The term “perp walk” did not appear in the Trudeau government press release, but we in the media know how to read between the lines.
The perp walks were scheduled for Monday morning. Cameras were ready.
The accused had been summoned to “an immediate meeting in Ottawa” to “begin discussions” with Industry Minister François-Philippe Champagne. The CEOs of Canada’s five largest grocery chains stand charged with “making more money, all while the cost of groceries has risen drastically and families are struggling to put food on their tables.”
The “discussions” were about a plea bargain: If the accused offered an acceptable plan by Thanksgiving to “stabilize prices,” the Crown might go easy on them.
As anti-inflation policy or economic strategy, this gets a zero-point-zero for technical merit. But Team Trudeau’s artistic impression scores are at seasonal highs.
The point of the exercise was to force the CEOs of Loblaw L-T, Sobeys, Metro MRU-T, Walmart WMT-N and Costco COST-Q to be seen disembarking from large black vehicles, flanked by advisers, wearing carefully selected dark suits, all while looking ill at ease and hurrying, the faster the better, to escape the cameras.
It’s time for the government to step in to freeze grocery prices
Mission accomplished.
The five grocers employ clinics of spin doctors, all graduates of residencies in message massage from the finest schools of spin doctorology. Yet these well-heeled handlers neglected to impress upon their clients that, when facing cameras you’d clearly rather not be facing, picking up your pace while saying “no comments” (Pierre Riel, senior executive at Costco), or averting your eyes while saying nothing at all (Galen Weston of Loblaw), is evidence enough to convict in the court of public opinion of ten provinces and three territories.
After the walks of shame, Mr. Champagne announced that, no surprise, the grocers had agreed to “work with the government to stabilize food prices.” According to the Minister, each company will submit plans by Thanksgiving.
So, score this as a public relations win for the government.
However, as with all the other challenges facing the country, the issue is not issues management. It’s economic management. Which is hard. And boring. No good visuals. Can’t be TikToked.
Prime Minister Trudeau said last week that unless the grocers came up with plans for “real relief,” he was “not ruling anything out, including tax measures.” Maybe that’s good politics, but the economics are a head scratcher. The government plans to lower the cost of building rental housing by lowering taxes paid by builders – but it’s considering higher taxes on grocers to lower the price of groceries? Huh?
Grandstanding aside, the government does have options to make the grocery industry – and the rest of the economy – more competitive.
Competition tends to push down prices. In a tight labour market, it also pushes up wages. How do companies deal with simultaneous pressures to lower prices and raise wages? They innovate. They invest in new technology. They come up with new processes to do more with less labour. If they don’t, their competitors will.
Innovation means downward pressure on prices has to be met by higher output per employee, and higher GDP per hour of work. Which makes our economy bigger, and Canadians wealthier.
However, the ideal business from the perspective of a business owner is a monopoly. Rising input prices? Yawn. Pass them on to the customers. No need to innovate.
As a recent report from the Competition Bureau concludes, Canada’s grocery business is not very competitive – a characterization that applies to much of Canadian business. Five big chains, some camouflaged under multiple banners, dominate food retailing. The independents of years past were bought up, and weak competition laws didn’t stand in the way.
On June 13, 2020, Canada’s three leading grocers cancelled the $2-an-hour “hero pay” bonus given to employees during the early stage of the pandemic. It was later revealed that the chief executives of the three companies had been in contact before making the move.
More shocking was that this wasn’t illegal.
Earlier this year, Parliament addressed that. Wage-fixing agreements are now banned under the Competition Act. Companies may not collude to keep wages down. Also illegal are so-called no-poach agreements, under which companies promise not to offer jobs to one another’s workers. Both are now criminal offences.
The Competition Bureau has similarly urged changes to provincial laws to prevent property controls in the grocery industry. For example, a major grocery store might only agree to move into a mall if the landlord freezes out competitors. Or a grocer selling an old store might make the sale conditional on locking out competitors. Such measures reduce competition, and not just in the grocery industry.
Beyond that, the Competition Act has to be modernized to make it harder for competitors to merge, and harder for incumbents – again, not only in groceries – to kill new entrants. Consideration should be given to breaking up existing grocery chains.
Ottawa can’t micromanage grocery prices. But it can macro-manage the rules of the game, to foster highly competitive marketplaces that leave business with no choice but to deliver greater benefits to consumers, workers and the Canadian economy.