Industry Committee on June 12th, 2024

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

Thank you.

I'll go back to you, Mr. Charlebois, before turning it over in about two minutes to Mr. Généreux.

We had a great exchange with Mr. Schaan from the Department of Industry when we were talking about apples. I'll bring up apples again. I bought a bag of apples on the weekend at the superstore. I think I paid about $7 or $8 for a bag of apples produced in Washington state but consumed regularly in B.C.

In that bag of apples I purchased, what do you think the breakdown is for what I paid? Where would that go?

[Dr. Sylvain Charlebois]

Well, first of all, I can't believe you bought American apples [Inaudible—Editor].

[Voices]

Oh, oh!

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

I know. It's shameful.

[Dr. Sylvain Charlebois]

I would say that, obviously, out of $8, if you want to use that sum—

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

Yes.

[Dr. Sylvain Charlebois]

—very little goes to the farmer.

On average, a farmer will get anywhere between, I'd say, 3% to 10% of the product you buy at the grocery store. Of course, it depends on the level of processing. For an apple, there's very little processing, so my guess is that it's closer to 10%. After that, you have brokers, merchandisers, shippers and, of course, distributors.

It is a fresh product. Margins are pretty high in the fresh section of the grocery store. It varies quite a bit between 30% and 50%, depending on the food category, so—

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

What about applesauce?

[Dr. Sylvain Charlebois]

For applesauce, the margins are much smaller. There's more processing involved. There's a lot more markup in processing, in particular. The apple grower will get much less—close to 3% or 4% for that apple.

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

Thank you.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Péladeau, what are your real expectations regarding the complaint you filed with the Competition Bureau today?

[Pierre Karl Péladeau]

Mr. Généreux, we're operating in an industry that was considered to be an oligopoly. You've discussed this a number of times at this committee and elsewhere, that wireless prices in Canada were among the highest in the world.

The purpose of our complaint to the Competition Bureau is to counter one of the measures that hinder competition. We hope that this complaint will result in an investigation, an analysis and, if necessary, initiatives that will make it possible to avoid measures being taken to slow down competition. That's what we want.

As you mentioned earlier, we've demonstrated beyond a shadow of a doubt that we're a player that isn't afraid of competition, having always evolved in this sector. When we entered the telecommunications sector, we were confronted with a culture that was unfamiliar to us. For many, many years, cable TV had been a monopoly, but not necessarily in the best interests of Canadians. Competition always tastes better and is better for citizens.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

What's the current situation with regard to competition in Quebec? We know that Videotron, which in fact provides very good service, is an extremely important player when it comes to cable TV, among other things. You've also expanded the services you offer in Quebec.

Do the latest CRTC decisions on MVNOs, or mobile virtual network operators, play into the competitive element that you want to see more and more, particularly in Quebec?

[Pierre Karl Péladeau]

You're right to point that out, Mr. Généreux, because the measures that have been taken in recent years promote competition, both in terms of switching from one network to another, and in terms of being able to take advantage of the policy you mentioned, the MVNOs, with conditions for network construction.

Players are prevented from engaging in speculation in what are called spectrum auctions, because there's now an obligation attached to that. When you buy spectrum, you have an obligation to build a network over the next seven years. If you don't, you lose the right to use that spectrum. As a result, all of these measures have ensured that Canadians can ultimately benefit from the best competitive conditions.

That said, some considerations are sometimes extremely surprising. For the same product, called fibre optics, or FTTH, the price will be $69 in Quebec compared to $89 in Toronto.

Could that be considered dumping or anti‑competitive measures? Of course, Quebeckers benefit, but give us access to the networks as well, just as we, Videotron, give access to users. It's called third‑party Internet access. Bell, on the other hand, has just bought almost all of these network users. There are measures like that.

Obviously, we're aware of this because it's what we do every day. However, everything has to be analyzed by the Competition Bureau, and you can well imagine that, as players in this industry, we don't hesitate to inform the Competition Bureau to put an end to these practices, which are harmful to Quebeckers and Canadians.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Thank you, Mr. Péladeau.

[The Vice-Chair, Conservative, Rick Perkins]

Thank you, MP Généreux.

For the next round for another five minutes we go to MP Turnbull, please.

[Ryan Turnbull, Liberal, Whitby, ON]

Mr. Charlebois, I'm going back to you.

I know that the Competition Bureau did a study on grocery prices way back now; it seems like a long time ago. It was when I was on the agriculture and agri-food standing committee. We received that report, and it really felt like it didn't get to the bottom of the issues, the heart of the issues, with grocery prices in Canada being inflated. I think part of the challenge they identified was that the Competition Bureau was limited in its powers to compel data. One of my concerns from hearing from the grocery giants in Canada on that committee at the time was that they were saying that, in fact, their margins weren't that much higher, when I think the data shows that their gross margins are somewhat higher—although low as a sector as a whole, for sure. What I wanted to say was that it seemed as though they were saying that their health and beauty products and lines were the reasons they were making a lot more money—or at least that's what Loblaws CEO Galen Weston told us.

What I want to ask you is this. Do you think that the Competition Bureau with the new powers that have been added to it to compel documents and data.... If they were to be able to get to bottom of the issue with those new powers, what do you suspect is the real heart of the issue with grocery prices and the concentration in the market that we see in Canada? Certainly part of the issue that we have, and I don't think anyone's going to doubt this, is that concentration is part of the problem. It might not be the whole problem, but it's certainly a big piece of it. Can you comment on those powers to compel data and what you think we would uncover, or the Competition Bureau would uncover?

