Current state

• Canada's open border and economy; many firms price at least partly to account for global realities;
• The ability of firms to quickly change prices based on multiple (and often external) factors;
• The demand for food is inelastic; large price declines only trigger modest consumption increases;
• The loss leader phenomenon, whereby stores deliberately drop the prices on certain goods to get people into their stores;
• Exchange rate fluctuations that impact the prices of imported foods;
• Cyclical seasonality in some commodities.

There is also significant debate in the economics literature about the best way to identify the link between corporate power, price, and supply chain manipulation and anti-competitive behaviour, and impacts on various actors in supply chains. As the economics community struggles to build a consensus on this (especially when considering the data limitations that exist in many countries), then there is an impact on decision makers who shy away from addressing corporate concentration and its impacts. The models used in Canada for identifying market power and impacts and the limited data sets available would appear to be substantially behind the latest approaches in Europe (see Cavicchioli, 2018).

We do know that market power usually reduces prices for farmers and processors,  and increases prices for consumers, but is this happening in Canada? Because of low-cost general retailers like Walmart, the story has been a bit different here. Due to their large scale, the big retailers generate cost savings by using new technology and increasingly big data and artificial intelligence (see Goal 8 Automation, Big Data and Food System Work). Smaller firms are unable to afford such investments. So the improved rates of return for large firms is more a result of their ability to reduce costs than to increase prices. For farmers and smaller processors, however, retailer power may be squeezing them financially, though studies of this issue in Canada are inconclusive. But farm gate prices have been going down for many commodities and retailer power combined with international price setting, global sourcing and consolidation, and market dynamics are likely factors (Sparling et al., 2005).

However, COVID may have produced a shift in these dynamics as during the pandemic when costs were up from supply chain disruptions, the big three food retailers are reported to have increased net income by 69 per cent (Loblaw), 36 per cent (Empire/Sobey's) and 26 per cent (Metro) (Milstead, 2023), implying significant power to raise consumer prices beyond costs.  There is evidence that firms in concentrated sectors use inflation as cover for tacit collusion to increase prices (Parramore and Skinner, 2022).

The additional challenges for small- to medium-sized farmers and processors appear to be:

• Gaining entry to larger markets;
• Producing enough volume to meet buyer requirements;
• Ensuring product homogeneity as big companies like their products to be consistent in presentation and quality; part of this challenge is having centralized grading and sorting facilities on-farm;
• Coordinating harvest to meet buyer schedules and spreading out supply to meet purchasing patterns, including organizing packaging and delivery;
• Meeting cost demands of buyers, particularly volume discounting which is unaffordable for small operations.

Large food corporations have also (see Getting Started, Problems):

• Influenced dietary guidelines;
• Shaped tastes with advertising and marketing;
• Determined product availability and location;
• Influenced what production and processing aids are used;
• Influenced chemical loading in the environment by requiring certain cosmetic standards.

Control over land

Private ownership of land has increased dramatically since European settlement (see Get Started, Colonial History). The Dominion Land Act (1872) was a key part of the dispossession of indigenous peoples. In concert with the Homestead Act, 160 acres of land was granted to European males willing to clear the land for agriculture (Desmarais et al., 2016). These original patterns of agricultural land holding shifted significantly over the course of the 20th century. Over this period, Canada lost over 500,000 farms to consolidation, bankruptcy, and abandonment. Average farm size nearly quadrupled from 1941 to 2011 (AAFC, 2012). Most of these farms were sole proprietorships, partnerships (often without a written agreement), and incorporated operations in which the farm family held all the shares, and provided management of the operation and most of the labour. However, the number of corporations managing farms, with hired managers and employees providing the labour, increased substantially in the second half of the 20th century, particularly in certain sectors such as hogs and mushrooms. There is significant evidence that these changes have resulted in declines in the vitality of many communities (MacRae et al., 2014b).

On top of these historical shifts, the last 10 years have witnessed another level of ownership transformation. Following the mini-crash of 2008, farmland in many parts of the world, including Canada, attracted the attention of investors and investment funds. Canada's largest farmland owner, Robert Andjelic,  a former large  industrial property owner, now controls approximately 225,000 acres, with multiple tenant farmers (Kirby, 2022). Ranches in BC, and their associated crown leases, are increasingly under the control of wealthy international owners (Gold, 2023). Associated with the financialization of food systems (Burch and Lawrence, 2009), farmland is being acquired by funds under purchase or lease arrangements who then either hire managers to run the farm or lease land to family farmers under a variety of arrangements (Desmarais et al., 2017). Given existing ownership restrictions (see Efficiency), several funds have taken governments to court, particularly in Saskatchewan.

