Canada’s competition watchdog is concerned that top executives at some of the country’s largest supermarket chains held discussions before removing pandemic pay bonuses for their front-line staff on the same day in June.
“Now, more than ever, Canadians expect and deserve vigorous competition for their hard-earned money,” Competition Bureau commissioner Matthew Boswell said in a pre-taped speech to Canadian Federation of Independent Grocers on Wednesday afternoon. “We must continue to look ensure that those with market power do not undermine the competitive process.”
It is the first time Boswell has publicly spoken on the wage cuts, which drew a significant amount of scrutiny by both the public and government.
The heads of Loblaw Cos. Ltd., Sobeys’ parent Empire Co. Ltd and Metro Inc. — Canada’s three largest grocers — were summoned in July to a House of Commons committee hearing to explain why they had all ended their $2-per-hour temporary wage increases at the same time.
At that hearing, Metro chief executive Eric La Flèche said he made several calls to competitors in May and June to ask whether they planned to end the pandemic pay. Loblaw president Sarah Davis testified that she sent a “courtesy email” to competitors to inform them in advance of her decision to end the bonuses.
“I heard of such discussions with concern,” Boswell said.
Metro, Loblaw and Empire have strongly denied any wrongdoing and said they did not coordinate their decisions to cut the bonus pay. Empire chief executive Michael Medline has noted that he insisted on having legal counsel during the call with La Flèche and did not divulge anything about his thinking on ending the bonuses.
Early in the pandemic, Boswell issued guidance on when companies may need to collaborate with competitors in order to keep supply chains intact.
“In general, communications among competitors regarding employee wages would seem to be unrelated to an effective response to the pandemic,” he said on Wednesday. “It is essential that all businesses remain cognizant of their obligations under the Competition Act and also to note that increasing collaboration amongst competitors carries a risk for businesses to continue down a slippery slope.”
Nathaniel Erskine-Smith, a Liberal member of parliament who has been critical of the grocers’ actions, applauded Boswell’s remarks.
Increasing collaboration amongst competitors carries a risk for businesses to continue down a slippery slope
“It’s important that the commissioner has recognized reason for concern, and acknowledged that the pandemic provides no rationale for communications between competitors about employee wages,” Erskine-Smith said in an email. “We need to reform the act to ensure the commissioner can better act on such concerns in the future.”
The Competition Bureau has been under pressure to act on both the wage issue and to establish a code of conduct to reign in what suppliers say are bully tactics from the big grocers.
The pressure comes after Walmart Canada and Loblaw started charging food producers more fees as a way to pay for multi-billion-dollar investments in e-commerce and store upgrades during the pandemic.
Earlier this month, Prime Minister Justin Trudeau said he found the fees “disappointing,” and noted that the Competition Bureau “is responsible for enforcing” the Competition Act.
“We expect that it will,” Trudeau said in question period on Nov. 4. “We are concerned with the costly fees added on by grocery chains and that is why we’ve turned to the federal Competition Bureau.”
The Conservative Party has also been pushing for the government to act.
“Looking at competition laws is something that is absolutely within the jurisdiction of the federal government,” said Lianne Rood, Opposition shadow minister for agriculture. “We’ve got five major grocery chains that dominate about, or more than, 80 per cent of the grocery industry in Canada, so it’s a high concentration in the industry.”
In Wednesday’s presentation, Boswell said current competition law prevented his agency from getting involved in an industry code of conduct.
“In its current role, the bureau cannot develop or enforce a code of conduct for any industry,” he said. “What the bureau can do, however, is provide a pro-competitive perspective to policy-makers at all levels of government, and we continue to do so.”
Financial Post
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