Canada Bread has agreed to pay at least $50 million for its role in fixing the price of bread for years.
The company made the revelation in an Ontario court on Wednesday, acknowledging that under a previous management regime, it colluded with its competitors in Canada’s bakery industry to work in unison to raise the wholesale prices they charge to grocery chains, pushing up prices for consumers in the process.
The company — which makes dozens of brands of baked goods, including Dempster’s, Stonemill, Vachon and others — has been owned by Mexican food giant Grupo Bimbo since 2014, but prior to that, it was majority controlled by Maple Leaf Foods.
According to an agreed upon statement of facts, an executive at Canada Bread, who was also an officer at Maple Leaf Foods at the time, “had discussions about prices” for bread products with one of more senior executives at Weston Foods (Canada) Inc., a subsidiary at the time of George Weston Ltd., which also controls the Loblaws grocery chain.
The documents filed at the Superior Court of Justice in Toronto lay out what happened. They show that the executives discussed raising prices in June 2007, and subsequently agreed to do so by between six and seven cents per loaf in October of that year. After more discussions in September, they agreed to raise prices by twice that — 12 to 14 cents — starting the next month.
The pattern was repeated a few years later, with discussions in November 2010, leading to an agreement to raise prices by seven cents per loaf starting in January or March of 2011. A subsequent meeting in January led to an agreement to increase the price hike to 14 cents per loaf instead, starting in 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 bureau 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, and said it “only learned about the price-fixing arrangements after the Competition Bureau executed a search warrant against Canada Bread on Oct. 31, 2017.”
At the time of the sale, “Grupo Bimbo was not told that Canada Bread had participated with Weston in the making of arrangements to increase the wholesale price of [bread], and the due diligence otherwise completed by Grupo Bimbo did not reveal that Canada Bread and Weston participated in such arrangements,” the documents read.
The company has pleaded guilty to four counts under Section 45 of Canada’s Competition Act, each of which come with a maximum penalty of $10 million for the first two and $25 million for the last two. But the Director of Public Prosecutions, which handles cases the Bureau refers to it when it has found evidence of a criminal offence, has agreed to recommend a 30 per cent “leniency reduction” for co-operation, which will bring the total bill down to $50 million.
Investigation ongoing
In the court documents, Canada Bread says its “liability resolved with the entering into of this plea” but notes that the Competition Bureau’s investigation into other companies is ongoing.
In a news statement, the bureau noted that the $50-million fine is the highest price-fixing fine imposed by a Canadian court to date, and it’s also the first time any sort of monetary penalty has emerged from the bureau’s eight-year investigation.
“Fixing the price of bread — a food staple of Canadian households — was a serious criminal offence,” commissioner Matthew Boswell said. “Our continuing investigation remains a top priority. We are doing everything in our power to pursue those who engage in price-fixing.”
The Competition Bureau launched its investigation when it was alerted to the arrangement by Weston and Loblaws in 2015. The two companies were granted immunity from prosecution by the bureau for co-operating in the matter.
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 its customers $25 gift cards when the story first came to light.
It’s also the first time any companies besides Loblaw and Weston has admitted to being involved in the scheme since the story first broke years ago. In testimony in front of a parliamentary committee earlier this year, Empire Foods CEO Michael Medline, which owns Sobey’s, vehemently pushed back at any allegations that the Nova Scotia-based grocery chain was in any way involved.
At a committee hearing in Ottawa this week, the heads of Loblaw, Metro and Empire Foods faced tough questions from parliamentarians about why food prices continue to skyrocket. All three pushed back forcefully against allegations they are profiteering from high inflation.
Maple Leafs Foods told CBC News in a statement earlier this year that while they owned shares in the company during the period in question, “Canada Bread was a standalone public company with its own independent operations.”
“We will continue to respect the Competition Bureau’s process while it completes its investigation, knowing that at all times we have acted ethically and lawfully, and further that we are not aware of any wrongdoing at Canada Bread during the time we were a shareholder,” the company said.
“As the investigation is ongoing, the Competition Bureau is obliged by law to conduct its work confidentially. We will not be granting interviews on this topic at this time.”
“Grupo Bimbo is considering all legal options against those responsible for the conduct addressed in court today,” the company said in a news statement.
“Under new ownership, Canada Bread is committed to being a responsible partner to our valued customers and making bread an accessible and reliable food source for Canadians. We are pleased to have resolved this matter, and we look forward to building upon our investments in Canada,” Canada Bread’s vice-president Alice Lee said in a statement, adding that the company employs 4,400 people in Canada.
Retail consultant Bruce Winder said in an interview with CBC News on Wednesday that given the change of ownership, it’s not surprising to see Grupo Bimbo blaming the previous regime and trying to recoup some costs and reputational damage by pursuing legal action.
“One can argue that Maple Leaf sold them an asset without disclosing a material risk to that asset,” he said. “It’s sort of like buying a car and … everything looks great on this car [but] you take it home and a few weeks later the engine falls apart.”
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