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04/13/2020

Cracking down on price gouging

Canadians have been concerned about food supply and food prices since the start of the COVID-19 outbreak. Some Canadians have even taken to social media to report inflated prices at some retailers. Though the accusations were warranted in some cases, the evidence in other cases was weak at best. While artificially inflating food prices can happen outside of a pandemic, it’s highly unusual.


For one thing, the risks are too high. Social media makes it so easy to call out suspicious practices, whether or not the accusations are valid. Last week the Ontario government introduced fines for price gouging, the first provincial government to do so in the COVID-19 era. Corporations involved in gouging could face fines as high as $10 million. Company leaders could also face fines as high as $500,000 and a year in jail.

These sanctions are severe, but price gouging on food is difficult to prove. Food inflation is a natural economic phenomenon that the food industry has little control over. Many factors influence retail prices including currency, energy costs and labour costs. Most grocers make a razor-thin profit between 1% to 2% on billions in sales at retail. The margin of error is equally thin. If the Canadian dollar drops suddenly, prices need to be adjusted quickly.

The only way to build a case in price gouging at retail is by accommodating whistleblowers. That’s exactly what happened with Canada’s bread price-fixing scandal. Weston Bakeries and Loblaw admitted to participating in a scheme to increase packaged bread prices for more than 14 years, which sparked a two-year undercover investigation on five other companies. Both companies receive immunity for their assistance.

There’s nothing to suggest abusive-pricing practices have taken place since the start of the COVID-19 pandemic. Prices were already increasing in the dairy and bakery categories before the outbreak. In December, Canada’s Food Price Report forecasted prices would increase 2% to 4%, and meat prices in particular would increase by as much as 6%. Consumers should be noticing these increases by now.

For a grocer or retailer to unjustifiably increase prices would damage their reputation overnight, which is why all of them are being extremely careful. Exceptions do exist, but instead of accusing retailers on social media of price gouging, they should notify the Competition Bureau. The Competition Bureau needs evidence and the public’s cooperation. Since the beginning of the crisis, we have seen false information galore. We need to be vigilant as to which information is accurate.

One thing COVID-19 has changed is our access to discounts. Weekly flyers are getting progressively thinner, and discounted food products are fewer and farther between. Grocers are clearly focused on other issues right now, which is why we should expect fewer items to be on sale in stores. Online, it’s even worse. In fact, online shopping was never a place where bargains were easy to find. Grocers cover margins by keeping prices higher so consumers end up paying for delivery and the labour required to put together their order.

After all, convenience and safety are premiums grocers can charge for, and that’s not criminal. It’s just business.

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Sylvain Charlebois is professor in food distribution policy and senior director/AGRI-FOOD ANALYTICS LAB at Dalhousie University.

Originally published at Canadian Grocer.