CARTELS UNDER OUR NOSES.
The Great Canadian Bread Cartel appears to have instantly and prematurely risen, as bread will, to the status of full conviction. On the basis of the Competition Bureau’s 50-odd pages of suggestive allegations of retail price fixing, supported by the Weston food empire’s admission of guilt and its bizarre and self-serving accusations against other food companies, it is now settled that the nation’s major bread makers and five grocery giants connived for 15 years to rip off consumers.
The cartel is evidence of “capitalism run amok,” wrote one columnist. We need regulation more than ever.
CBC Radio’s grey- bearded lefty, Michael Enright, always alert for signs of capitalism’s failures, wondered about “other foodstuffs with rigged prices: Bagels? Cheese dip? Potatoes? Apples? What about my favourite, avocados?”
Well, yes on that cheese dip, cheese being part of the government- backed milk and dairy price- fixing cartel. Chickens, too. Also beer, wine and liquor, which are largely locked down by government-backed cartels. Health care? A government monopoly. And now governments are forming drug cartels, in a collusion called pharmacare, to rig prices.
When it comes to cartels, nobody beats the state-mandated schemes.
But the head of the Competition Bureau, John Pecman, suggests Canada is crawling with non- government cartels, too.
“The truth about price-fixing often remains hidden in the shadows,” he wrote recently in a Globe and Mail op-ed. “These cartels typically involve secret deals between schemers who are careful to cover their tracks. Neatly written agreements between competitors rarely exist. E- mails get deleted, and meetings to collude on price happen in obscure places.”
Pecman claims his bureau is vigilantly protecting us from price fixers and other corporate criminals. Since 2011, he said, the bureau collected more than $ 118 million in fines and racked up 67 months in jail terms against 50 companies and 34 individuals. Wow, take that cartels!
Pecman quoted UBC professor James Brander, who said “Canada’s approach to price fixing works well.”
Or maybe not. As I wrote here last week, Pecman’s breadcartel claims are based on “somewhat limited but also somewhat convincing evidence from emails and a few unnamed participants who say they witnessed the price fixing system.” Somewhat limited and somewhat convincing hardly proves the companies named actually engaged in criminal cartel activity.
Clearly something was going on and clearly members of the Weston corporate empire — which agreed to confess and name other names in exchange for immunity — are covering their butts. That Sobeys and the other grocers whose names Weston handed to the Competition Bureau are up in arms over this is understandable.
Meanwhile, Pecman and his Competition Bureau’s claims of great success in fighting cartels are grossly overblown. The bread allegations seem to parallel the bureau’s disastrous chocolate price-fixing case, which blew up in 2015 when the Public Prosecution Service of Canada (PPSC) decided not to prosecute based on the bureau’s evidence, or lack thereof.
The chocolate investigation ran from 2007 to 2013 after one company, Cadbury, was granted immunity for supplying evidence. Other companies named included Nestlé, Hershey, Mars, a distributor, and several executives. Hershey agreed to a fine of $4 million in 2013. But the others, including some executives, wouldn’t settle, forcing the bureau to send the case to the federal prosecutor’s office, which in 2015 suddenly dropped the proceedings. Despite the bureau’s eight years of evidence gathering, it failed to meet the PPSCs key tests: “Is there is a reasonable prospect of conviction based on evidence that is likely to be available at trial?… If not, and charges have been laid, the charges should be withdrawn or a stay of proceedings entered.”
The bread allegations seem to follow the same pattern as the chocolate case. While one company receives immunity, others are dragged through the mud based on somewhat limited evidence that in the end may be assessed by the prosecutors as inadequate.
In another case, in 2015 the bureau lost its 10-year attempt to convict seven companies and a dozen individuals for allegedly rigging bids for federal government contracts for professional IT services. Some pleaded guilty and paid a fine, but a 2015 jury trial of three companies and seven individuals ended with acquittal, in part because there was no intent to rig bids and the government buyers knew full well the companies were co-operating.
Pecman’s $ 118 million in fines for cartel activity is how he measures success in cartel fighting. But much of that money came from the bureau’s ability to free ride on a U. S. anti- trust crusade against international auto parts makers. Almost 75 per cent of the $ 118 million was paid by firms who pleaded guilty in the United States to price-fixing and/ or bid rigging, including in Canada, and were made to pay restitution here, too. In the U. S., anti-cartel actions have resulted in the conviction of 48 companies and the payment of US$ 2.9 billion in fines. How many of them paid up just because it was easier than fighting the government will never been known.
Another $ 24 million collected as part of Canada’s Competition Bureau’s anti- cartel revenues, came from another free ride, a European Union prosecution of a group of foreign airlines — Cathay- Pacific, Air France, Qantas, KLM and British Airways — who began their first payments in 2009 and subsequent years for allegedly “fixing” air- cargo surcharges.
The bureau’s success at finding and prosecuting price fixers is not quite what it claims. Meanwhile, the really big price- fixing cartels operated by governments roam freely across the land.