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Canadian Grocers Accused of Bread Price-Fixing Scheme

Canadian Grocers Accused of Bread Price-Fixing Scheme
(Carlos Osorio/Toronto Star via Getty Images)

Canada's two big bread producers and five grocers were revealed to have been involved in a 16-year bread price-fixing scheme that inflated prices by $1.50.

According to the Competition Bureau, wholesalers Canada Bread Company Ltd. and George Weston Ltd., as well as grocers Loblaw Companies Ltd., Walmart Canada Corp., Sobeys Inc., Metro Inc. and Giant Tiger Stores Ltd. have indictable offenses under the Competition Act, a Canadian federal law that prevents anti-competitive practices in retail.

Simon Bessette, a senior officer from the federal competition, made accusations of collusion in a previously sealed December 18 affidavit alleging that Canada Bread and George Weston's senior officers arranged to raise consumer bread prices in tandem at least 15 times and at 10 cents per loaf.

The previously sealed court affidavit said:

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 document alleged that the five retail clients "accepted the price increase on condition that their retail competitors would also accept the price increase, maintaining the fixed price across the retailers."

The Financial Post reported on how the watchdog was made aware of the covert practice of the price surge from Loblaw informants:

In December, Loblaw and George Weston admitted they sparked the investigation when they approached the watchdog after becoming aware of an allegedly industry-wide arrangement to co-ordinate retail and wholesale prices of some packaged bread products from late 2001 to March 2015.

Kevin Groh, the spokesperson for Loblaw Companies Ltd. said the documents were "unequivocal," and added, "We have admitted our role, and you cannot price fix alone." The company received immunity from prosecution for coming clean of their involvement to the federal department.

Consumers are cynical about customer loyalty.

Bessette said that the reasoning behind the suppliers scheme was to levy the competition.

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.

Canada Bread issued a statement admitting they were made aware of the claims made back in December. They were informed not to discuss matters until the news was made public. "The allegations do not reflect the Canada Bread we know," they said on Wednesday.

However, the prices haven't changed.

According to Financial Post, the document stated that the suppliers "demanded" the retailers to participate. Walmart, Giant Tiger, Loblaw's No Frills, Sobeys' FreshCo and Metro's Food Basics were apprehensive.

None of them wanted to be the first to implement the price increase …There was always a negotiation process going back and forth between the four retailers where the supplier was trying to coordinate it, because somebody had to be the first to move.

Does it end with bread?

The Competition Bureau investigation continues to this day. Spokeswoman Véronique Aupry said, "There is no conclusion of wrongdoing at this time and no charges have been laid."

Is the penalty worth the slice?

Meanwhile, in an effort to do damage control, Loblaw is issuing customers a $25 gift card compensation for customers who believe they purchased bread from 2001 to 2016, the period when the price hike was actively in place.

The gesture could cost the company $150 million in the fourth quarter. But no matter how you slice it, having a clear conscience could be a small price to pay.

Over in America...

H/T - Financial Post, Twitter