From 2002 to 2014, investor control of farmland in Saskatchewan increased 14 fold, and then a further 13% between 2014 and 2018 (Magnan et al., 2022). In some counties, investor ownership represented 8-10% of the county total. Such dynamics put more pressure on farmland prices and rents and make access to land more difficult for owner-operators and make the transition to sustainable farming more difficult (Desmarais et al., 2017; Rotz et al., 2019; Magnan et al., 2022;  Aske, 2022; see also Fairbairn [2020] for a global analysis). Nationally, it is now estimated that 2% of farmland is managed by investor funds, including AGinvest Farmland Properties, Area One Farms, Veripath,  and Bonnefield (Lanthier, 2024). There is evidence that institutional investors charge higher land rents and that, in many cases, rents are no longer aligned with the productive capacity of the land (Magnan et al., 2022), a sign of land market failure. They may also play a more interventionist role in land management decisions as part of the process of "protecting" their investment (Magnan et al., 2022).  Ironically, some of the investors are pension funds for para-governmental organizations, a clear contradiction of social purposes. There is some evidence globally that managers for such investment funds, in their efforts to optimize returns for investors, focus on export crops with less attention to local food needs (Müller et al., 2021). If that is also happening domestically, it compromises the shift to demand-supply coordination (see Goal 2). Governments are generally not responding adequately to these challenges.

How has the policy system contributed to the current problems (adapted from Mendly-Zambo et al., 2018)

How corporations are defined, structured, and operationalized

According to the Canadian government, a corporation, or 'company’, is a legal entity entitled to the same rights and obligations under Canadian law as a natural person.  These legal protections go to the heart of the problem. Originally conceived as instruments of community and public good, the corporate form has been so altered over the years that it bears little resemblance to original structures and purposes.

The essential problems are these (MacRae et al., 1993):

• multiple purposes, many of which are effectively hidden from public scrutiny especially if the firm is not publicly traded;
• limited liability for shareholders and managers;
• the ability to exist in perpetuity;
• easy transferability of ownership;
• concentration and specialization of management;
• no substantive links to the communities in which they are located (unless the firm chooses to make this a priority).

These problems and how to address them are discussed in Redesign.

How legislation has failed to curtail the excesses of food capitalism

To better understand the current situation, it is necessary to review the history of this legislation and the role of the state.

Anti-competitive legislation has existed in Canada since the late 19^th century with the first iteration passed in 1889, as a response to firm consolidation of power by businesses following the industrial revolution (Government of Canada, 2013). While legislation has been adopted under a number of different titles, including the Anti-Combines Act, 1889, Combines Investigation Act, 1910, Combines and Fair Prices Act 1919, the Combines Investigation Act, 1923, and most recently the Competition Act, 1985, the basic themes guiding the legislation are consistent; large companies that hold a dominant position within a market are necessary for a strong economy and not necessarily engaging in anti-competitive behaviour.

The legislation was expanded over time to include issues such as “mergers, monopolization of business and consumer activities, maintaining checks and balances for companies in a dominant position within the market, delivered pricing and specialization agreements” (Government of Canada, 2013). From 1889 to the 1970s, the legislation contained language that enabled loopholes for anti-competitive behaviour, enforcement mechanisms were underfunded and understaffed, and the legislation itself was developed within a political climate regardless of party affiliation that openly supported the business community (Cheffins, 1989).

This enabled anti-competitive behaviour to persistently occur. An additional obstacle unique to Canada is that federal anti-competition legislation was subject to jurisdiction under federal criminal law rather than federal trade and commerce rules (Cheffins, 1989) until approximately 1976. As a result, it was difficult to prosecute issues related to anti-competitive behaviour because it was very difficult to prove “beyond a reasonable doubt” (Osler, Hoskin & Harcourt LLP, 2007) as is required under criminal law.

In the 1980s, the Competition Act, 1985 was updated to increase oversight in areas of advertising to address misleading and deceptive practices, including the addition of new procedures to review corporate mergers, “strengthen criminal provisions on cartels, collusion and bid‑rigging” and, resulted in the creation of an adjudicative body known as the Competition Tribunal (Government of Canada, 2013) that reviews cases in areas in business including but not limited to abuse of dominant position; business mergers; deceptive marketing practices and; delivered pricing (Competition Tribunal, 2018). The Competition Tribunal is subject to regulations under The Competition Act, 1985 and the Competition Tribunal Act, 1985. The bureau investigates complaints and determines whether or not the escalation to the Competition Tribunal is warranted.

