Agriculture Committee on April 3rd, 2008

[Andrea Rosen]

Not necessarily. I must add that with regard to farm products, it's not up to us to issue an opinion, it would be up to the CFIA. So it would be best to put this question to Ms. Bryanton.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Right now, what does it mean?

[Debra Bryanton]

Presently the guidance we apply as it relates to “Product of Canada” and “Made in Canada” claims is the same guidance that is used by the Competition Bureau at Industry Canada for other consumer goods. A product can currently be indicated as a product of Canada although the food ingredient in the product may not have been grown in Canada. That's under our current policy.

[The Chair, Conservative, James Bezan]

Thank you very much. The time has expired.

Mr. Miller.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

Thanks, Mr. Chairman.

Thank you to the witnesses who have come today. Because our time is limited, I am going to try to ask pointed questions. Try, if you can, to keep your answers brief.

One of the main things we're talking about here today is food labelling, and I very much support Mr. Bellavance and where Mr. Easter went. The grapefruit juice that I have every morning, when you pick it up, says “Product of Canada”. Now, I've yet to find a place in Canada where grapefruit is grown, so there is obviously a big problem.

I want to concentrate my questioning today on the Competition Act, and in particular on the food business and how it gets down to the consumer. There's no doubt in my mind—and I think I can fairly well speak for any committee member who was here last spring when we had an in camera session with independent grocers and some other businesses—about the control that is going on in that business.

First of all, the Competition Act, as Mr. Easter said, is not working. It's either that the Competition Act people are not doing their job—and I'm not suggesting that, necessarily—or the mandate is too loose. Something is wrong; it's not doing its job.

One question I have, Mr. Taylor, or whoever wants to answer, is this. Do you believe it's okay for a huge conglomerate, e.g., Loblaws, Sobeys, or whoever, to dictate that a small local supplier have only them as a customer? Do you think that's right?

[Richard Taylor]

Under the Competition Act, Mr. Chair, those kinds of exclusive dealing arrangements raise an issue when a company demands exclusivity, or not dealing with anybody else, or that they be offered the lower price or be given a price matching what they've given somebody else. Those kinds of vertical restraints that a buyer puts on a seller would raise an issue under our act if the firm is dominant.

This whole concept of dominance is a very important point to understand. It sounds bad; it sounds unfair. It sounds—

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

It's happening.

[Richard Taylor]

Of course it is happening, and we know it's happening, and we get complaints about it. But the question about whether anybody is dominant, if you'd just let me finish off—

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

If you're brief, we will.

[Richard Taylor]

Well, Loblaws, you may have read.... There's an eight-page story. For the last 10 years, we've heard about Loblaws' dominance. They were and they are the largest grocery chain in Canada. In fact, their average national share went to about 35% at its zenith. In Ontario and Quebec it was slightly higher, because they're less represented out west. Well, if Loblaws is dominant, then I guess we have these 10-page articles trying to figure out what's wrong with Loblaws. Loblaws has not been able to translate it into higher prices, which is from our point of view what a dominant firm does.

Our role is to make sure consumers continue to get the best-priced products. When we look at the price inflation rate for groceries and at Loblaws' profitability, we see that Loblaws hasn't been profitable in three years. So if they're pushing their weight around, they're not doing a very good job of it.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

Okay, I just—

[Richard Taylor]

And their market share is now declining and is being picked up by companies such as Shoppers Drug Mart, Lawtons—which has gone into groceries—Zellers, and Wal-Mart, and a number of local stores such as, in Ottawa, Farm Boy and Produce Depot. That whole market has evolved from five years ago, when Loblaws was looking untouchable as the dominant firm in the market. It's still a big firm, but it is not dominant under our standards.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

That can be up for debate.

The one thing I want to touch on and that I think our direction is wrong on is that it's important to provide good, safe products for our consumers and at as reasonable prices as possible, but the problem in the whole system—and I think the Competition Act has a role in this—is that what we're doing, which you just emphasized, Mr. Taylor, is concentrating so much on providing a cheap product that the people producing it aren't getting anything for it, or not enough to survive. That's wrong, and our direction needs to be changed.

Do you think it's right that a Loblaws or a Sobeys—and I'm just using these names because they're common, not to pick on them—is able to charge, for example, $100,000 or $250,000 for a supplier to put a product on the shelf? Just yes or no; I just want to hear the answer.

