Analysis-Stricter merger laws unlikely to cool Canada’s surging food prices

Prognosis-Stricter merger laws unlikely to cool Canada's surging food prices
© Reuters. FILE PHOTO: The price of apples at the Northmart grocery store in Iqaluit, Nunavut, Canada July 28, 2022. REUTERS/Carlos Osorio/File Photo

By Divya Rajagopal

TORONTO (Reuters) – Canada’s conception to bring down food prices by tightening regulation would possibly maybe well perhaps backfire and fail, raising the designate of doing industry in the nation with out offering relief to shoppers, lawyers and economists talked about.

Canada’s feeble competition law has been long blamed for permitting about a gamers to dominate industries ranging from banks to telecoms and groceries. Last week, High Minister Justin Trudeau promised to amend the Competitors Act to relief bring down prices, together with taking away a clause that permits companies to pursue and defend mergers so long as they make efficiencies or savings, even in the occasion that they hurt competition in the sector.

The proposed amendment will topple the so-known as efficiencies protection provision, giving Canada’s antitrust regulator – the Competitors Bureau – the energy to block provides it deems as rising market concentration, regardless of any designate efficiencies.

Trudeau’s transfer comes as many Canadians reel under an affordability disaster with food prices jumping 25% because the open up of the COVID-19 pandemic in 2020. At the identical time, the central bank’s efforts to bring down inflation by raising ardour rates to a 22-one year-excessive dangle pushed up mortgage prices for householders and made procuring for a residence unaffordable for others.

The double whammy has hit the Liberal Event’s reputation, helping opposition Conservative leader Pierre Poilievre – who has blamed sizzling inflation on yarn spending by Trudeau’s authorities to toughen the economic system all the method by method of the pandemic – surge ahead in thought polls.

Whereas amending the Competitors Act answers a longstanding quiz from the antitrust regulator to bring Canadian laws in accordance to other developed nations, it’s miles unlikely to cool food inflation as it totally stands to prevent future provides among grocers, and does nothing to exchange the reputation quo of some gamers dominating the sector.

Omar Wakil, a accomplice at law firm Torys LLP who specializes in competition law, talked about the proposed amendments will assemble bigger the designate of doing industry in Canada and provide no benefit to shoppers.

As an illustration, one proposal contains permitting the regulator to habits market research on anti-aggressive practices.

“What is clear is that the designate of market research will be borne by companies that will well dangle to cross them onto shoppers,” Wakil talked about. “And those prices would possibly maybe well perhaps very successfully be necessary.”


Canada’s top 5 grocers – which contain Loblaw Co, Empire Co-owned Sobeys and Metro Inc, support a watch on about 80% of the market. The top three generated C$100 billion ($74 billion) in sales in 2022, and earned a total of C$3.6 billion in earnings, a 50% jump since 2019.

But the huge grocery chains dangle pushed wait on in opposition to accusations of designate gouging and blamed elevated prices on distributors passing on enter prices to the grocers. On Monday, the authorities talked about the heads of 5 major grocery chains had agreed to toughen the authorities in its efforts to stabilise prices.

Economists also pronounce that whereas food inflation in Canada has been running above the headline user designate inflation number, the nation – adore most others – is barely plagued by elevated prices globally pushed by disruptions largely precipitated by the pandemic and Russia’s invasion of Ukraine.

Food inflation stood at around 35% in Germany and the United Kingdom – successfully above the 25% stage of food inflation in Canada because the open up of the pandemic, Scotiabank research confirmed.

“Our authorities is taking short-term and long-term measures, together with a stable stance in opposition to future consolidation in the sector, to toughen competition and stabilize food prices,” talked just a few spokesperson for the alternate minister under which Competitors Bureau falls.

Derek Holt, vp of capital markets economics at Scotiabank, wrote in a yarn that Canada would possibly maybe well perhaps dangle politically tilted the discipline in opposition to merger proposals and that the authorities’s proposals would possibly maybe well perhaps lead to unintended consequences adore elevated regulatory prices and taxes that deter foreign growth into Canada and discourage investment.

“As incorrect as the efficiencies protection would possibly maybe well perhaps be in accordance to some, what replaces it’d be a truly politicized route of bustle in accordance to the whims of Cabinet,” he wrote.

Antitrust lawyers also point out that the efficiencies protection clause has been infrequently ever dilapidated in most popular M&A battles and nearly by no technique in the user-going by method of retail industry.

Even essentially the most bitterly contested takeover in Canada’s history – Rogers (NYSE:) Communications Inc’s expose for Shaw Communications (NYSE:), which at final became accredited by the authorities in March – did now not invoke that clause.

($1 = 1.3523 Canadian bucks)

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