Investigation into infamous bread price-fixing scheme isn’t finished, competition watchdog says

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The case against a group of grocery chains and commercial bakeries that allegedly fixed the price of bread in Canada for at least 14 years hasn’t resulted in any charges yet, but the federal competition watchdog said it’s still an active investigation.

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The Competition Bureau started its inquiry in 2017, executing search warrants on some of the most powerful food companies in Canada because investigators believed they had conspired together to control the price of commercial bread products since 2001.

“I understand that people think it should go faster, but these investigations are often complicated and require a fair bit of work,” bureau commissioner Matthew Boswell said. “What I can tell you is our investigation in that matter is proceeding.”

Loblaw Cos. Ltd. — Canada’s largest grocery chain — tipped off the bureau to what the grocer described as an “industry-wide price-fixing arrangement” on commercial bread products. Loblaw also offered customers a $25 gift card for its role in the saga, a heavily publicized act that led many to believe the case was over.

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In its search warrant applications, the bureau outlined that it believed two commercial bakeries, Canada Bread Co. and Weston Foods Canada Inc., conspired with major grocers Loblaw, Sobeys Inc., Metro Inc., Walmart Canada Corp. and Giant Tiger Stores Ltd. on the alleged price-fixing scheme.

“It looks like Canada has dropped the ball,” said Ambarish Chandra, a professor at the University of Toronto who focuses on competition and public policy. “No one’s paid a fine. No one’s gone to jail. It’s crazy.”

It looks like Canada has dropped the ball

Ambarish Chandra, professor, University of Toronto

One of the main ways that investigators learn about cartels is through so-called immunity and leniency programs, where one of the conspirators comes forward to confess.

“You come in and spill your guts, and you help the government go after the other guys and in exchange, you get immunity,” said Michael Laskey, a partner in the competition group at law firm Stikeman Elliott LLP in Toronto.

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The bureau granted immunity in the bread-fixing case to both Loblaw and Weston Foods, which up until recently were both controlled by George Weston Ltd. This week, George Weston announced a $1.2-billion deal to sell the Weston Foods bakery businesses to FGF Brands Inc.

The bureau’s investigation into the other companies could end one of two ways. Either investigators conclude “there was no wrongdoing by other grocery stores and drop their investigation or they could bring criminal charges,” Laskey said. “But there’s been no obvious movement by the bureau at all.”

Laskey said it’s normal for these types of investigations to move slowly, because the prospect of laying criminal charges means the bureau has to be “quite careful” about its approach and in gathering evidence.

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A spokesperson for Sobeys’ parent Empire Co. Ltd. said the company has seen “absolutely no indication” that Sobeys broke competition law.

“It is unfortunate that our brand has been painted with the same brush as others,” Jacquelin Weatherbee said in an email. “This process has moved very slowly and we hope to see meaningful progress towards a resolution.”

Both Metro and Giant Tiger also said in statements to the Financial Post that they do not believe they broke the law. Walmart and Canada Bread declined to comment. Loblaw also did not respond to a request for comment.

If the bureau believes it has sufficient evidence of a criminal offence, it refers the matter to federal prosecutors. A spokesperson said confidentiality rules prohibit the bureau from commenting on whether anything has been referred to prosecutors, but confirmed that “at this time” no charges have been laid.

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“Speaking generally, I can tell you that our criminal conspiracy investigations are often quite complex,” Boswell said in an interview.

His predecessor, John Pecman, wrote in 2018 that “it’s important to get it right, because price fixing is notoriously difficult” to prove in court.

“These cartels typically involve secret deals between schemers who are careful to cover their tracks. Neatly written agreements between competitors rarely exist. Emails get deleted, and meetings to collude on price happen in obscure places.”

Pecman at the time said it may take time to get to a point where cartel cases can be proven beyond a reasonable doubt, but “the bureau gets results.”

Gary Sands, vice-president of the Canadian Federation of Independent Grocers, said the investigation’s pace is further “validation” that the heavily consolidated food retail sector needs a code of conduct.

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The industry has been debating the development of universal rules of engagement for the sector and the need to rein in bully tactics from some of the dominant players.

Sands said a code of conduct would provide a much-needed way to resolve disputes faster.

“Seeking a remedy under the Competition Act, and waiting four or five years for whatever the outcome may be, is just not realistic,” he said.

Financial Post

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