Update: Canada’s bread price fixing scandal

Charges laid against Canadian bread cartel for alleged price fixing scandal despite allegations

By Gill Hyslop contact

- Last updated on GMT

Documents from Canada's Competition Bureau allege that seven of Canada's biggest bread producers and wholesalers were involved in bread price fixing. Pic: ©GettyImages/hayesphotography
Documents from Canada's Competition Bureau allege that seven of Canada's biggest bread producers and wholesalers were involved in bread price fixing. Pic: ©GettyImages/hayesphotography

Related tags: Canada bread, Cartel, Competition

ITO documents by Canada’s Competition Bureau released on Wednesday contain allegations of collusion between two of the country’s biggest bread producers and five grocery retailers.

The court documents purport suppliers Canada Bread and Weston Bakeries, and retailers Loblaw Companies Ltd., Sobeys Inc., Metro Inc., Walmart Canada Corp. and Giant Tiger Stores Ltd participated in a price-fixing scheme that inflated the price of bread by at least CA$1.50 (US$1.21) between 2001 and 2015.

However, a spokesperson for the Competition Bureau said there is no conclusion of wrongdoing at this time and no charges have been laid.

In December, Weston and Loblaw admitting to participating in the 14-year industrywide bread price fixing scheme.

The two companies received immunity in exchange for their cooperation.

The 7/10 convention

According to the previously sealed documents, senior officials from Canada Bread and rival operator Weston – owned by George Weston Ltd. and parent company of Loblaw – communicated over many years to boost bread prices in tandem, typically by seven cents (US 0.05c).

The wholesalers then purportedly individually met with their respective retail clients to get them to accept the fixed prices.

The pattern became colloquially known as the 7/10 convention – a seven cent (US 0.05c) wholesale price increase and a 10c (US 0.08c) price spike for consumers in stores, which resulted in an average margin increase of three cents per loaf for retailers.

“The alleged conspiracy was a deliberate attempt by management of Canada Bread and Weston Bakeries, along with the retailers, to suppress competition at both the wholesale and retail level and thereby increase the wholesale and retail prices of fresh commercial bread in Canada,”​ says Simon Bessette, senior competition law officer for the Competition Bureau who is leading the investigation.

Initial resistance

The documents say the coordination was “particularly difficult”​ between discounters, including Walmart, Giant Tiger, Loblaw’s No Frills, Sobeys’ FreshCo and Metro’s Food Basics.

“[Redacted] stated that there was quite a bit of negotiation when [redacted] dealt with the aforementioned retailers because none of them wanted to be the first to implement the price increase.

“Consequently, it was incumbent upon the suppliers to provide assurances that a retailer’s competitors would follow quickly,”​ say the documents.

The retailers, however, allegedly “accepted the price increase on condition that their retail competitors would also accept the price increase, maintaining the fixed price across the retailers.

“Further, the retailers demanded that the suppliers actively manage retail competition by co-ordinating retail prices for their respective fresh commercial bread products and ensuring pricing alignment amongst the retailers,”​ the documents state.

Ongoing practice

Bessette says he believes the practise – also referred to as the “socialization”​ of a price increase by the alleged conspirators – could have continued up until his affidavit issued in December 18, 2017, despite whistleblowers from Weston and Loblaw alerting the Bureau of the practice in March 2015.

“In my experience as a Competition Law Officer, when a cartel participant seeks immunity under the Bureau’s Immunity Program, the cartel participant is obliged to keep their application for immunity confidential. Consequently, other participants in the alleged cartel continue to operate as if the cartel were still functioning,”​ he wrote.

Total cooperation

All the companies involved have said they are cooperating in the investigation.

In December, Canada Bread issued a statement stating the accusation against “certain former Canada Bread executives”​ dates back to 2001 “while Canada Bread was under previous ownership.”

Grupo Bimbo bought a majority share in Canada Bread from Maple Leaf Foods in 2001.

Commenting after Wednesday’s reveal, the Mexican bakery giant said its current leadership is taking “these allegations very seriously and are actively investigating to take the necessary measures.

 “The allegations do not reflect the Canada Bread we know,”​ the company said.

Denying involvement

Commenting after Wednesday’s reveal, Metro and Giant Tiger both said they have found no reason to believe their employees violated the Competition Act.

“Based on the information processed to date, we have found no evidence that Metro has violated the Competition Act,” ​said Metro.

“Giant Tiger reaffirms our previous assertion that we have no reason to believe that Giant Tiger or any of our employees has violated the Competition Act.”

Sobeys, too, are confident the employees named did “nothing to contravene the Competition Act,”​ said spokeswoman Cynthia Thompson.

No man is an island

However, Loblaws’ spokesman Kevin Groh said: “The Bureau’s own document is unequivocal… We have admitted our role, and you cannot price fix alone.”

Walmart did not respond to a query for comment.

The investigation is ongoing.

Related topics: Bread, Manufacturers, Markets

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