Facing interest rates and price hikes, Canadians are struggling financially. One way to keep prices down is by increasing competition. Is it the best decision? That’s a very delicate and nuanced question to answer. There are many factors to consider, from how much the market can comfortably accommodate to what it means to employment. It’s the Competition Bureau’s job to look at all the deciding factors and make an informed decision about what’s best for the Canadian economy. With such a high-profile role, it’s important to know the role the Competition Bureau plays and how it works. Let’s dive deeper.
What is the Competition Bureau?
Canada has many organizations set up with the task of managing the affairs of certain industries and tasks. This is to protect Canadians and optimize how the country operates. The Competition Bureau is just one of these organizations. Their objective is to regulate competition and protect both Canadian consumers and the Canadian market.
A guiding force behind the Competition Bureau’s work is The Competition Act. Passed in 1986. the Competition Act’s purpose is to, “maintain and encourage competition in Canada in order to promote the efficiency and adaptability of the Canadian economy.” By keeping competition at an optimum level, the aim is to, “provide consumers with competitive prices and product choices.”
Their role is similar to what the Financial Consumer Agency of Canada does to regulate financial institutions. Both agencies enforce rules Canadian companies must adhere to. When they have reason to suspect a company is violating the rules, they can launch an audit. If an audit reveals a violation they move forward with approved methods for encouraging companies to comply.
The Competition Bureau doesn’t have the legal authority to collect information from companies. That’s why it works closely with the Government of Canada. The goal is to change and create laws in the interest of making the economy more manageable for everyday consumers.
How The Bureau protects consumers and the Canadian economy?
The Competition Bureau achieves its mandate in a few ways.
They enforce product labelling and pricing rules that ensure accuracy and fairness. For example, to be marked as “Made in Canada” a minimum of 51% of the cost to produce a product must be collected in Canada.
Another way the Bureau regulates competition is by approving company mergers.
As of right now, two major pieces of criteria are looked at when making this decision. First, they look at how significantly the amount of competition in that particular industry would be affected by the merger. Next, they decide if the benefits that would come out of these companies joining would outweigh the negative impact it could have on the economy. Otherwise known as the “efficiency defence.”
The Competition Bureau also handles matters regarding fraud or scams. They work alongside the Canadian Anti-Fraud Centre to assist people who have been victimized by these schemes. Reporting any of these instances to either organization will help you and other potential victims.
Finally, The Bureau recommends changes to the Competition Act to make sure it reflects the current culture and market. For example, recently Matthew Boswell, the head of the Competition Bureau, has proposed two important changes. One of the changes would give the Bureau the authority to gather information to more efficiently and accurately perform their audits. He also wants to remove the efficiency defence as a determining factor when considering merger agreements.
The Competition Bureau at work
Most people are unaware of the impact the amount of competition in the market has on the Canadian economy. Competition can affect consumer’s finances in a number of ways. That’s why the work the Competition Bureau does is so important. In recent years, the food industry, in particular, has been under a lot of scrutiny by the Competition Bureau.
In 2017, The Bureau filed a search warrant against Grupo Bimbo, the company that currently owns Canada Bread. The investigation proved that former owners, Maple Leaf Foods, colluded with competitors to strategically raise the price of bread products.
Grupo Bimbo pleaded guilty to the charges. As a result of an 8-year investigation, they were penalized the highest fine a Canadian court has charged in a price-fixing case.
Canada Bread was fined the maximum charge at the time. It was through the Bureau’s efforts that the law recently changed so this offence can be charged up to any amount. Thanks to the Bureau, there will be greater consequences for companies overcharging consumers.
In 2022, the steep rise in grocery prices initiated a probe by The Competition Bureau to uncover the cause.
While the investigation did uncover that grocers’ profit margins have increased slightly over the last five years, they concluded it wasn’t an excessive amount. Even lacking bits of information, they found the root cause was a lack of competition.
The Canadian food industry is a fairly concentrated industry. In fact, 75% of all food sales are being collected by just five major players. Domestic companies include Loblaws, Metro, and Sobeys. While the foreign companies are Walmart and Costco.
The solution may be more competition, but it’s a tricker solution than one might first suspect. Retail Council of Canada spokesperson Michelle Wasylyshen says, “The conclusion that we draw from the report is something of a paradox: more competition could result in lower prices, but foreign grocers aren’t raising their hands to enter our market because Canadian grocers already compete fiercely on price”.
The Competition Bureau’s final report on the investigation boiled down to this: the solution is more competition, but foreign companies aren’t rushing in, the only place left to look is domestically. They are encouraging all levels of government to actively support new homegrown grocers.
Competition and your finances
With all this information on competition and the economy, you might be thinking about the next steps for you to take. As you know, the more competition the more variance in pricing. The best way to navigate all pricing is to be aware of which deals are actually good deals. Companies often use psychological tactics to convince consumers they’re getting a better deal than they are. One of these methods is called anchoring. This tactic uses your subconscious knowledge of advertised prices to make you think the price drop makes consumers think they’re getting a good deal. Unfortunately, it’s not always the case. By taking notice of prices on a regular basis you’ll know for sure if you are or not.
Just like The Competition Bureau, at Debt.ca, we look out for the consumers of Canada. While you can’t control the economic climate, you can control how you manage your finances. If you’re struggling financially, contact us today to begin your journey towards financial freedom.