Loblaw discount reduction not evidence of grocery collusion: competition expert

Loblaw’s recent move to reduce discounts on last-day sale items is a normal practice in the industry, not a sign of collusion, according to an expert in Canadian competition.  

"Retailers are always following each other," said Michael Osborne, the chair of the Canadian competition practice at law firm Cozen O’Connor. 

"It's perfectly lawful to observe the prices that your competitor is charging, to observe the discounts that they have, and to just follow suit on your own."

His comments came after NDP MP Alistair MacGregor asked the competition commissioner to investigate a recent change in discount practices at Canada's largest retailer. 

News broke this week that Loblaw would no longer offer discounts of up to 50% on items nearing expiry, instead marking them down by 30% across the board. 

Loblaw previously offered between 30% and 50% on last-day sale items, spokeswoman Catherine Thomas said in a statement Monday (Jan. 15). It now offers 30% off across the board to be more predictable and consistent, she said. 

In a letter to the competition commissioner Tuesday, MacGregor called for an investigation into potential anti-competitive practices in the grocery industry.

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MacGregor said that comments by Loblaw indicated they changed their discount to align with their competitors, and that this was cause for suspicion. 

However, it's common practice for retailers to visit each other's stores to stay up to date on what their competition is doing, and make changes as a result, said Osborne. 

"So they notice this and they say, 'Hey, we're leaving money on the table. So we're going to do it too,'" he said. 

"There's nothing wrong with that, provided that they're not in cahoots." 

By "cahoots," Osborne means collusion — which he said is not the same thing as lawfully matching observed prices or discounts. 

"They can decide to follow the leader, but so long as they do it on their own without an agreement, there's no problem."

Metro said on Tuesday that it has been marking down foods nearing their expiry date by up to 30% for more than two decades. 

Loblaw's shift to 30% is in line with its competitors, said J.C. Williams Group retail analyst Lisa Hutcheson on Tuesday. 

Demand for discounted food items has gone up, she said, giving the grocers more room to sell those items for a smaller discount. 

“What drives markdowns for retailers is whether it’s selling or not selling,” she said.

Grocers, and retailers in general, determine prices based on a variety of factors including input and operational costs, said Retail Council of Canada spokeswoman Michelle Wasylyshen.

"That doesn’t mean that they need to be oblivious to what competitors are doing in the market," she said. "The concern from a competition standpoint would be if they came together to discuss pricing, and that didn’t happen here."

The uproar over last-day sale items comes as the major grocers are under intense scrutiny from customers and politicians alike. The government has been leaning on grocers to stabilize food prices, while shoppers have been increasingly flocking to discount stores in a bid to mitigate food inflation. 

With files from Ritika Dubey