[Dr. Sylvain Charlebois]

In response to your question, I have two comments.

One is about net margins. Yes, net margins are very low in Canada compared with other sectors. But if you compare the net margins of Empire, Sobeys, Loblaws, and Metro, the net margins are actually, on average, double of what they are in the U.S. if you look at Albertsons and Kroger there. So, yes, it's a competitive market in Canada, but it's been comfortable for them too.

Most of them are integrated businesses; they do carry products with higher margins like cosmetics, and pharmacies and things like that. But it's been comfortable for the main players here in Canada, I do want to say.

Secondly, our most important recommendation, we believe, for Bill C-352 is our first one, which is very much about data. This is probably the most frustrating thing that I've experienced as a scholar working with businesses, that we fly in the dark in Canada. I think that the Competition Bureau has a role to play to democratize data as much as possible so that the public would know some of these things about margins and and some of these things about competition in Canada.

Also, it would help businesses that are looking at that space too. The lab that we have at Dalhousie is all about democratizing data, but we can't do everything ourselves, and that's why we wanted to recommend this specific thing. Even though it may not be in the scope of Bill C-352, we still believe that democratized data should be a priority for the bureau.

[Ryan Turnbull, Liberal, Whitby, ON]

Thank you. I will move on and ask you one more question.

I noted in that report back when I read it that they had recommended a lot more independent grocery stores in Canada, but really gave no path forward, in my view, to actually getting there.

I agree with their recommendation that we need more independent grocery stores in Canada—perhaps to break up that oligopoly and have more competition. At the same time, I believe that concentration exists throughout the entire supply chain in most cases. Primary agriculture has been consolidated over many years. I've seen the statistics, and food distribution and wholesaling have also been concentrated.

I note you mentioned that regional and local food systems are important, and I couldn't agree more with you on that. My feeling is that we need to build small-scale supply chains to really have the independent grocers have the supply chains that support them in being able to exist and compete. Would you agree with that sentiment? You noted food hubs, and here I think that regional food hubs are part of the missing middle of that small-scale supply chain in Canada that could coexist with the big players and increase competition. Would you agree with the way I'm framing it, that we need more regional supply chains that support independent grocers?

[Dr. Sylvain Charlebois]

Yes, I think the path is pretty simple in my mind. You have two elements: the code of conduct and processing.

The code of conduct would obviously bring more depth to our food processing sector because they'll be able to have a voice to negotiate with grocers, so you will increase chances of processors surviving and thriving in Canada. In doing so, you actually give more choices to independent grocers. You level the playing field for the big five and independent grocers, and you give more choices up the food chain.

Right now what we have is a group of five grocers essentially selling the same thing because they can dictate who wins and who loses up the food chain. By allowing a food processing sector to become stronger, you actually give an opportunity to independent grocers to sell something else, something different, something unique. Yes, we want more independent grocers, but the governance of the industry needs to be addressed by implementing more discipline, more rigour, and I think a lot of people are hopeful that the code would do that.

[The Vice-Chair, Conservative, Rick Perkins]

Thank you.

With the indulgence of the committee, I would suggest two and a half minutes for Monsieur Garon, two and a half minutes for Monsieur Masse, and I think MP Williams has one question he'd like to ask at the end after those.

I would also just like to remind members, before everyone starts thinking about leaving, that amendments for this bill, Bill C-352, are due at noon tomorrow, if you have any.

MP Garon, you have two and a half minutes.

[Jean-Denis Garon, Bloc, Mirabel, QC]

Thank you, Mr. Chair.

I'd like to thank the committee for its generosity, as they so aptly put it.

Mr. Péladeau, there's a new energy at the Competition Bureau. This is evident in the new powers it's been given, such as the fact that it will soon be launching a study on airfares.

As for mobile stores in grocery stores, we've seen the competition commissioner for the first time use his power to issue subpoenas. We can feel this new energy.

You're certainly aware that, on Monday, the Competition Bureau announced an agreement with Bell in the Outfront Media case, where it was recognized that a merger would have a significant impact on competition in more than 600 stores in Toronto, Montreal, Sherbrooke, among others.

Is that the kind of agreement or the kind of proactive, efficient way of doing things that you expect, particularly in the case you're dealing with in Manitoba?

[Pierre Karl Péladeau]

You're right to mention that. This example is a good illustration of the capacity and leadership we feel. We're also feeling it from the CRTC, the chair of which is from the same background.

I think measures designed to promote competition are neither “anti” nor “pro” undertakings; they are to the benefit of citizens. They also require companies to become even more involved in innovation. Ultimately, everyone benefits. Making our companies more competitive, more attentive, and more dedicated to innovation can only be beneficial. You're right to point out that we acted quickly.

As you can probably imagine, we informed the bureau of this situation and they took it head on. It conducted its own investigation and analysis with the various players in the industry. The result is that we acted swiftly enough to ensure that it will be good for competitors on both sides, although the results remain to be seen. It will also give Canadians more choice.

[Jean-Denis Garon, Bloc, Mirabel, QC]

Thank you, Mr. Péladeau.

[The Vice-Chair, Conservative, Rick Perkins]

Thank you, MP Garon.

We have MP Masse for two and a half minutes.