Canada’s grocery industry is highly concentrated, with Loblaw, Empire, Metro, Costco, and Walmart having a combined market share of 75%, according to the Retail Council of Canada. Many competition-policy commentators and professionals, such as Matthew Boswell, Keldon Bester, and Robin Shaban, have criticized Canada's historically permissive approach to mergers and acquisitions, arguing that inadequate competition enforcement has contributed to excessive market concentration. Advocates of this approach often pursue stronger competition laws to address corporate consolidation. In fact, the efficiencies defence under Section 96 of the Competition Act was successfully repealed in part due to the work of Boswell, who argued it constrained the Competition Tribunal's ability to block anti-competitive mergers and favoured corporate consolidation over the preservation of market competition. While the Competition Act formalized a process to review mergers for the Competition Bureau and Tribunal and block those that lessen competition and hurt consumers, Section 96 armed corporations with the highly controversial efficiencies defence. In this rule, if a corporation's cost-savings from an acquisition or merger outweighed consumer harm, the Competition Tribunal was forced to let the merger proceed. Such critics focus on the Competition Act as a primary culprit for the grocery market’s lack of competition. Similarly, they argue the elimination of market competition is demonstrated in how Canada’s once eight large companies with strong regional identities and competitive retail strategies have now been acquired or outcompeted by Loblaw Companies Limited, Empire Company Limited, and Metro Inc. However, large companies acquiring and merging with competitors is a common practice in a functioning market, and is not inherently negative. Contrary to popular belief, the free-market defences that the Competition Act institutionalized are not the appropriate culprit in assessing the failures of the contemporary Canadian grocery market. In fact, such defences were economically reasonable, and its opponents have failed to consider the greater issue of government intervention that has deterred potential investors from entering the market. The high costs and lack of competitive pricing at grocery stores has risen as a result of policymakers favouring interventionist approaches and refusing to allow a proper free-market.
The lack of competition in Canada’s grocery industry has many financial consequences, primarily on consumers. These minimal price discrepancies between stores exist due to institutional security for incumbent firms that reduce competition. In addressing this issue, the government should not have repealed areas of the 1986 Act, and certainly should not repeal it further. Instead, policymakers must reduce the financial barriers that prevent market access and block Canadians from access to variety.
First, we must understand why increasing the Competition Bureau’s legal power to break up large companies is not desirable. Corporations are not inherently disadvantageous to consumers by virtue of them being large and nationwide. Canada’s situation is unique; when compared to Europe and the U.S., our population is sparse and spread across a large terrain. Thus, having nation-wide companies allows for products to be efficiently made available to consumers across the country. The real issue arises in their lack of incentive to lower prices. As mentioned, the incumbent firms are protected from new competition entering the market, allowing them to charge goods at the highest threshold most Canadians are capable of purchasing from. The ability for new companies to enter the market is ultimately what keeps prices low in a capitalist economy. Consider the effect Walmart’s expansion into the grocery industry had on prices in Canada. In 2006, Walmart opened Canadian Supercentres, becoming a more direct competitor to grocery supermarkets. They initially priced products approximately 2% below local discount competitors, with select locations having prices reduced by an additional 9-10%. The incumbent discount retailers, No Frills and Food Basics, responded by lowering their own prices. Even Real Canadian Superstore, despite not being a hard discounter, was forced to adjust prices to remain competitive. This demonstrates that the existing companies were capable of reducing prices while remaining profitable, and more importantly, it illustrates how market entry can force competitive pricing.
To exemplify that market accessibility is sufficient to lowering prices, we can look at a Statistics Canada case study on how a new competitor’s planned entry in a location caused incumbent firms to reduce prices and pre-emptively compete. In Statistics Canada’s Analytical Series No. 18 (2006), researchers examined grocery prices in a mid-sized Quebec city where a new superstore opened in October 1997. They began tracking grocery prices in the city in August, and in September, one month before the superstore opened, grocery prices fell 4.8%, compared with a greater 2.4% across Quebec. In October the new superstore opened, and prices continued to fall, with the researchers measuring a continued decline in November, all while prices in the whole of Quebec were rising.
Competitive pricing in the Canadian grocery sector is evidently stimulated by the entrance of new competitors, but government market intervention deters both startups and potential corporations from expanding into Canada. The costs and regulatory obstacles that discourage new entrants and limit expansion must be reduced in favour of a free-market approach. A primary example of such obstacles are interprovincial trade barriers. These barriers complicate the movement of goods and the expansion of business across provincial boundaries. To illustrate this, consider this hypothetical situation; Imagine that you are the CEO of a successful grocery company in the U.S. and you are considering an expansion to Canada. You first consider the financial investment needed for new suppliers, transportation networks, and distribution agreements. But, because of Canada's unique framework, you encounter additional costs through the different provincial requirements and applicable federal rules that complicate expansion. Expansion quickly becomes less attractive as the expected profits simply don’t justify compliance costs, and so you decide against expansion. This decision then enables incumbent nation-wide companies to continue to less potential competition, reducing their incentives to lower prices. Inter-provincial trade barriers are only one example of many obstacles. Other constraints include zoning and development regulations, supply management and import restrictions, bilingual labelling requirements, and high corporate and property taxes, that deter potential investors from entering the Canadian grocery market. Reducing these barriers can lead companies, such as the German discounter Aldi, to view the Canadian market as a desirable investment, the way they have viewed the U.S. as one. The ability to sell imported eggs and poultry, more feasibly cross provincial borders without differing requirements, and not have profits dramatically reduced by Canada’s high corporate tax rates will make Canada’s sparse population and related costs have a much less dramatic effect on investment.
Canada’s 1986 Competition Act and the resulting increase in M&A was not inherently negative for consumers, but market intervention has decreased competition, leading to the limited price options Canadian’s experience at grocery stores today. The solution is not to repeal the Competition Act or strengthen the legal power of government agencies, but to limit government intervention in the market, specifically in barriers to entry. As demonstrated, market competition and the emergence of new competitors is highly successful in stimulating competitive price reduction. Canadian policymakers must not favour interventionist approaches that reduce investment attraction, but further free the market and allow Canadians to appreciate the economic benefits of fair competition.
Bibliography Competition Bureau Canada. “Assessing Progress on the Competition Bureau’s Retail Grocery Recommendations.” September 3, 2026. https://competition-bureau.canada.ca/en/how-we-foster-competition/education-and-outreach/publications/assessing-progress-competition-bureaus-retail-grocery-recommendations. Competition Bureau Canada. Canada Needs More Grocery Competition. June 27, 2023. https://competition-bureau.canada.ca/en/how-we-foster-competition/education-and-outreach/canada-needs-more-grocery-competition. Competition Bureau Canada. “The Future of Competition Policy in Canada.” March 15, 2023. https://competition-bureau.canada.ca/en/how-we-foster-competition/promotion-and-advocacy/regulatory-adviceinterventions-competition-bureau/future-competition-policy-canada. Dunn, Brian. “The Battle for Canada.” Supermarket News, September 17, 2007. https://www.supermarketnews.com/finance/the-battle-for-canada. Hayman, Candace. Outlet Substitution Bias in the Canadian Consumer Price Index: A Case Study. Prices Analytical Series, no. 18. Ottawa: Statistics Canada, 2006. https://www150.statcan.gc.ca/n1/en/catalogue/62F0014M2005018.