Lack of competition hurts Canadians

Boycotts have a long history of having no effect, and it looks like the Loblaws boycott will meet the same fate and achieve no reduction in food prices. Pictured: NDP Leader Jagmeet Singh. Photo Credit: Jagmeet Singh/X.

Loblaws is in the news these days as federal NDP leader Jagmeet Singh has for some reason decided to blame them for food inflation in Canada. It’s unclear why Singh has singled out (Singhled out?) Loblaws as there is no difference on average between the prices charged by Loblaws and other large food retailers. Food retailing is still a competitive industry in Canada. Although a small number of very large players may hold significant sway over the market, there are still many thousands of smaller food stores, speciality stores, farmers’ markets and other means of shopping around for customers seeking better prices or higher quality food products. 

That can’t be said for many other Canadian industries where consumers are held hostage by very few goods and services providers who are protected from competition. A classic example is the television/telecommunications sector, in which a handful of very large companies dominate the market and charge rates well above comparable services in other countries. Banks are another highly concentrated industry, with a handful of financial institutions controlling most of the Canadian market and providing services to consumers and businesses that are mediocre at best. Airlines are another good example and once again, Canadians pay dearly for air travel as compared to other countries. All of these industries are much more dominated by a few players than food retailing. 

No matter how much they like to moan and blame others for high prices in Canada, the unholy alliance between the federal NDP and the Liberals have acted to make things even worse. In the telecommunications sector, the federal government bizarrely decided in March 2023 to approve the multi-billion-dollar takeover of Shaw Communication by Rogers, even though the competitive disadvantages were clear and significant. In March of this year, the government put up no objections to the takeover of HSBC by the Royal Bank, further reducing the competitive players in Canada’s banking sector. In the airline industry, dominance of Air Canada and protection from foreign competition discourages new entrants that could provide more competitive offerings and better prices.

Canada does have a relatively small population for its large geography, so is not always a tempting target for foreign companies to come in and compete with established Canadian players. But governments should not be preventing the entry of foreign competition into Canada and should especially not be permitting these already highly monopolized industries to become even more so. Canada badly needs more effective competition policy, and governments that have a better understanding of the beneficial impacts of competition on any market. 

In the food sector, Singh’s inexplicable targeting of Loblaws has undoubtedly been a key factor leading to a group forming to boycott Loblaws stores throughout the month of May. Like most boycotts, this has been poorly thought out and will have a number of negative unintended consequences. For instance, as a means of lowering meat costs, Loblaws has said it will import more lower cost, ungraded beef from Mexico. This will replace higher quality, graded beef from Canadian producers, harming our own industry in the process. Is this something the boycotters think is a positive development? 

As well, the boycott group has said they are demanding Loblaws not pay out any dividends on their stocks. Really? Many average Canadians have Loblaws stocks in their RRSPs, as they happen to be a good investment. Is it really a noble goal to try to damage the retirement savings of other Canadians as a part of this boycott? So far in May, there has been virtually no impact of the boycott on Loblaws’ sales numbers, and their stock value has actually increased. Boycotts have a long history of having no effect, and it looks like this one will meet the same fate and achieve no reduction in food prices. 

The real target of any action against inflation should be the Canadian government and its provincial and municipal counterparts. Despite Finance Minister Chrystia Freeland’s claims that the recent federal budget was financially “prudent” it was nothing of the sort. Even Bank of Canada Governor Tiff Macklem has said on several occasions that federal government overspending is delaying the interest rate cuts that all Canadians would welcome, as high government spending is a main driver of inflation. As well, federal government policies that discourage investment and promote growth in government instead of the productive private sector lower the value of our dollar. Canada imports a great deal of food items, as well as other products, and a lower dollar means higher prices for those imports. 

Provincial governments are not off the hook either. We continue to see excessive spending increases in all provinces. The pandemic understandably increased spending by government, but that should have been temporary. We should now be seeing reductions in total spending at all levels of government. Yet it seems governments have become comfortable with higher spending and are not motivated to return to fiscal sanity. Another financial crisis such as that Canada faced in the mid-1990s seems inevitable. Unless Canadians start to recognize the real source of our inflationary cost-of-living problems – bad government policies – boycotts will accomplish nothing other than the odd headline or two.

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