Loblaw discount cut prompts calls for probe into ‘price fixing’

A decision by Loblaw to end 50 per cent discounts on expiring food items is leading to calls for an investigation by the Competition Bureau into what some are calling “price fixing” practices.

Last week, the company confirmed in an email to Sylvain Charlebois, director of Dalhousie University’s Agri-food Analytics Lab, that it planned to move away from a previous practice of offering discounts as low as 50 per cent for ‘serve tonight’ products nearing the end of their shelf life.

Instead, Charlebois says, the company will offer a maximum discount of only 30 per cent for expiring food.

“We’re now moving toward a more predictable and consistent offering, including more consistency with our competitors,” Loblaw vice-president of communications Catherine Thomas wrote in her email to Charlebois, which he shared with SaltWire.

“That said, we continue to offer a range of discounts via in-store promotions and flyer, as well as deep discounts on food nearing expiration through the Flashfood app.”

‘Price fixing cultural problem’

Charlebois says the company’s statement shows evidence of “discount fixing,” and is just the latest example of what he says are widespread anti-competitive practices by the five big grocery retailers, who control 80 per cent of Canada’s grocery market.

“I’ve been saying it for years, I think there is a price-fixing culture problem in the industry,” Charlebois said.

He pointed to the so-called “blackout” periods, during which the big grocery chains impose unilateral price freezes during holiday periods. A federal-provincial working group that looked at retail fees in 2021 issued a report that flagged these price freezes as problematic, especially for food suppliers.

“I actually do think (grocery chains) don’t see the problem. And with the blackout period, and now this — it’s been a recurring problem.”

Loblaw did not respond to a request for comment on this story.

For Atlantic Canada, this decision by the company that owns Atlantic Superstores will have disproportionately negative impacts, Charlebois added, as there are fewer alternative or independent grocery retailers in the region, particularly in more remote and rural areas.

By saying it wants to be more “consistent” with its competitors, Loblaw is taking away options for Atlantic consumers to find deals, he said.

“It does sound anti-competitive. I mean, consumers should expect grocers to be creative, innovative and trying to offer the best deals possible and not to copycat each other.”

That’s why he says he believes the Competition Bureau should step in and take a closer look at this decision.

He’s not alone.

‘Possible collusion’

On Wednesday, B.C. New Democratic Party MP Alistair MacGregor wrote to the Competition Bureau calling for it to launch an official investigation into possible grocery anti-competition measures in light of Loblaw’s discount policy change.

MacGregor, who is the party’s food price inflation critic, said he believes the move raises suspicions of “possible collusion or anti-competitive business practices.”

“Almost every Canadian has been forced to cut back over the last two years, especially when it comes to food. Meanwhile, these grocery CEOs have been allowed to rake in more and more money,” MacGregor said in a statement.

“Last-day-of sales on fresh food is one of the few more affordable options Canadians have for fresh products nearing the best-before date. Something isn’t right here.”

In June, the Competition Bureau called on federal and provincial governments to do more to increase competition in the grocery sector following a market study it conducted on grocery prices in Canada.

It found Canada’s grocery industry is extremely concentrated, with most Canadians buying groceries in stores owned by just a handful of grocery giants.

In 2022, Canada’s three largest grocers — Loblaws, Sobeys, and Metro — collectively reported more than $100 billion in sales and earned more than $3.6 billion in profits.

Industry concentration and the use of property controls that restrict the types of stores that can operate in certain locations has made it harder than ever for independent grocers to open, expand or compete effectively with the big chains, the bureau found.

Food costs rise

Meanwhile, the price Canadians pay for groceries has been rising fast, it added.

New data from Statistics Canada this week shows food costs rose at a higher rate than the national rate of inflation in December.

Prices for food purchased from stores were 4.7 per cent higher than December 2022. While the rate of these increases has been slowing, federal Industry Minister François-Philippe Champagne says Canadians still pay too much for groceries.

“We will continue to hold the industry accountable to bring relief to Canadian consumers,” Champagne’s office said in a statement to SaltWire.

But questions remain about what steps Ottawa is actually prepared to take, in light of resistance from two of Canada’s largest retailers, Loblaw and Walmart, to voluntarily sign a grocery code of conduct, which has been touted as a way to promote more price transparency in the industry.

In a statement to SaltWire, federal Agriculture Minister Lawrence MacAulay said active participation from all major grocers and suppliers is “vital to the success of the code,” and that Ottawa continues to encourage all parties to come to the table.

He stopped short of saying whether Ottawa would force mandatory participation through legislation but did say all options are being considered.

“We’re looking at all available federal options, and, as key aspects of the code would fall under provincial jurisdiction, we’ve asked the provinces and territories to do the same.”