"both Metro and Sobeys have denied any wrongdoing," but it's hard to see how a cartel could even work without the involvement of 2 of the largest grocery chains. Loblaw's, Sobey's, Metro, Walmart, and Costco control 80% of the Market. So if Sobey's and Metro weren't involved then cartelizing with Joe's Bakery would be effectively the same as just raising the price of bread beyond the market equilibrium, which is completely legal, uncontroversial, and unprofitable.
If the cartel doesn't contain a significant market share, then price gouging doesn't work. So either someone at Loblaw's is very confused, or more realistically, one or more of these other large grocery chains are guilty as well.
The unfortunate part of this is that Loblaw's is getting the brunt of consumer criticism. But they're the ones that confessed and brought this whole thing to light. They're the ones giving away $25 gift cards to 3-6 million people costing them about $100 million.
Read the meme above. First of all, yes yes YES. Go give your money to hungry families. Or better yet, spend $25 less on your next grocery bill and donate what you would have spent to whatever charity ranks highest on Givewell.org. Awesome. So now that you've done that, this meme said something that kind of bugged me.
Notice the meme says that Loblaw's stole from Canadians. Really? Stole? As in, theft?
Cartels do not steal by raising prices above the market equilibrium price. This goes against the normal definition of theft, taking something without consent of the owner. Every loaf of bread Loblaw's sold was consensual.
But if you really want to go down that track... have you ever heard the economic definition of a labor union? Cartelized labor. They function to push up the price of workers the same way Loblaw's pushed up the price of bread. I'm pretty uncomfortable with saying that labor unions are stealing from their employers, aren't you?
Some people like to mix the legality of something up with the morality. Like, "it's not morally theft since the government didn't make cartelized labor illegal, but it is morally theft because they did make cartelized bread illegal." To that I say, "so you're really saying that if someone wrote new legislation that reversed the situation you'd reverse your moral indictments?"
So.
How much was bread pushed up by the cartel anyway?
I live in Canada and I never noticed Loblaw's price of bread being especially high, at least not compared to the price premium Loblaw's has for all their groceries. I'm a Wal-Mart shopper, and yeah the price of bread is cheaper Wal-Mart, but everything is cheaper at Wal-Mart. It's hard for me to believe that Wal-Mart would be mixed up with this, not because Walmart has excess integrity or something, but that Wal-Mart is an American company that wouldn't dare tarnish their brand by engaging in a Canada specific controversy.
Well, that and the simple observation that bread is super-cheap at Wal-Mart.
This line of thought should make it pretty easy to identify who was involved in the cartel. Who had inflated prices for bread? That wouldn't prove anyone's guilt, but that's an obvious place to weed out the innocent.
I also found this quote interesting,
According to Canada’s Competition Act, it is illegal to “prevent or unduly lessen competition or to unreasonably enhance the price of a product.Unduly? Unreasonably? I'm just hoping that these are words are stand-ins for the economic textbook definitions, rather than some dude guessing what seems reasonable based on his intuitive judgement. "Hmm, I don't know, $1.75 for a loaf of bread just doesn't seem fair".
I know that's not what we have, but this kind of language confirms many people's false idea that the reason prices aren't higher is because the government is preventing it from happening. And as stupid as that sounds, I meet people who actually believe this.
For me the most interesting part of all this is how they could get away with it? If there's a Cartel, wouldn't game theory predict that firms would find it profitable to defect and undersell the competition?
