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Nov 21, 2017

Competition Bureau drops civil probe into Loblaw

Loblaws location on Carlton Street in Toronto

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TORONTO -- Canada's competition watchdog has closed a 3 1/2-year civil investigation into Loblaw Companies Ltd. related to allegations it abused its dominant position in dealing with its suppliers and determined no further action is warranted.

The Competition Bureau said Tuesday that after analyzing the impact of Loblaw's (L.TO) supplier policies on competition, it concluded there wasn't sufficient evidence to support allegations that Canada's largest grocer abused its dominant position.

The civil investigation -- which is separate from the bureau's criminal investigation into the grocery industry -- centred on whether Loblaw had influenced its suppliers' dealings with other customers by seeking compensation when other retailers sold their products at lower prices.

The bureau said it began the civil investigation in March 2014, shortly after a review of Loblaw's acquisition of Shoppers Drug Mart Corp., which was Canada's largest pharmacy chain at the time.

"The Bureau has gathered the facts and developed a deep understanding of the complex issues in the grocery industry: we have followed through on our commitment to conduct a thorough review," Commissioner of Competition John Pecman said Tuesday in a statement.

"The line between hard bargaining and anti-competitive conduct is a fine one and firms should be careful not to cross it. The position statement we issued today in connection to this civil investigation provides guidance to the grocery industry on how to stay onside of Canada's competition law."

The bureau said that its civil investigation of Loblaw focused on nine policies that were discontinued in January 2016. It added that it could revisit its decision if further information comes to its attention.
Players in the Canadian grocery industry often charge suppliers various fees. Suppliers may pay listing fees, for example, to have their product stocked.

Earlier this month, Loblaw announced that its largest suppliers will have to pay a new handling fee. Suppliers using Loblaw's distribution centres will pay 0.79 per cent on the cost of goods they sell to the company, while those shipping directly to stores will pay 0.24 per cent.

Previously, Loblaw told suppliers in July 2016 that it would apply an automatic 1.45 per cent price deduction on all shipments. It also said the grocer would reject any future cost increases from suppliers, unless they are related to higher input costs.

Loblaw and other grocers are focused on cost-cutting as they grapple with rising minimum wage laws in certain provinces, and pressure from discount retailers and Amazon's acquisition of Whole Foods.

Loblaw announced last week that it is closing 22 unprofitable stores across a range of banners and formats. The move came shortly after the company announced it would lay off 500 office workers, including various executives.

The bureau is also separately investigating allegations of price fixing in the bread aisles of major grocer's, including Loblaw, Sobey's Inc., Metro Inc. and others who have said they are co-operating with the investigation.