Opinion: The Trudeau government has two plans to reduce food prices. One is for show. The other is real

The term “perp walk” does not appear in the Trudeau government’s press release, but we, the media, know how to read between the lines.

The criminals’ walks were scheduled for Monday morning. The cameras were ready.

The accused had been summoned to “an immediate meeting in Ottawa” to “start discussions” with the Minister of Industry François-Philippe Champagne. The CEOs of Canada’s five largest grocery chains are accused of “making more money, while the cost of groceries has risen dramatically and families are struggling to put food on their tables.”

The “discussions” were about a plea bargain: if the defendants came up with an acceptable plan by Thanksgiving to “stabilize prices,” the Crown could go lenient with them.

As an anti-inflationary policy or economic strategy, this gets zero points for technical merit. But Team Trudeau’s art impression scores are hitting seasonal highs.

The aim of the exercise was to force the CEOs of Loblaw LT, Sobeys, Metro MRU-T, Walmart WMT-N and Costco COST-Q to be seen disembarking from large black vehicles, flanked by advisors, dressed in carefully selected dark suits , all while looking uncomfortable and hurrying, as quickly as possible, to escape the cameras.

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Mission accomplished.

All five grocers employ spin doctor clinics, all graduates of message massage residencies from the best spin doctor schools. Yet these well-heeled managers neglected to convey to their clients that, in front of the cameras, you would clearly prefer not to be confronted, quickening your pace while saying: “No comments” (Pierre Riel, senior manager at Costco), or look away say nothing at all (Galen Weston of Loblaw), constitutes sufficient evidence to convict in the court of public opinion in ten provinces and three territories.

After the walks of shame, Mr. Champagne announced that, unsurprisingly, grocers had agreed to “work with the government to stabilize food prices.” According to the minister, each company will submit its plans by Thanksgiving.

So consider this a PR victory for the government.

However, as with all other challenges facing the country, the problem is not problem management. This is economic management. Which is difficult. And boring. Not good visuals. Cannot be TikToked.

Prime Minister Trudeau said last week that unless grocers come forward with plans for “real relief,” he is “not ruling out anything, including tax measures.” It may be good policy, but the economics are a real headache. The government plans to reduce the cost of building rental housing by reducing taxes paid by builders – but is it considering raising taxes on grocers to lower the price of groceries? Eh?

Grandmagogues aside, the government has options to make the grocery sector – and the rest of the economy – more competitive.

Competition tends to drive prices down. In a tight labor market, this also drives up wages. How do businesses cope with simultaneous pressures to lower prices and raise wages? They innovate. They invest in new technologies. They come up with new processes to do more with less work. If they don’t, their competitors will.

Innovation means that downward pressure on prices must be offset by higher output per employee and higher GDP per work hour. Which makes our economy bigger and Canadians richer.

However, from a business owner’s perspective, the ideal business is a monopoly. Increase in input prices? Yawn. Pass them on to customers. No need to innovate.

As a recent Competition Bureau report concludes, Canada’s grocery sector is not very competitive – a characterization that applies to a large portion of Canadian businesses. Five large chains, some camouflaged under several brands, dominate the food retail sector. The independents of past years have been bought out, and weak competition laws have not stood in the way.

On June 13, 2020, Canada’s three major grocers canceled the $2 per hour “hero pay” bonus given to their employees at the start of the pandemic. It was later revealed that executives from all three companies had been in contact before making the decision.

The most shocking thing was that it wasn’t illegal.

Earlier this year, Parliament considered this issue. Wage fixing agreements are now prohibited under competition law. Companies cannot agree to keep wages low. Also illegal are so-called no-poaching agreements, under which companies agree not to offer employment to each other’s workers. Both now constitute criminal offenses.

The Competition Bureau has also called for changes to provincial laws to prevent ownership controls in the grocery sector. For example, a large grocery store might only agree to move to a shopping center if the owner excludes its competitors. Or, a grocer selling an old store could condition the sale on the exclusion of competitors. Such measures reduce competition, and not just in the grocery sector.

Beyond that, competition law needs to be modernized to make it harder for competitors to merge and harder for incumbents – again, and not just in the grocery sector – to kill off new entrants . Consideration should be given to dismantling existing grocery chains.

Ottawa cannot micromanage food prices. But it can manage the rules of the game at scale, to foster highly competitive markets that leave businesses with no choice but to deliver greater benefits to consumers, workers and the Canadian economy.