Cracking Down On COVID-19 Profiteers

While artificially inflated retail food prices are possible in Canada at any time, it’s highly unusual – even now

Even if they really haven’t had good reason, many Canadians have felt food insecure lately. Access to food has been a concern. Affordability is certainly a close second.

Since the beginning of the COVID-19 crisis, consumers have occasionally taken to social media to report inflated prices by retailers. Even though the accusations were warranted in some cases, the evidence in other cases was weak at best.

While artificially inflated retail food prices are possible in Canada at any time, it’s highly unusual.

For one thing, the risks are too high for everyone involved. Social media makes it so easy to call out suspicious practices, whether or not the accusations are valid. We’ve seen cases like this already during the COVID-19 crisis.

But consumers appreciate knowing that someone has their back. The Ontario government last week became the first province to introduce fines for price gouging since the start of the COVID-19 crisis. Corporations involved face fines as high as $10 million. Company leaders face fines as high as $500,000 and a year in jail.

These are severe sanctions.

But price gouging is difficult to prove, especially when it comes to food. Food inflation is not uncommon. Many factors the food industry has little control over influence retail prices, including currency, energy costs, labour costs – the list is long.

Most grocers make a razor-thin profit of one to two per cent on billions in sales at retail. The margin of error is equally thin. If the Canadian dollar drops suddenly, for example, prices need to be adjusted quickly. That’s what led to the cauliflower price jumps a few years ago.

The only way to build a price-gouging or price-fixing case at the retail level is by accommodating whistleblowers.

That’s exactly what happened with the bread price-fixing scandal, which had been going on for 14 years. The investigation required two companies, Weston Bakeries and Loblaws, to out themselves to the Competition Bureau of Canada in order to launch a two-year undercover investigation involving five other companies. For their co-operation, Loblaws and Weston received immunity.

The investigation, according to some reports, cost nearly $500,000 and continues years after it started.

It’s safe to say, then, that these cases are difficult to prove and historical data is key.

Going to social media will only make things more difficult for anyone investigating.

The audience for the Ontario government’s new regulations against price gouging was clearly consumers, not industry. In a time of self-isolation, coupled with a sentiment of communal suspicion, it was the right thing to do, regardless of whether exaggerated food inflation is happening.

Monitoring since the beginning of the crisis suggests price fixing practices are almost certainly non-existent, although meat prices, especially pork and beef, are higher than expected. Even though some categories have seen increases, food prices have mostly behaved normally.

We expected food inflation of four per cent this year, so prices should go up, regardless. Meat prices could go up by as much as six per cent, so consumers should notice increases by now.

Nothing suggests prices are increasing due to abusive pricing since the start of the COVID-19 outbreak. In the dairy and bakery categories, prices were increasing before the virus started changing our lives.

When everyone is watching everyone else, it’s quite common – too common, in fact – to report any sort of irresponsible behavior or breaches to our public health regulations.

For any retailer to unjustifiably increase prices only to have its reputation damaged overnight would be unwise. So they’re being extremely careful.

Exceptions exist, of course, but consumers should be careful with the power social media gives them.

Instead of accusing retailers on social media, the Competition Bureau is the best place to go for protection. The bureau needs the evidence and the public’s co-operation.

Since the beginning of the crisis, we’ve seen plenty of false information and we need to be vigilant about finding accurate information.

One thing COVID-19 has changed is our access to discounts. Weekly flyers are getting thinner, and discounted food products are fewer and further between. Grocers are clearly focused on other issues, which is why we should expect fewer items to be on sale in stores.

Online, it’s even worse. In fact, online food 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 orders.

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

By Sylvain Charlebois

Dr. Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University.

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