Corporate concentration is one of the symptoms of a malfunctioning marketplace. Its existence violates one of the essential rules of properly functioning markets, that there are sufficient buyers and sellers to ensure no individual actors can influence the price and distribution of goods. As discussed in Get Started, Problems, there is significant market failure in the Canadian food system and corporate concentration is a significant contributor to these failures. From a Marxist perspective, corporate concentration can be understood as a core internal contradiction of capitalism. The rules of capitalism inexorably and perversely encourage firms to accumulate capital and exert control over markets, prices, costs, and resources. In this sense, corporate concentration is actually fulfilling requirements for "success". The significant uptick in rate of profitability in the highly concentrated grocery industry during the pandemic (see Statistics Canada, 2023; Nocos, 2023), during a time of food price inflation, significantly heightened food bank use and increased food insecurity, speaks to this core contradiction.
The state enables such developments by excusing concentration through the narrow lens of conventional economic efficiency. This approach also aligns with elite accommodation. Canada's economic resources, thus, are held by a relatively small number of powerful economic actors. Although societal welfare losses are recognized to be associated with corporate concentration, most conventional economists defend them as tolerable when measured against narrow measures of cost efficiencies that typically exclude externalities. As well, it has now become the norm that the most efficient company (and the largest) brings great value to the company at the expense of social welfare (Martin, 2019). In other words, the efficiency gains are so narrowly held, usually by shareholders rather than consumers, that they contribute to deterioration in social welfare. Such realities, combined with the challenges of measuring concentration and concentration impacts (see Current state), have resulted in weaker, not stronger, anti-competitive laws, regulations, and behaviour. Some regulators have recognized this and are calling for improvements in Canada's competition legislation (cf. Kerr, 2021).
Firms increase their size, scope, and power through some well-established mechanisms:
- Internal growth through sales, investments, and expansions into new markets. For many decades of the 20th century, this was the primary mechanism of firm expansion. It required a patient approach to growth.
- Mergers and acquisitions, vertically and horizontally. This has become the most common strategy because it sped up the growth process. This of course results in fewer firms in a sector.
- Strategic alliances with other firms in the supply chain. This has become more common as the costs and challenges of mergers and acquisitions increase.
- Illegal collusion, e.g., price-fixing cartels. Criminal law has traditionally focused on preventing such collusion, not always successfully.
If we wish to increase competition and broaden the base of ownership of economic resources, many interventions are required, including changing our legal approach to competition and ensuring public ownership of certain resources related to the food system.