Following Loblaw’s admission it participated in a bread price-fixing scheme spanning more than 14 years, both companies announced this week they have taken actions to address bread price-fixing.
According to Galen G. Weston, chairman and CEO of both companies, the management of the firms only became aware of of collusion to set retail and wholesale prices of some packaged breads in March 2015
Under the arrangement – which took place from late 2001. the participants regularly increased prices on a coordinated basis.
“This is a difficult matter and clearly something that never should have happened,” said Weston, confirming the employees responsible for the role in the arrangement are no longer employed at the two companies.
“This sort of behaviour is wrong and has no place in our business or Canada's grocery industry,” he added.
However, “as a result of the cooperation we have provided to the Competition Bureau, neither George Weston Ltd. nor Loblaw or their respective employees will face criminal charges or penalties,” Weston said.
As reported by BakeryandSnacks last month, the Competition Bureau executed warrants to search the offices of George Weston, Loblaw, Metro, Walmart Canada, Sobey’s and Canada Bread to gather evidence into a price-fixing arrangement, but said there had been no conclusion of wrongdoing and no charges had been laid.
In a statement, Loblaw announced it is offering eligible customers a $25 gift card that can be used at its grocery stores across Canada packaged bread products – a gesture that could cost as much as C$150m (US$116m).
Loblaw and George Weston said it might also book the charge in the coming quarters but said its cash balances “far exceed any realistic damages scenario”.
That could include agreements between competitors to fix prices, or to restrict production of a product by setting quotas or other means would be considered cartel activities.
Penalties for price fixing could include fines of up to $10m, imprisonment of up to five years, or both.
However, the bureau says price-fixing conspiracies are, by their nature, difficult to detect and prove.
Class action lawsuits have commenced against those involved on the basis of the searches initiated by the Bureau.
However, neither Loblaw nor George Weston expect the outcome to have an adverse impact on their finances.
They expect that Loblaw is likely to be more exposed because the majority of the over-charging on bread accrued to retailers.
They added disclosure came after sealed court filings into the matter were made available to the companies and other affected parties for review.
Canada's Competition Act prohibits agreements that “prevent or unduly lessen competition or to unreasonably enhance the price of a product,” according to the Bureau.
Metro, Sobeys and Canada Bread said they are cooperating with the investigation.
In a statement, Metro said it has launched an internal investigation and “found no evidence” that it had violated the Competitions Act. The grocer added it does not believe the probe will have a “material adverse effect” on its business.
Sobeys said it has “no reason to believe that Sobeys, nor any of its employees, have been involved in price-fixing,” adding that Loblaw’s “reckless assertion of industrywide price fixing has not been validated.”
Canada Bread did not comment.