According to the Competition Bureau, substantial changes were also put into effect in 1999, 2002, and 2009 wherein the Canadian government changed the legislation to include a “civil law track to the provisions on misleading advertising and deceptive marketing practices” (Government of Canada, 2013), clarified the jurisdiction and powers of the legislation to enable the Competition Tribunal greater power in matters before the tribunal as well as the “introduction of new merger review procedures…strengthening criminal provisions…adoption of a provision on restitution” (Government of Canada, 2013) among other measures.

However, what might be positive changes are in some cases diminished by increasing industry self-regulation in certain areas of the food system, in particular, food advertising rules. These changes are connected to other pieces of federal legislation (see Goal 1, Consumer Information Systems), but the aggregate effect is to reduce the ability of government to prevent misleading advertising of food, especially to children.

Other significant changes to the legislation in the 1980s under the Mulroney administration were linked to “opening” Canada up to foreign investment to achieve stronger economic growth in part to counter a recession experienced in Canada at that time (Freed, 1985). Expansions in trade relationships, in particular with the United States, had a strong influence on competition law, including within the agriculture and retail food sectors. As part of the shift from the interventionist, domestically centered government of Trudeau (Stanford, 2010), the Mulroney administration embraced policies that encouraged foreign investment in Canada and increased trade liberalization, as demonstrated by the creation of the Canada-U.S. Free Trade Agreement, the precursor to the North America Free Trade Agreement and the current CUSMA.

Related to trade promotion, the Investment Canada Act, 1985 and Investment Canada are examples of domestic policy and legislation developed under the Mulroney government, that were highly supportive of foreign investment in Canada. Investment Canada even supported the takeover of Canadian businesses as long as there was a “net benefit test to…protect Canadian interests” (Stanford, 2010) although what was meant by “benefit” at the time was not necessarily clear. While amendments to the above as well as other pieces of legislation have occurred since their respective inception, the enthusiastic support of trade agreements and the business-first perspective from the Canadian government has moulded the rules related to competition in business in Canada.

So, while there have been both improvements and weakening of the legislation over time, Canadian governments believe that the food marketplace fundamentally works, except under very extreme circumstances, such as WWI and WWII (see Goal 2, Demand Supply Coordination). Consequently, the policy system is designed to intervene only when more egregious capitalist behaviour is exhibited, in this case, when pronounced anti-competitive behaviour is displayed that has a significant negative impact on the market and society. In this view, consolidation leads to efficiencies and it is only when such efficiencies tip into the realm of market dominance that an intervention is required.

This, in part, explains why the Competition Bureau has argued in the past that large companies are sometimes necessary, to “achieve lower production costs or to compete against foreign and domestic competitors” (Competition Bureau Canada, 2018). The impacts of lowering production costs on suppliers, or on workers (since labour is a big cost in most food firms) do not appear to be core considerations by the Bureau. The Bureau announced that collusion to suppress wages would no longer be subject to criminal investigation, only civil ones, with a higher threshold of proof. This was triggered by a change from 2009, that "purchase"' (as opposed to sale) is no longer subject to criminal conspiracy provisions (Bednar and Shaban, 2020). This also applies to wages since they are considered the purchase of labour, meaning that wage-fixing by companies is not subject currently to criminal prosecution. Equally significant, the loss of product quality often associated with cost reductions and market concentration, do not appear to be major areas for assessment. However, the use of a dominant position to eliminate competition within a market, as determined by a set of criteria established by the Competition Bureau, is subject to enforcement provisions under Sections 78 & 79 of the Competition Act, 1985.

Importantly, most anti-competitive legislation, including Canada, has been focused on horizontal integration, when one company buys up another providing similar goods and services.  What is more problematic in the current environment is vertical integration, the purchase of firms that provide goods and services related to the purchasing firm's supply chain or service requirements, or even in some cases in barely related business areas. Most legislation is not well designed to address this form of corporate concentration (Mooney 2018).

There is evidence also that the Canadian approach (and that of the US as well) to creating freer markets by reducing government intervention has been failing.  Philippon (2019) argued that by lessening both operational regulation of business and anti-competitive controls, the US (and by extension Canada) have created an increasingly anti-competitive marketplace that charges consumers more than would exist in a competitive market. He contrasts the US situation with Europe which used to be over-regulated, but by focusing its regulatory muscle (through supranational agencies in the EU) on anti-competitive activity, has now generated a more robust marketplace in many sectors than exists in the US. The barriers to entry in the US that used to be imposed by state regulation have just been replaced by the barriers from increased corporate concentration.

Finally, and particularly post-COVID, the federal parliament has acted to  strengthen anticompetitive provisions of the Act, in part because of high food prices and questionable food firm profit taking.  A set of changes initiated in the 2022-2024 period have been adopted.  Their impact will be revealed over the next few years.