On March 20, 2014, the Commissioner of Competition
(Commissioner) and Loblaws entered into a consent agreement,
whereby Loblaws agreed to 27 divestitures as well as behavioural
remedies vis-à-vis its suppliers in order to address the
Commissioner's concerns that its acquisition of Shoppers would
substantially lessen competition.
As is typical for retail mergers, the Commissioner determined
that the geographic market is local and conducted a review,
utilizing both traditional market share metrics and econometric
analysis, to determine the effect of the acquisition on the retail
sale of overlapping products. The Commissioner identified
competition issues in 27 localities with respect to the sale of (i)
pharmacy products (including prescription and non-prescription
drugs), (ii) drugstore type merchandise (including food, cosmetics
and health & beauty products), or (iii) both.
To address these concerns, Loblaws agreed to divest 18 retail
stores (including both Loblaws and Shoppers stores) as well as nine
pharmacies located within Loblaws stores. The divestitures are
located in Alberta (3), British Columbia (1), New Brunswick (2),
Nova Scotia (2), Newfoundland (2), Prince Edward Island (1) and
After interviewing relevant stakeholders and reviewing
Loblaws' internal documents, the Commissioner also identified
vertical concerns with Loblaws' supply practices that the
Commissioner contends would likely negatively impact consumers upon
the acquisition of Shoppers. More specifically, the Bureau was
concerned with agreements whereby Loblaws seeks financial
compensation from suppliers to maintain its profit margin in the
face of price competition. Furthermore, the Commissioner was
concerned with the treatment of small suppliers.
To address the former concern, Loblaws agreed, for a five year
period, not to enter into supplier agreements with such financial
compensation; this is a blanket prohibition with respect to
Shoppers stores and, with respect to Loblaws stores, a prohibition
relating to specified products (including non-prescription drugs,
beverages and certain cosmetic and health & beauty products).
Additionally, for the same five year time period, Loblaws agreed
not to incorporate Shoppers stores into any such supplier
agreements, whether by procuring for Shoppers stores or by
benefitting from volumes purchased by Shoppers stores. Otherwise,
to address the latter concern, Loblaws agreed (for both Loblaws and
Shoppers stores) not to penalize small suppliers for failing to
meet certain supply chain metrics and not to seek cost reductions
except in certain limited circumstances for a two year period.
Finally, Loblaws is obligated to provide written explanation to
its suppliers about the applicability of its supply practices in
light of the consent agreement in addition to general information
about its supply practices.
The Commissioner of Competition addressed innovation, enforcement and policy initiatives at the Competition Bureau in his keynote speech, "Strengthening Competition: Innovation, Collaboration and Transparency."
Used car listing website operator CarGurus Inc.'s attempt to force rival Trader Corporation to supply it with vehicle listing data has encountered a dead end as the Competition Tribunal denied it leave to commence a private application under several provisions of the Competition Act.
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