Canada’s major grocery store chains have each agreed to sign a federal government “code of conduct” that’s meant to protect consumers from price gouging.
Retailers that include Loblaw (L), Walmart (WMT), Costco (COST), Metro (MRU) and Sobey’s parent company Empire (EMP.A) have agreed to the terms of the new government policy.
The terms outlined in the voluntary “grocery code” are not only meant to protect consumers but also level the playing field for suppliers and smaller retailers.
The code provides guidelines for fair negotiations, including for the application of penalties and fees on the large grocers.
Government officials in Ottawa have said that the new code is meant to provide more transparency, fairness and predictability to the domestic food industry.
While government officials have stressed that the code of conduct is not meant to lower grocery prices, the policy was spurred by a sharp rise in grocery prices coming out of the pandemic.
Since June 2021, prices for food purchased from stores in Canada has risen 21.9% nationwide, according to Statistics Canada’s latest data.
The rise in grocery prices has far outpaced overall inflation that peaked at 8.1% in June 2022.
While inflation has declined to an annualized rate of 2.7% in June of this year, the latest Consumer Price Index (CPI) showed that grocery prices continue to steadily increase.
Critics have accused the grocery store chains of collusion on prices and of price gouging as consumers struggle with the rising cost of food.
Earlier this year, consumer groups organized a boycott of Loblaw stores over the high prices being charged.
At the same time, suppliers to the grocery store chains have complained about new fees being charged and the stifling of competition within the industry.
Grocery store chains such as Loblaw and Walmart initially responded to the proposed grocery code by saying it would lead to even higher prices charged to consumers.
However, the grocers had a change of heart after the federal government threatened to make the voluntary code mandatory.
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