(Bloomberg) -- Prime Minister Justin Trudeau’s proposed reforms to competition law are being welcomed by some advocates as a step toward making Canada’s corporate sector more competitive. Whether his move will quell voters’ frustration about prices is another matter.
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Trudeau pledged on Thursday to give the Competition Bureau more power to force companies to hand over information for investigations, and to act against firms that are trying to co-operate with each other in ways that “stifle competition and consumer choice.” It’s a response to months of sinking poll numbers that show many Canadians blame the government for inflation.
Industry Minister François-Philippe Champagne called grocery executives to Ottawa for a meeting on Monday, where he’ll demand a plan for curbing food inflation by Oct. 9 — under the threat of unspecified tax measures if they don’t.
The government also plans to change the law to eliminate a clause that, in rare circumstances, has allowed companies to push through mergers that were harmful to competition.
“These are positive steps,” said Keldon Bester, a former Competition Bureau adviser who now leads the Canadian Anti-Monopoly Project. “We’re not going to wake up tomorrow to a capitalist paradise, but these are important fixes to some of the problems that have been in our law for a long time.”
The grocery industry has become a political target in Canada because of elevated food inflation — made worse in some cases by a weaker Canadian dollar, which drives up the cost of imported US goods. Canada has three large national grocers — Loblaw Cos., Empire Co. and Metro Inc. — that compete with Walmart Inc. and regional chains.
“Most people just don’t trust food companies,” said Sylvain Charlebois, a food professor at Dalhousie University, who will take part in Monday’s meeting. “According to one of our recent surveys, 82% of Canadians believe that greed is behind higher food prices.”
The government said there have been situations where large grocers got together “to prevent smaller competitors from establishing operations nearby,” without giving specifics. A Competition Bureau report in June found that independent grocers struggle to find real estate. It also said consolidation makes it tougher for new stores to stay in business and that many independent grocers are forced to buy products from their competitors.
Bloomberg Poll: Canadians Blame Government, Firms for Rising Prices
Canada’s largest supermarket chains have denied allegations of profiteering. Dan Wasiolek, an analyst at Morningstar, said Trudeau’s comments come across as politically driven. While Loblaw and Metro are generating record earnings before interest, taxes, depreciation and amortization, “they are far from gouging citizens,” he said.
‘We’re Going to Pay for It’
The overall impact of competition-law reforms will depend on the details of the legislation, said Michael Osborne, chair of the Canadian competition practice at law firm Cozen O’Connor LLP. Giving the bureau the power to compel information from companies has the potential to raise costs, as those orders can cost millions to comply with, involving lawyers, investigations and discovery.
“This is money that they will have to spend complying with yet more government regulation. And that’s going to get passed on to consumers in the end. We’re going to pay for it,” Osborne said.
The government’s proposal to limit “collaborations” among rival firms is vaguely worded, he added.
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