What’s up with the bread price-fixing investigation?

By Mariane Gravelle November 7, 20177 November 2017

What’s up with the bread price-fixing investigation?

 

The story

Last week, the Competition Bureau and RCMP raided the offices of several companies in Canada’s grocery industry on suspicion of price-fixing of packaged bread products. According to the Competition Bureau, the raid was “based on evidence that there are reasonable grounds to believe that certain individuals and companies have engaged in activities contrary to the Competition Act.” As of yet, no charges have been laid. The investigation was confirmed by grocery companies such as Metro, Sobeys, Wal-Mart and Loblaws.

Why does this matter?

Price-fixing – or setting the price of a product or service, rather than allowing it to be determined naturally through free-market forces –contravenes provisions 45, 46 and 48 of Canada’s Competition Act. Says the Competition Bureau:

[The] Competition Act prohibit[s] agreements between two or more persons to prevent or unduly lessen competition or to unreasonably enhance the price of a product. Agreements between competitors to fix prices, to allocate customers or geographic markets, or to restrict production of a product by setting quotas among competitors or other means are considered to be "hard-core" cartel activities, with no socially redeeming features. Anti-competitive agreements harm both consumers and businesses, and enforcing the conspiracy provisions is an important priority for the Bureau. Much of the Bureau's work in this area involves investigating and prosecuting international cartels, which is a crucial activity for competition agencies around the world.

Why focus on bread?

Bread, to some, may seem an odd product to investigate. Explains Sylvain Charlebois, dean of the Faculty of Management and professor in food distribution and policy at Dalhousie University,

At the centre of this investigation is a much deeper problem that lies in the food-supply chain. For years now, grocers have engaged in an open war with food processors, with grocers trying to position themselves as protectors of the public interest by pushing vendors to lower prices in order to remain competitive.

For the past few years, tensions between grocers and vendors have been at a record high. For a few years, major grocers have demanded price cuts from suppliers and it has had a domino effect on the entire industry. So it is not surprising to learn that independent grocers, through an industry association, passed along their concerns to the Competition Bureau. […]

Almost by design, the Competition Bureau may be trying to communicate to the market that grocers are on watch for squeezing processors. As a food staple, bread is an appealing target. The bureau could have selected any food product, but bread's status as a food staple makes it an obvious choice; a clear majority of Canadians eat bakery products almost daily and, as a result, its price is an ongoing concern.

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