Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Tuesday June 20, 2023
Grocery Monopoly: Big Chains Face Windfall Tax and Code of Conduct Scrutiny
In a classic case of Monopoly come to life, the parliamentary agriculture committee is calling for Ottawa to slap a windfall tax on the owners of Big Grocery if they dare to generate excess profits on food items. These wealthy Uncle Milburn Pennybags-like figures must be feeling the heat as the committee released its report on June 13, capitalizing on Canadians’ frustration with rising inflation during their weekly grocery run.
The committee highlighted that while the food and beverage retail sector has been dealing with supply chain issues and labor shortages, they conveniently managed to record an increase in net income. This has led to speculation about the so-called “price gouging” by Canada’s five largest retailers, who hold a whopping 80 percent of the grocery market. It seems the committee is playing the role of Detective Weak Police, wondering if anyone at the Competition Bureau is actually paying attention to what’s happening right before their eyes.
Analysis: Food retail sector facing big changes
However, the owners of these Big Grocery chains were quick to defend themselves. They appeared before the parliamentary committee in March and took the oath to solemnly swear that they weren’t profiteering off higher grocery prices. Galen Weston, the president of Loblaw, one of the major players, even had the audacity to argue that “reasonable profitability” is simply part of running a successful business. Oh, how noble of them! Apparently, those profits are just being reinvested into the company and, of course, into the oh-so-needy country.
But if the government decides to implement this windfall tax, it will surely hit the grocers where it hurts the most—their bottom lines. Of course, this hinges on the findings of the Competition Bureau, which is currently conducting a study of food inflation. As expected, the bureau released a statement listing various factors that could have impacted food prices, including extreme weather, higher input costs, geopolitical events like Russia’s invasion of Ukraine, and supply chain disruptions. They seem to be exploring every excuse in the book rather than addressing the elephant in the room—questionable competition factors.
Not everyone is convinced that a windfall tax is warranted, though. Gary Sands, the vice-president of government relations at the Canadian Federation of Independent Grocers, adamantly denies any evidence of “greedflation.” He argues that price increases are not limited to the big grocery chains but are apparent in smaller stores as well, as everyone is simply responding to supplier price hikes. Sands presented his case to the committee and warned them of the slippery slope they’re treading on. He rightly points out that if retailers face a windfall tax, suppliers should be subjected to the same treatment, given the interconnected nature of the industry.
The government, however, wants everyone to know that they’re not just picking on grocers. No, no, they’re committed to ensuring that everyone pays their “fair share” of taxes. Adrienne Vaupshas, the press secretary of the federal minister of finance’s office, had the audacity to claim in an email statement that the government has imposed taxes on other companies like banks and insurers in the past. Well, that makes it all fair and square, doesn’t it?
According to Michelle Wasylyshen, the spokesperson for the Retail Council of Canada, the industry’s price hikes are justified by various macroeconomic trends and have nothing to do with greed. She blames the rising costs of feed, fuel, and fertilizer, along with supply chain disruptions, labor shortages, and climate events, as the real culprits behind food price inflation. Wasylyshen warns against excessive government intervention in the retail food business, claiming there’s no evidence to suggest that meddling in operational aspects would do anything to benefit consumers.
But of course, there are always those who believe that government intervention is the holy grail to control Canada’s grocery oligopoly. Advocates have been clamoring for a grocery code of conduct, similar to those in Australia and the United Kingdom, to rein in the power of Big Grocery. Finally, after years of deliberation and consultation with industry players, it seems that the code is nearing completion. Agriculture Minister Marie-Claude Bibeau even boasts that it could be implemented before the end of 2023. However, the agriculture committee insists that the code must be mandatory and enforceable, or else there’s no guarantee that all the major grocers will willingly sign on. (AI)