The case for regulating grocers just doesn’t add up

The Grocery Code of Conduct is more about performative politics than real policy. The evidence for market abuse is thin at best

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The federal government’s Grocery Code of Conduct is a solution in search of a problem. Grocery chains felt pressured to adopt it after the pandemic and the resulting spike in inflation, but there is little evidence of market abuse. While it remains unclear whether this Code will benefit consumers or small suppliers, Ottawa has embraced it as a model of industry cooperation.

The Code is a voluntary framework developed by industry stakeholders and encouraged by the federal government. It was introduced after COVID-19 lockdowns triggered supply chain breakdowns, product shortages and price spikes. It’s meant to promote fairness and transparency in dealings between grocery retailers and their suppliers.

Some suppliers, speaking anonymously, alleged they faced excessive penalties from retailers for missed deliveries or failing to meet demand. In some cases, penalties reached $1 million per product. These complaints were part of a broader outcry during the pandemic, when large grocers reportedly demanded variable quantities of product without warning, then penalized suppliers for noncompliance.

The Code’s website outlines its central principle: “Nothing in the Code shall require a Party to purchase a Product from or supply a Product to another Party.” It adds that if a supplier declines to meet a forecast, or if a retailer issues an unexpected or changed order, “the relevant Party shall provide an explanation of its decision with reasonable substantiation.” Vague wording like this offers little assurance to small producers navigating volatile markets.

Canada’s five largest grocers—Empire (Sobeys, Safeway), Loblaw (Loblaws, Superstore, No Frills), Metro, Walmart Canada and Costco Canada—have all signed on. Aggrieved suppliers are supposed to take their complaints through a Dispute Resolution Management Process (DRMP), but it won’t be operational until January 2026. In the meantime, the Code offers no details on how disputes will be handled, who will preside over them or what rules will apply.

Given the power imbalance, small suppliers may feel compelled to quietly absorb losses to preserve shelf space. Larger players are more likely to negotiate directly with grocers—Code or no Code—and avoid any public process entirely.

The federal Competition Bureau investigated possible monopolistic conditions in 2022, giving political weight to the push for a code. But three broader forces really shaped this initiative: the COVID-era shortages, the food and fuel price surge following Russia’s invasion of Ukraine and the wider inflation wave from 2021 to 2023.

Still, inflation data weakens the idea that grocers exploited their market share. Between March 2020 and March 2024, Canada’s broad money supply rose 36 per cent, but consumer prices increased just 20 per cent. That suggests grocers may have helped contain inflation, not drive it. Even during the supposed “greedflation” peak, inflation hovered near two per cent, a figure hardly consistent with runaway profiteering.

Profit margins tell a more grounded story. Loblaw posted an average EBITDA margin of 11.2 per cent for the three years ending Dec. 28, 2024; up from 10.06 per cent for 2019 to 2021, and 8.7 per cent from 2016 to 2018. That’s a steady trend, not a pandemic windfall.

Metro saw more modest gains, from 7.6 per cent pre-COVID to 9.6 per cent by the end of 2024. Empire showed the biggest jump, from 3.9 per cent pre-COVID to 7.6 per cent by May 2025—but this likely reflects a catch-up to competitors rather than abnormal profits.

EBITDA—earnings before interest, taxes, depreciation and amortization—is a standard way to measure profitability. In a capital-intensive industry like grocery retail, rising margins often reflect consolidation, automation and long-term investment, not price gouging.

Prominent voices, like Troy Media contributor and Dalhousie Professor Sylvain Charlebois, hailed the Code as a way to curb potential abuses. Whether those abuses were widespread or even preventable during a global supply crisis is far from clear.

More competition is always welcome, and regional grocers continue to challenge the Big Five. But there’s still no compelling evidence that grocers abused market dominance, hurt consumers or drove inflation.

And this Code? It’s unlikely to change much for the very people it claims to protect.

Ian Madsen is a senior policy analyst at the Frontier Centre for Public Policy.