House of Commons Industry Committee Invites Grocery Chains to Explain Pandemic Pay Decision

On June 18, 2020, the House of Commons Standing Committee on Industry, Science and Technology (the "Committee") voted unanimously to invite representatives of three major grocery chains, Loblaw Companies Limited, Metro Inc., and Empire Company Limited (parent of Sobeys), to “explain their decision to cancel, on the same day, the modest increase in wages for front-line grocery store workers during the pandemic, including how those decisions are consistent with competition laws”.

Canada’s Competition Act, R.S.C. 1985, c. C-34, contains provisions restricting agreements or arrangements between competitors. It should be noted that the Committee has no authority with respect to enforcing the Competition Act and that appearing before the Committee is voluntary. Enforcement of the Competition Act is the responsibility of the Commissioner of Competition (and may also occur through private action). Nonetheless, the Committee’s interest in this matter underscores that companies should be aware of the practical risk of public scrutiny regarding the perceived scope of the Competition Act.

The Competition Act contains civil and criminal provisions governing agreements or arrangements between competitors. The civil provision, section 90.1, provides for remedies in respect of an agreement or arrangement between competitors that substantially prevents or lessens competition. Section 90.1 requires an agreement or arrangement and does not apply to parallel decisions or actions by competitors where the companies act independently in reaching their respective decisions.

The Competition Act also includes a criminal offence, under section 45, where two or more competitors engage in a conspiracy, agreement, or arrangement to, (among other things), fix prices. However, it is not clear that this extends to joint purchasing agreements, which the Competition Bureau has indicated are not prohibited by section 45. Moreover, and similar to section 90.1, section 45 does not prohibit parallel decisions by competitors if the companies act independently in reaching their respective decisions.

It appears to be the concurrent timing of the decisions of the three grocery chains regarding pandemic pay that is raising a question for the Committee regarding consistency with competition laws. Thus, even though the companies may have valid explanations for reaching their decisions, it is important nonetheless to be aware of the practical risk that parallel pricing decisions may raise the prospect of scrutiny based on competition law considerations.

Companies should be careful to take steps to minimize interactions with competitors and to document the independence of their decisions. This includes measures such as:

Practical Law Competition Canada has a number of relevant resources relating to the elements of Canadian conspiracy law, including best practices to avoid entering into a conspiracy agreement. These include the following: