Thank you, Mr. Chair, and all the members of the committee for inviting me to appear before you this evening to speak about the topic of food price inflation.
My name is Mark Schaan, and I serve as the senior assistant deputy minister in the Strategy and Innovation Policy Sector at Innovation, Science and Economic Development Canada.
While federal government policies with respect to food may be most closely associated with my colleagues at Agriculture and Agri-Food Canada, there's no question that food has many dimensions and is of a critical importance that cuts across departmental lines.
In addition to encompassing several discrete industries and markets in the modern globalized economy, the production, transportation and distribution of foodstuffs represent important markets, industries and inputs in a number of dimensions, not the least of which is that they are fundamental inputs for all of Canada's workers, producers and consumers as well as a source of a tremendous amount of employment and investment that feeds our economy less literally.
It is there where my department enters the picture, focused on the rules and the resources that allow our economy to function and flourish to meet the needs of Canada's population.
It's well known at this point that the causes of inflation within the food industry and elsewhere go well beyond Canada's borders. I'm sure this committee has heard much about war, weather events and the effects of the COVID-19 pandemic on consumption habits and shipping capacity, which you don't need me to repeat.
Given the global nature of these phenomena, the solutions will need to be multifactorial, with the recognition that many players will have to do their part to make it more manageable for Canada's population.
Macroeconomic responses lie with Finance Canada and the Bank of Canada. Questions of employment are handled by the federal, provincial and territorial departments and ministries with that portfolio. We at ISED try to ensure innovative, competitive markets that deliver the best results and benefits to businesses and consumers, including affordable prices, irrespective of the overall state of inflation.
First, I would like to discuss our role in well‑functioning supply chains. Canada's division of powers prevents the federal government from simply legislating ground rules for specific industries, with the exception of the few set aside as federal areas by the Constitution.
However, we have joined forces with Agriculture and Agri‑Food Canada to convene participants from different stages of the food supply chain to work out a code of conduct that governs their commercial relationship.
Details are still being finalized on this project, but through the hard work of the industry steering group, as well as that of a host of federal and provincial governments, a framework has been coming together to promote fair trading practices and contractual certainty. This will help ensure an equitable and prosperous relationship between food manufacturers and the grocers who bring their products to the public.
The code of conduct will set out principles and clear definitions, subject to various dispute resolution and adjudication mechanisms. It will help smooth over some of the problems that have surfaced between grocers and their suppliers. It does not directly address consumer pricing—to be very clear—but the importance of stable and healthy supply chains cannot be overstated in providing a competitive retail food market in which customers have their choice of many different offerings at the best available price.
My department also has stewardship of the Competition Act. The statute sets out a law enforcement regime to address business practices that harm competition, such as collusion among competitors, mergers that lead to undue concentration, or steps taken by dominant firms to undercut the competitive process.
I raise this point because these general rules inform business behaviour and can be an important part of fuelling competitive dynamics. More specifically, at this stage the department does not possess the best evidence to confirm or refute any specific suggestion of anti-competitive activities in the food sectors, which would in any case be a matter of fact within the remit of the Competition Bureau and the courts. However, Canada's grocery sector is relatively concentrated, which means that remaining vigilant and ready to respond to any threats to competition in an inflationary environment that may provide cover for unlawful activity is always top of mind.
On this, the government has taken and continues to take action to reinforce our competition enforcement regime. In 2022, the Competition Act was bolstered by a series of amendments to fill gaps and bring Canada more into line with its international partners. For instance, in the wake of concerns over potential wage-fixing coordination in the grocery industry during the early stages of the pandemic, the act was amended to ensure that agreements between different employers to collude on wages or conditions of work, thus harming competition for labour, were treated the same way that harmful price-fixing agreements were.
Other amendments updated maximum penalties to make them proportionate to the benefit derived from anti-competitive or deceptive conduct to make sure that penalties are meaningful and not simply the cost of doing business. The consumer-unfriendly practice of drip pricing—that is, hiding mandatory fees to make it harder to do accurate comparison shopping—was clarified as a deceptive practice.
Numerous other targeted but important updates were made to the law for shorter-term improvement.
Now a full consultation is under way with respect to the broader, more open-ended question of how the Competition Act should serve the modern economy.