Canada Bread agrees to fine $50 million for role in bread price-fixing scandal
Canada Bread has agreed to pay at least $50 million for its role in determining the price of bread for years.
The company made the disclosure Wednesday in an Ontario court, acknowledging that under a previous management regime it colluded with its competitors in the Canadian bakery industry to work together to increase the wholesale prices they charge supermarket chains, driving prices for consumers in the process.
The company — which makes dozens of baked goods brands, including Dempster’s, Stonemill, Vachon, and others — has been owned by Mexican food giant Grupo Bimbo since 2014, but before that it was majority owned by Maple Leaf Foods.
According to an agreed statement of facts, a Canada Bread executive, who was also an officer at Maple Leaf Foods at the time, had “discussions about pricing” for bread products with one or more senior executives at Weston Foods (Canada) Inc. ., a subsidiary at the time of George Weston Ltd., which also controls the Loblaws supermarket chain.
The documents filed with the Superior Court of Justice in Toronto explain what happened. They show that in June 2007 the executives discussed raising prices, then agreed to do so in October of that year at between six and seven cents per loaf. After more discussions in September, they agreed to raise prices by twice as much – 12 to 14 cents – starting the following month.
The pattern was repeated a few years later, with talks in November 2010 leading to an agreement to increase prices by seven cents per loaf from January or March 2011. A subsequent meeting in January resulted in an agreement to increase the price increase to 14 cents per loaf instead, from February.
The bread price fixing scandal first came to light in 2017, when Canada’s Competition Bureau launched an investigation into the matter after receiving information from an anonymous tipster. The agency subsequently executed search warrants against numerous companies, including Weston, Loblaws, Metro Inc., Sobeys Inc., Walmart Canada, Giant Tiger Stores Ltd., Overwaitea Food Group, and Canada Bread.
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Grupo Bimbo bought Canada Bread in 2014, saying it “only learned of the price fixing after the Competition Bureau executed a search warrant against Canada Bread on October 31, 2017.”
At the time of the sale, “Grupo Bimbo was not told that Canada Bread had participated with Weston in agreeing to fix the wholesale price of [bread]and the due diligence further conducted by Grupo Bimbo has not revealed that Canada Bread and Weston participated in any such arrangements,” the documents said.
The company pleaded guilty to four charges under Section 45 of Canada’s Competition Act, each of which carries a maximum fine of $10 million or $25 million. But the Director of Public Prosecutions, which handles cases where the Bureau finds evidence of a possible criminal offense, has agreed to recommend a 30 percent “cut of leniency” for the company’s cooperation. That brings the total bill to $50 million.
Investigation is ongoing
In the court documents, Canada Bread says its “liability has been resolved with entering this plea,” but notes that the Competition Bureau’s investigation of other companies is ongoing.
In a news report, the agency noted that the $50 million fine is the largest price-fixing fine imposed by a Canadian court to date, and it is also the first time a fine has emerged from the eight-year-long office investigation.
“Putting the price of bread – a staple food of Canadian households – was a serious crime,” Commissioner Matthew Boswell said. “Our ongoing investigation remains a top priority. We are committed to prosecuting those involved in price fixing.”
The Competition Bureau started its investigation when it was made aware of the scheme by Weston and Loblaws in 2015. The two companies were granted immunity from prosecution by the agency for cooperating in the case.
But two class action lawsuits, one in Ontario And one in Quebec, have been certified in court, each seeking financial compensation from various companies involved. Loblaw also offered his customers $25 gift cards when the story first came to light.
It is also the first time a company other than Loblaw and Weston has admitted to being involved in the scheme since the story first broke years ago. In testimony before a parliamentary committee earlier this year, Empire Foods CEO Michael Medline, owner of Sobey’s, vehemently rejected all allegations that the Nova Scotia-based supermarket chain was involved in any way.
At a committee hearing in Ottawa this week, the heads of Loblaw, Metro and Empire Foods faced tough questions from lawmakers about why food prices continue to rise. All three vigorously oppose accusations that they are profiting from high inflation.
Maple Leafs Foods told CBC News in a statement earlier this year that while they owned stock in the company at the time in question, “Canada Bread was a public company in its own right with its own independent operations.”
“We will continue to respect the Competition Bureau’s process as it completes its investigation, knowing that we acted ethically and lawfully at all times, and further that we are not aware of any wrongdoing at Canada Bread during our time as a shareholder .” said the company.
“As the investigation is ongoing, the Competition Bureau is required by law to conduct its work confidentially. We will not allow interviews on this subject at this time.”
“Grupo Bimbo is considering all legal options against those responsible for the conduct brought to court today,” the company said in a press release.
“With new ownership, Canada Bread is committed to being a responsible partner to our valued customers and making bread an accessible and reliable source of food for Canadians. We are pleased to have resolved this issue and look forward to to build on our investments in Canada,” Canada Bread Vice President Alice Lee said in a statement, adding that the company employs 4,400 people in Canada.
Retail adviser Bruce Winder said in an interview with CBC News on Wednesday that given the change of ownership, it’s not surprising that Grupo Bimbo is blaming the previous regime and trying to recoup some costs and reputational damage by taking legal action.
“It can be argued that Maple Leaf sold them an asset without disclosing a material risk to that asset,” he said. “It’s like buying a car and … everything looks great about this car [but] you take it home and a few weeks later the bike falls apart.”
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