Canada Bread fined $50 million for bread price-fixing scandal, say court documents

The alleged conspiracy resulted in 15 price increases for bread. Investigators claimed this cost consumers an extra $1.50 per loaf over a 16-year period.

Canada Bread fined $50 million for bread price-fixing scandal, say court documents
The Canadian Press / Kelly Clark
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For years, one Canadian company has gotten away with up-charging consumers for bread. Their scheme has left them with a stiff $50 million fine for their troubles.

The Ontario Superior Court revealed Thursday that Canada Bread Co. and others engaged in a national price-fixing scheme worth up to $5 billion — a dereliction of the Competition Act

"The Competition Bureau recommended to the Public Prosecution Service that Canada Bread receive leniency in sentencing in return for its full cooperation," said federal lawyers. Other companies, including Metro Incorporated, Sobeys, Walmart Canada, Giant Tiger Stores and Maple Leaf Foods, remain under investigation.

Until 2014, Maple Leaf Foods owned a majority stake in the company, which makes dozens of baked goods brands, including Dempster's, Stonemill, Vachon and others.

Dating eight years, the investigation has yet to incur any criminal charges against corporate executives or their companies, reported Blacklock's Reporter

Seven firms face accusations of manipulating the $40 billion bread market "to accrue somewhere in the range of $5 billion in ill-gotten gains," according to Ontario Superior Court Justice Edward Morgan.

The company pleaded guilty to four counts under Section 45 of Canada's Competition Act, each with a maximum penalty of $10 million or $25 million. With a recommended 30% "leniency reduction" for Canada Bread's cooperation, the total bill amounted to $50 million.

"Fixing the price of bread, a food staple of Canadian households, was a serious criminal offence," added Competition Commissioner Matthew Boswell. He maintains the continuing investigation remains a "top priority."

Court documents said the federal Competition Bureau launched a probe into the allegations in 2015. 

Loblaw Companies and Weston Bakeries soon received immunity from prosecution for their cooperation in the bureau investigation.

Both companies admitted in 2017 to "industry-wide coordination" to manipulate the retail and wholesale prices of certain packaged bread products between November 2001 to March 2015. Loblaw offered its patrons $25 gift cards totalling $150 million for their role in the price-fixing scheme.

"The conspiracy at issue in this proposed class action is alleged to have gone for some 16 years," wrote Justice Morgan. "The plaintiffs claim it was massive in scale involving the wholesale and retail sale of one of Canada's most widely consumed staple products, packaged bread."

In an agreed-upon statement of facts, an executive at Canada Bread Co., also an officer at Maple Leaf Foods at the time, "had discussions about prices" for bread products with senior executives at Weston Foods Canada Inc., a subsidiary at the time of George Weston Ltd., which also controls the Loblaws grocery chain.

The alleged conspiracy resulted in 15 price increases for bread "via direct communications between senior officers and executives," according to Blacklock's Reporter. Investigators claimed retailers raked in 30% of the extra $1.50 earned from price fixing, with the remainder going to bakers.

Court records show that the executives discussed raising prices in June 2007 and agreed to subsequent increases of six and seven cents per loaf in October. Further discussions in September led to a 12 to 14 cent price increase.

Canada Bread repeated the pattern in November 2010, with another seven-cent increase per loaf starting in early 2011. In January that year, they agreed to increase prices by 14 cents per loaf instead.

"The victims of the conspiracy are alleged to be millions, or perhaps tens of millions, of consumers. If consumers across Canada spend more on food, they will eventually have less to spend on automobiles," wrote Justice Morgan.

"In a complex market economy, there is no limit to the potential impact of a staple commodity whose price is fixed on non-market terms."

As of Friday, Boswell said there will no longer be a maximum fine per offence, which ups the legal and financial risks to companies moving forward.

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