Capitalism’s grubby underside exposed in price-fixing charges
‘Bread-gate’ reveals practice ‘unhampered ... by ethical consideration’
If we ever needed a reminder of the need for rigorous regulation, this is it.
And if we ever needed a reminder of the perils of market domination, this is it.
And if we ever needed a reminder to revisit how history has taught us to keep watch against collusion, this is it, too.
The allegations made by the Competition Bureau against the country’s largest breadmakers reads like a piratical 19th-century price-fixing scheme, the sort of drama that recalls John D. Rockefeller, the inexhaustible investigative journalist Ida Tarbell and the ultimate breakup of Standard Oil.
Rockefeller was a pious pirate ever so subtly described by Tarbell as “unhampered ... by any ethical consideration.” Yet the black-hearted dreams of anti-competitive behaviour did not die with him.
There have been serial anti-trust behaviours since. A small sampling: AT&T (busted up upon order of the courts); Bridgestone Corp. (a $425million US fine for conspiring to fix the prices of “automotive anti-vibration rubber parts”) and, this week, a lawsuit launched by two food processors in the U.S. against a group of poultry producers, alleging the price manipulation of chickens.
The disclosure this week in the “bread-gate” court filings reveals capitalism at its grimiest. While none of the allegations has been proven in court, George Weston Ltd. and Loblaw Cos. Ltd. were granted an “immunity marker” by bringing the case before the Competition Bureau in 2015. In January 2016, the Canadian Federation of Independent Grocers landed its own allegations of collusion.
The unseemly affair brings immense disgrace upon the storied Weston company, which traces its lineage to George Weston’s first bakery in 1882. Weston Bakeries, a division of Weston Foods, is the leading fresh and frozen baking company in Canada (and includes the Ace Bakery artisanal line). Through Loblaws, George Weston controls the country’s largest food distributor and has a big play in the drugstore world thanks to its purchase of Shoppers Drug Mart.
If that reads like market power, you have read it correctly.
The court filings allege that the price-setting arrangements between Weston and Canada Bread Co. date back to November 2001. Fifteen price increases are documented, conventionally a 7-cent increase at the wholesale level; 10 cents at retail. A one-time 16-cent bump is described as a deviation from the norm. Using Nielsen Corp. data, the Competition Bureau notes that in 2016, Weston retained 38 per cent market share in the fresh bread business. Canada Bread claimed 40 per cent market share. (Grupo Bimbo, the $14-billion (U.S. sales) Mexican conglomerate with operations in 32 countries, acquired Canada Bread from Maple Leaf Foods Inc. four years ago.)
It is understandable if the reader’s thoughts here drift to kitty-corner gas stations raising pump prices in unison on hot summer Fridays.
According to the bread-gate court filings, “direct communications between senior officers” resulted in the collusive scheme, and that each would meet with retail customers “to obtain their acceptance of the fixed price, thereby fixing the retail price for the sale or supply of fresh commercial bread.” It was up to the suppliers to ensure “alignment” across retailers.
Giant Tiger Stores Ltd., Metro Inc., Walmart Canada Corp. and Sobeys Inc., and, of course, Loblaw are the retailers in question. In a 2015 email to Weston, a Metro employee complains: “Why the hell are they (Giant Tiger) at $1.88? The price increase just happened. Why would they go this cheap? You’re upsetting the market.”
Giant Tiger reiterated this week that it is co-operating fully with the Competition Bureau’s investigation. Subsequent to the unsealing of the court documents, the retailer issued a statement that “reaffirms our previous assertion that we have no reason to believe that Giant Tiger or any of our employees has violated the Competition Act.”
Metro issued a similar release, stating that it had found no internal evidence of violation of the Competition Act.
And Sobeys CEO Michael Medline sent up a red flare, advising the Westons to “keep checking the mailroom,” as Sobeys considers legal action.
Jimmy Pattison’s Overwaitea Food Group Ltd. is mentioned in one court filing, not as a target company, but only on the grounds that it might have records relevant to the investigation.
So the spotlight returns to the mighty Westons, whose firm is now known to be active in the undue lessening of competition.
“On every lip there was but one word, and that was conspiracy,” Tarbell wrote back in her day.
Such ugly behaviour, more than a century later.