing a market study to promote competition in Canada’s retail grocery sector (Study).
  2. A market study allows the Bureau to examine the competitive dynamics of an industry. This Study will explore how governments across Canada can act to promote greater competition in the retail grocery sector.Footnote 1
  3. Market studies are distinct from, and are generally not intended to motivate, law enforcement activities under the Competition Act (Act).Footnote 2 In undertaking this Study, the Bureau is not examining any specific allegations of wrongdoing. However, should the Bureau uncover any evidence during the Study that the Act has been contravened, the Bureau will investigate and take appropriate action.

Purpose of the Study

  1. The Canadian grocery sector is concentrated. Many Canadians buy groceries from retail chains operated by one of three companies: Loblaws, Sobeys, and Metro. Other important retailers include Costco and Walmart, as well as independent grocers operating in communities across Canada.
  2. The level of retail grocery competition varies across local areas in Canada. Some Canadians have access to a larger number of grocery stores, whereas others have fewer options. The Bureau’s past work indicates that, when consumers have more choices between grocery stores, they are likely to pay lower prices, gain greater convenience, and be served by higher levels of innovation.Footnote 3
  3. Grocery prices in Canada are currently increasing at their fastest rate in the past 40 years.Footnote 4 While the Canadian economy is generally in an inflationary period, grocery prices are increasing at an above-average rate.
  4. Through this study, the Bureau hopes to examine how governments could act to combat grocery price increases by way of greater competition in this industry.

Scope of the Study

  1. The Bureau plans to examine three broad questions during this Study:
    1. To what extent are higher grocery prices a result of changing competitive dynamics in the sector?
      1. If they are, what factors may have contributed to the change in dynamics? What role did the pandemic and supply chain disruptions play?
    2. What can we learn from steps that other countries have taken to increase competition in this sector?
    3. How can governments lower barriers to entry and expansion to stimulate competition?
      1. For example, how do restrictive covenants and access to wholesale supply of groceries affect grocers’ ability to compete in Canada?
  2. During the Study, the Bureau does not plan to focus on issues relating to the purchase of groceries from suppliers by retailers, except to the extent that they may impact retail competition. This aspect of the sector is subject to the establishment of a code of conduct that is currently being negotiated among key stakeholders.Footnote 5
  3. As the Study progresses, the topics within the scope of the Study may change (including adding, substituting, or removing topics). In the event that the scope is changed materially, the Bureau will update this notice and take reasonable steps to advise stakeholders of the changes.

Outcomes of the Study

  1. The Bureau expects to publish the results of the Study in a public report, which will include recommendations to government authorities, as appropriate.
  2. The Study will enable the Bureau to, among other things:
    1. Provide informed advice regarding steps that governments could take to promote competition in the grocery sector; and
    2. Increase the Bureau’s knowledge and understanding of the competitive dynamics of the grocery sector to inform its future work.

Process and Study Milestones

  1. The Bureau intends to engage with a wide range of stakeholders during the Study. As an initial step, the Bureau invites stakeholders to provide submissions—either in writing or via oral interviews with Bureau staff—both in respect of the study questions identified above, and any other matters relevant to retail grocery competition in Canada. All written submissions will be made public and posted on the Bureau’s website in the language provided unless it is specifically requested that they be kept confidential.
  2. Following this initial effort, the Bureau will work with interested parties to find potential solutions to identified issues. Once solutions have been vetted, the Bureau will communicate its recommendations in a final report.
  3. The Bureau intends to conduct the Study according to the following timeline:
    1. October 2022: Commence Study
    2. December 16, 2022: Deadline for written submissions to identify issues for examination
    3. January-February 2023: Stakeholder engagement and research
    4. Spring 2023: Analysis of solutions and market testing of recommendations
    5. June 2023: Publish final report
  4. This Study will proceed on an expedited basis, so that the Bureau can make recommendations in a timely manner.

Getting Involved

  1. Please provide written submissions either via our web portal or by email to the officer identified below. If you would like the Bureau to contact you for an oral interview, please provide your contact information. The Bureau wishes to receive submissions and/or indications of willingness to participate in an oral interview before December 16, 2022, in order to provide adequate time to review and conduct follow-up interviews.
  2. The main contact for the study is:

    Greg Lang
    Major Case Director and Strategic Policy Advisor
    Competition Promotion Branch

    Email: cbmarketstudies-etudesdemarchebc@ised-isde.gc.ca

Premise of the Study

  1. Competition is a key catalyst of growth and innovation in the Canadian economy. A competitive marketplace empowers consumers and drives businesses to become more productive, improve product quality, and decrease prices. This attracts new investment, stimulates the creation of high-skilled jobs, and fuels the competitiveness of Canadian businesses abroad.
  2. Government policy is central to driving competition. That is why the Bureau works with governments to assess the competitive impact of new and existing policies and regulations, and champion the essential role of competition in the economy.

Limitations of the Study

  1. A number of the Bureau’s foreign counterparts have undertaken similar analyses of their domestic grocery industries.Footnote 6 These studies have been relied on by governments worldwide to spur greater competition in their jurisdictions.
  2. Such analyses of competition are typically informed by internal business records and data from market participants. However, unlike many of its foreign counterparts, the Bureau does not have the power to compel businesses to provide such information for this Study.
  3. This may limit some aspects of the Bureau’s analysis in undertaking this Study. For example, the Bureau may not be able to undertake some analyses of Canadians’ grocery purchasing habits, or fully understand all of the factors that drive grocers’ pricing decisions. This is because underlying data and information can be difficult to collect on a voluntary basis.
  4. A lack of relevant information can impair the Bureau’s ability to diagnose competition problems. This, in turn, can limit the extent of evidence-based advice that the Bureau can provide to policymakers.
  5. Nevertheless, the Bureau is confident that, through this Study, it can identify and propose solutions to competition issues that affect grocery retail in Canada.

Confidentiality

  1. The Bureau conducts its advocacy and enforcement activities under the authority of the Competition Act. Section 29 of the Act protects information obtained by or provided to the Bureau, including the identities of the persons who provided the information, and any information that could reveal their identities. However, when information has been made public or where persons providing information authorize its communication to other parties, subsection 29(2) permits the disclosure of such information. Additionally, subsection 29(1) provides exceptions for the communication of information to a Canadian law enforcement agency or for the purposes of the administration or enforcement of the Act.
  2. The Bureau encourages stakeholders to consult its Information Bulletin on the Communication of Confidential Information under the Competition Act.
  3. The Bureau expects to publish a report during the Study that may contain analysis based on confidential or commercially sensitive information. We encourage stakeholders to identify any confidential or commercially sensitive information in their submissions. The Bureau will anonymize the information to the best of its ability.

Annex A: Foreign Studies of Grocery Competition

Footnotes

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