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

By Divya Rajagopal TORONTO - Canada's plan to bring down food prices by tightening regulation could backfire and fail, raising the cost of doing business in the country without providingBy Divya Rajagopal

The proposed amendment will drop the so-called efficiencies defense provision, giving Canada's antitrust regulator - the Competition Bureau - the power to block deals it deems as increasing market concentration, irrespective of any cost efficiencies. While amending the Competition Act answers a longstanding request from the antitrust regulator to bring Canadian laws in line with other developed nations, it is unlikely to cool food inflation as it only stands to prevent future deals among grocers, and does nothing to change the status quo of a few players dominating the sector.

"What is clear is that the cost of market studies will be borne by businesses that will have to pass them onto consumers," Wakil said."And those costs could be significant."Canada's top five grocers - which include Loblaw Co, Empire Co-owned Sobeys and Metro Inc, control about 80% of the market. The top three generated C$100 billion in sales in 2022, and earned a total of C$3.6 billion in profit, a 50% jump since 2019.

Food inflation stood at around 35% in Germany and the United Kingdom - well above the 25% level of food inflation in Canada since the start of the pandemic, Scotiabank research showed.

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Analysis-Stricter merger laws unlikely to cool Canada's surging food pricesCanada's plan to bring down food prices by tightening regulation could backfire and fail, raising the cost of doing business in the country without providing relief to consumers, lawyers and economists said. Canada's weak competition law has been long blamed for allowing a few players to dominate industries ranging from banks to telecoms and groceries. Last week, Prime Minister Justin Trudeau promised to amend the Competition Act to help bring down prices, including removing a clause that allows companies to pursue and defend mergers as long as they produce efficiencies or savings, even if they hurt competition in the sector.
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