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

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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 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.

The price of apples at the Northmart grocery store in IqaluitTORONTO - 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 providing relief to consumers, lawyers and economists said.

Trudeau's move comes as many Canadians reel under an affordability crisis with food prices jumping 25% since the start of the COVID-19 pandemic in 2020. At the same time, the central bank's efforts to bring down inflation by raising interest rates to a 22-year-high have pushed up mortgage costs for homeowners and made buying a home unaffordable for others.

Omar Wakil, a partner at law firm Torys LLP who specializes in competition law, said the proposed amendments will increase the cost of doing business in Canada and provide no benefit to consumers.For example, one proposal includes allowing the regulator to conduct market studies on anti-competitive practices.

Economists also say that while food inflation in Canada has been running above the headline consumer price inflation number, the country - like most others - is simply suffering from higher prices globally driven by disruptions largely caused by the pandemic and Russia's invasion of Ukraine. Derek Holt, vice president of capital markets economics at Scotiabank, wrote in a report that Canada may have politically tilted the field against merger proposals and that the government's proposals could lead to unintended consequences like higher regulatory costs and taxes that deter foreign expansion into Canada and discourage investment.

 

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