CHARLEBOIS: Would you like to explore the food competition? Look at the USA

“Kroger, a U.S. grocery chain, had to divest nearly 15% of its stores over the weekend just to secure a shot at regulatory approval to acquire a competitor. Would a similar scenario unfold in Canada? Highly unlikely…”

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When it comes to understanding competition, Canada lags significantly behind the United States. As both nations grapple with antitrust concerns, the United States stands out for its steadfast vigilance against monopolies and public companies. The U.S. Department of Justice actively pursues companies and their executives, often resulting in convictions and prison sentences. What is remarkable is that their investigations are carried out quickly and do not drag on for years, but only last months. Even complex cases, such as the canned tuna price-fixing scandal, were addressed head-on.

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Conversely, in Canada we rely overwhelmingly on corporate goodwill and hope that companies will voluntarily plead guilty in exchange for immunity. Take, for example, the bread pricing scandal in which Grupo Bimbo, the current owner of Canada Bread, was fined $50 million but continues to do business with the federal government. In stark contrast, Loblaw and Weston Bakeries received immunity through their complaint, and the investigations are still ongoing – a staggering eight years and counting. The differences in approach are striking.

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U.S.-based companies have been remarkably careful and strategic when it comes to mergers and acquisitions. The Kroger-Albertsons saga serves as a prime example. To gain regulatory approval, Kroger recently divested itself of over 413 stores to address antitrust concerns that Canada’s leading grocer Loblaw wants to sell 354 stores before a takeover. It represents a fundamentally different landscape.

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According to Mark Warner, a prominent Canadian competition lawyer, Kroger is taking proactive steps to address potential concerns from the FTC in the US. They propose sales as a remedy, effectively asking the FTC to block the merger and leaving the decision to a judge to assess the remedy’s effectiveness. This trend could become increasingly common among well-financed merger companies, particularly as antitrust regulators become more proactive. In the past, before the Biden administration, antitrust regulators were more inclined to accept proposed remedies and approve mergers. Canada appears to still be taking a similar approach.

Significant transactions have been rare in Canada recently. The activist landscape may indeed have changed, as Warner suspects. The most recent major deal, Sobeys’ acquisition of Safeway, required a consent agreement and the sale of 23 stores – just 1.5% of Sobeys’ total business. This pales in comparison to the strict oversight in the United States. What’s notable is that some of the 23 stores sold by Sobeys are still closed after a decade.

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But let us face a hard truth. While Congress closely watched the Kroger-Albertsons deal from the start, few Canadians raised an eyebrow when major grocers changed hands. In Washington, antitrust concerns became a highly politicized issue, forcing the companies involved to publicly acknowledge their concerns. Now that food prices are rising, Canadians are starting to really care about how the architecture of the industry affects food prices.

One major difference between the United States and Canada is becoming clear: Lawmakers and policymakers in both countries agreed many years ago that the intricacies of the food industry were too complex for the general public to fully understand. Instead, the public’s greatest concern is how the industry directly impacts their daily lives, particularly in terms of food affordability, access and safety. Consequently, lawmakers across the United States have been willing to proactively take on the responsibility of addressing these concerns on behalf of their fellow citizens.

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Canada, on the other hand, has chosen a different approach. Many politicians have resorted to corruption allegations and the “greed inflation” campaign as their primary strategies. Unfortunately, these tactics often prevent the general public from engaging with and understanding the intricacies of food distribution and policy.

As we assess the challenge of promoting competition in the food sector, it is abundantly clear that this represents a significant obstacle for both nations. But the fact that Canada is even considering following France’s example – asking the food industry to freeze prices on 5,000 products – is a stark reminder of how unfamiliar our lawmakers are with how our own country works.

If Canadians do not voice their concerns and demand change, they will end up preserving the food industry they are willing to tolerate.

—Dr. Sylvain Charlebois is senior director of the Agricultural and Food Analytics Laboratory and professor of food distribution and policy at Dalhousie University

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