Senior officials at Canada’s two largest bread markers, Canada Bread and Weston Bakeries, agreed to increase their wholesale bread prices in lockstep over a 14-year period, according to newly released court documents.
The documents were released Wednesday as part of the Competition Bureau’s inquiry into the fixing of bread prices in Canada. The bureau alleges in the documents that wholesalers Canada Bread and Weston Bakeries – Weston, which is owned by George Weston Ltd. and is the parent company of grocery chain Loblaw – directly communicated to boost bread prices before meeting with retailers to get them to accept the fixed prices.
The grocers involved include Loblaw Companies Ltd., Walmart Canada Corp., Sobeys Inc., Metro Inc. and Giant Tiger Stores Ltd.
“The implementation of a price increase would be discussed at least 3-4 months in advance,” says a document from Simon Bessette, a senior competition law officer at the bureau.
“I understand from interview that the retailers would engage in back-and-forth communications involving Canada Bread and Weston Bakeries where the retailer would discuss specific dates and price points with respect to the increase.”
The ITO documents, which contain information for the basis of obtaining search warrants, allege the wholesalers and grocers committed indictable offences under the Competition Act.
“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 documents state.
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Melanie Aitken, the former Competition Bureau commissioner from 2009 to 2012, said these offences outlined in the ITO could lead to criminal charges.
“If this investigation leads to the laying of charges –which it could – it would be the public prosecution service supported by the bureau and the results of their investigation that would pursue the companies and or the individuals,” Aitken told Global News.
Penalties for violating the Competition can result in a $25-million fine or up to 14 years in jail, she said
“Nobody to date has ever spent any time in a jail cell in Canada ,” Aitken said.
The alleged wholesale and retail price increases occurred between 2001 and 2015 on at least 15 separate occasions, according to the documents. The price increases involved a 10-cent retail price increase, which was a 7-cent wholesale increase, the fillings say.
“This pattern became colloquially known as the ‘7/10 Convention,” according to Bessette.
The court documents also reveal how conspiring to increase the price of bread was “particularly difficult” among discount retailers Walmart, Giant Tiger, LCL’s No Frills, Sobeys’ FreshCo banner and Metro’s Food Basics banner.”
“ stated that there was quite a bit of negotiation when dealt with the aforementioned Retailers because none of them wanted to be the first to implement the price increase,” the documents say. “Consequently it was incumbent upon the suppliers to provide assurances that a retailer’s competitors would follow quickly.”
Loblaw and George Weston have said they alerted the competition watchdog as to the price-fixing scheme after becoming aware of the alleged industry-wide arrangement. They received immunity in exchange for their co-operation.
Beginning Jan. 8, Loblaw started offering $25 gift cards to its customers over its involvement in the scheme.
“We have admitted our role, and you cannot price fix alone,” Loblaw spokesman Kevin Groh said Wednesday.
All companies have said they are co-operating in the investigation.
Metro Inc. and Giant Tiger said Wednesday that there is nothing in the documents that indicates they broke competition laws.
“Based on the information processed to date, we have found no evidence that Metro has violated the Competition Act,” Metro said in a statement.
“Giant Tiger reaffirms our previous assertion that we have no reason to believe that Giant Tiger or any of our employees has violated the Competition Act,” the company said. “We look forward to seeing the results of the Competition Bureau’s complete investigation.”
Bessette writes that although the last documented price increase occurred in December 2015, he believes the “conduct is ongoing.”
“In my experience as a Competition Law Officer, when a cartel participant seeks immunity under the Bureau’s Immunity Program, the cartel participant is obliged to keep their application for immunity confidential,” Bessette writes. “Consequently other participants in the alleged cartel continue to operate as if the cartel were still functioning.”
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