The Competition Bureau is investigating allegations of bread price-fixing at seven companies – the country’s two largest bread producers, its three biggest grocery retailers and two major discount chains – court documents confirm.
Loblaw Cos. Ltd., Canada’s top supermarket retailer, admitted late Tuesday to participating in what it says is an industry-wide bread price-fixing scheme for about 14 years until March of 2015. In exchange for co-operating with the bureau and providing it with information, Loblaw and its parent George Weston Ltd. – which owns Weston Bakeries, one of the country’s largest bread makers – will not face criminal charges.
The bureau is also investigating the alleged involvement of grocers Sobeys Inc. and Metro Inc.; bread producer Canada Bread Co. Ltd.; and discounters Wal-Mart Canada Inc. and Giant Tiger Stores Ltd., according to court documents that were unsealed this week.
However, spokespersons for Sobeys, Metro and Giant Tiger said they have no reason to believe they violated competition laws. All the companies say they are co-operating with the bureau’s inquiry.
Sobeys, for example, said it had “no reason to believe” that it, or its employees, “have been involved in price-fixing,” spokeswoman Cynthia Thompson said in an e-mail Tuesday night.
While Loblaw and George Weston have acknowledged their wrongdoing, “it is important to note that their reckless assertion of industry-wide price-fixing has not been validated,” she said.
The admission by Loblaw and George Weston has raised questions of the extent of price-fixing in the grocery sector generally – an industry dominated by fewer and larger players – and threatens to tarnish consumer trust in the grocers.
“It could be damaging for the overall food distribution industry,” said grocery expert Sylvain Charlebois, dean of the faculty of management at Dalhousie University. “There are going to be some ripple effects.”
The fact that the price-fixing continued undetected over such a long period and only came to light because Loblaw came forward underlines the ease with which the sector can manipulate prices without public scrutiny, Prof. Charlebois said.
Loblaw is seeking to minimize the damage by offering $25 gift cards to customers who declare they bought bread at certain, as yet unspecified, Loblaw banners before March, 2015, with some eligibility restrictions to be announced next month. The program could cost the grocer up to $150-million.
But Gary Sands, senior vice-president of the Canadian Federation of Independent Grocers, said the bureau should not let Loblaw get away with the “marketing ploy” of luring consumers to shop at its stores with the vouchers that allow the retailer to collect customer information through the gift-card sign-up.
Rather, the bureau should itself distribute the funds from Loblaw to consumers and penalize the grocer in some way, he said. “We’re very disappointed in the bureau.”
While bread prices have been dropping recently, the average price of a loaf jumped about 50 per cent since 2001 to $2.80 in September, according to Statistics Canada. Over the same period, the price of wheat – the main ingredient – has increased by 18 per cent.
The domestic bread-making industry is dominated by Canada Bread, which controls 36 per cent of the market, and Weston Bakeries, with a 31-per-cent share, recent data from Ibis World show.
“Canada Bread and its associates operate with the highest ethical standards and is co-operating fully with the investigation,” the company said in a statement. “Neither the company nor any associates have been charged with any offences.”
Wal-Mart spokesman Alex Roberton said the discount titan “takes its legal obligations very seriously and we have provided our full co-operation to the Competition Bureau.”
The Bureau executed search warrants at the offices of a number of the companies earlier this fall, but has said there has been no conclusion of wrongdoing and no charges have been laid. Its inquiry began Aug. 11 and was expanded on Oct. 23, the documents say.
“The bureau is collecting facts to determine the precise time frame of, and the participants in, the alleged conspiracy,” Simon Bessette, a senior competition law officer, said in a document.
Metro said in a statement late Tuesday that it continues to co-operate with authorities and it has launched an internal investigation. “Based on the information processed to date, we have found no evidence that Metro has violated the Competition Act and we do not believe that the bureau’s investigation will have a material adverse effect on the corporation’s business, results of operations or financial condition.”
Weston and Loblaw said Tuesday that they became aware of an arrangement under which participants “regularly increased prices on a co-ordinated basis” of some packaged breads from late 2001 until March, 2015. Loblaw, Weston Bakeries and “other major grocery retailers and another bread wholesaler” were involved, they said.
The companies said they established an independent compliance office earlier this year and provided training and re-certification to staff. The employees responsible for the companies’ role in the arrangement are no longer employed there.