[Richard Taylor]

That's acceptable if they're not dominant. It's no abuse of dominance. It wouldn't violate Canadian laws if they're not dominant. There are a number of other firms that are competing also for that supplier's product. The supplier that is looking at paying $100,000 to Loblaws as a penalty could also go to Wal-Mart and try to get Wal-Mart's business, or it could go to Farm Boy, or it could go to Costco, or it could go to about a dozen other companies that sell groceries in most towns.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

I would say in that frame of thinking, number one, you're not really protecting the consumer around there, because that's going to get passed on to the consumer, and second, it's very detrimental to small businesses surviving, and that's important.

Large wholesalers—

[Richard Taylor]

I'll just point out that we do protect the consumer. It's only when there's dominance. Dominance is synonymous with a price rise—

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

I understand that, Mr. Taylor. I just happen to disagree with that dominance part. I don't want to belabour it because we're running out of time.

Large wholesalers continually—and I know for a fact—blacklist any supplier who will sell to an independent grocer. They do. They blacklist them, make sure none of the big ones buy from them, and basically starve them out. I can give you examples, but I don't want to waste time on that.

Another thing they do is not allow independent stores or even their member stores to sell provincial beef, and in Ontario we have one of the highest food inspection regulations, I think, compared to nearly any province in the country. It's certainly close, if not at the top. Yet they won't allow them to.

What I think of that, and you tell me if I'm wrong, is that it's just basically another way to have control—i.e., a monopoly. Do you have any comments on that?

[Richard Taylor]

I shop at Farm Boy, and Farm Boy is a very successful local chain out of Cornwall that has about 10 stores and is growing by leaps and bounds in Ottawa. I don't know what beef it is, but they have Canadian beef. If they're having trouble getting beef, or chicken, or a major product that such a grocery store would sell, then obviously it's a problem. I'm not aware that they're having trouble. They may not be able to get every brand, but they are certainly able to have a full store.

I'd just ask you to look at Farm Boy. It's an independent grocery store run by a family in Cornwall; it's extremely successful. It's on its tenth store now. It seems to have all these products, so it has overcome these restrictions.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

Thank you.

I'm going to give you an example here, and I know this to be a factual one. A wholesaler, whether it's Loblaws or National Grocers, sells eggs to an independent store for $1.19. That's the store's cost. I'm sorry, no, they buy the eggs from the egg producer at $1.19. They sell them to the independent store at $1.69, and then they turn around and order it to sell them at $1.19, as a loss leader. Do you think that's right?

[Richard Taylor]

Again, it's a question of whether the company selling them at $1.19 is in a dominant position. The laws in Canada don't require firms that are not dominant in competitive markets.... We don't monitor the prices to make sure every price they charge makes a profit, especially in a grocery store where there may be 20,000 SKUs. They make money on some products, they make a lot of money on some products, and they make less money on other products.

We would look at that in two scenarios. First of all, is the grocery firm that is selling one product below cost dominant? The second question we would ask is whether that firm is profitable overall. Whether it sells the eggs at a loss is not the issue; it's whether or not they make profit overall.

In the grocery business it's a well-known fact that grocery companies charge....They don't make any money on certain key products, milk, bread, and eggs being three of them—also turkeys around holiday season. They routinely discount those products and sell them below cost.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

There's a point, though, that needs to be made here. They don't lose money on them; the stores lose the money on them, sir.

[Richard Taylor]

Even if the stores lose money on them, they may make money up, because you buy your Coca-Cola at $7.99 a case and you may buy your carrots at $3 a pound, in which case overall for your $120 bundle of goods, they may make their little margin, which is 4% or 5% in the grocery business. The question from our point of view is whether or not that bundle of goods is profitable.

[Larry Miller, Conservative, Bruce—Grey—Owen Sound, ON]

My point is—

[The Chair, Conservative, James Bezan]

Mr. Miller, your time has expired.

Mr. Bevington.

[Dennis Bevington, NDP, Western Arctic, NT]

Thank you, Mr. Chair.

It's a pleasure to be here on the agriculture committee. I'm not all that experienced with this field, but I'm interested in some of what's going on here. It seems you're looking at coming up with new ideas for labelling products in this country, and I think that's a great idea. I think the committee should be commended. Consumers are after more information all the time, and some of the changes we've seen have been great, and people are picking up on them.

One question I have is this. When it comes to labelling products in Canada, are we restricted by any of our international trade agreements about how we deal with the labelling provisions on the products in Canada?