While the Americans are pulling their hair out over their government (and possibly their president) being enmeshed in a Russia collusion scheme, Canada has a scheme of its own to worry about. For 14 years, Loblaws and other grocers were involved in a fixed-price scheme that systematically raised the prices of packaged bread for consumers across the country. Loblaws Companies Ltd. and their affiliated bakery George Weston Ltd. announced in a statement Tuesday that they alerted Canada’s Competition Bureau of the scheme and their role in it as soon as they learned of it.
The announcement was made after confidential court filings from an investigation by the Competition Bureau were made available to the companies early on Tuesday. The filings are still sealed to the general public so information on the case and those involved is limited. What we know is that from late 2001 to March 2015 there was an “industry-wide arrangement” in which “the participants regularly increased prices on a coordinated basis.” According to the statement, the arrangement included Loblaws, the Weston Bakeries division of G.W., other major grocers and one other wholesale bakery. Loblaws and Weston reportedly alerted the Competition Bureau of the anti-competition scheme in 2015, prompting the investigation.
In return for their tip and full cooperation, the companies will receive immunity, although employees involved in the scheme have been terminated and may receive “criminal charges or penalties” as authorities see fit. The Competition Bureau says, however, that charges of price-fixing are particularly difficult to substantiate.
According to Canada’s Competition Act, it is illegal to “prevent or unduly lessen competition or to unreasonably enhance the price of a product” which includes coordinating price-hikes like the investigation suggests happened. Basically, in a competitive marketplace, companies have an incentive to keep prices as low as possible because people will shop at the place where a product is cheapest. In this scheme, several grocers agreed to raise prices together so that consumers would have no choice but to pay the higher price. Canada essentially had a bread cartel. It would be a little cool if it didn’t mean we were paying inflated prices for bread for over a decade.
Loblaws has taken measures to right their wrongs. In addition to removing the employees involved, the company is offering a $25 gift card to customers who enroll on LoblawCard.ca between Jan. 8 and May 8 and who declare they purchased packaged bread from a Loblaws store before 2015. The company is expecting three million to six million Canadians to register to the tune of $75 million to $150 million in lost revenue for the gift cards. They are also preparing for class action cases to be brought against them.
In response to the revelations, Loblaws and Weston also established an independent competition standards compliance office earlier this year and re-trained employees and executives on federal and company competition compliance policies.
Metro, Sobeys, Canada Bread and Walmart Canada have all announced that they are unaware of any involvement of their companies in the scheme but they are participating fully with the Bureau investigation.