Bread price fixing: Galen Weston butters up authorities and offers cheated customers a $25 gift card
Loblaw averts criminal charges by admitting to 15-year scheme, rivals lash out against ‘reckless assertion’ of industry-wide practice
Loblaw Companies Ltd. turned itself in to authorities to avoid facing criminal charges and fines for fixing bread prices, said it would offer $25 gift cards to customers, and promised it had taken steps to ensure it wouldn’t happen again.
Textbook crisis management, according to the head of a firm that specializes in communications and issues management.
“It’s a lower risk strategy to break the news yourself, rather than to have it broken by others — then you can define the message,” said Lesli Boldt, president, Boldt Communications.
“In an issue-management situation there is a three step process: Acknowledging that you made a mistake, articulating how you are going to remedy that mistake, and how you are going to make sure it never happens again.”
But Loblaw Cos. chairman and chief executive officer Galen G. Weston seems to have ruffled a few feathers by describing the bread price-fixing scheme — conducted from 2001 to 2015 — as an industry-wide issue.
Giant Tiger and Metro Inc. issued releases saying they had no reason to believe or evidence to suggest any of their employees had been engaged in the scheme. Sobey’s took its response a step further. “Although Loblaw and George Weston have admitted wrongdoing by their companies and certain of their employees, it is important to note that their reckless assertion of industry-wide price-fixing has not been proven,” according to the Sobey’s release.
“The Competition Bureau investigation is ongoing. We are co-operating fully. And at this time we have no reason to believe that Sobeys, or any of its employees, have violated the Competition Act.”
Weston announced Tuesday evening that Loblaw turned itself in to the Competition Bureau under an amnesty program in connection with the bread-pricing scheme.
He said that those engaged in the conspiracy are no longer employed by the company and steps have been taken to ensure future compliance, including the appointment of an independent compliance officer.
Under the Competition Act, penalties for price-fixing include fines of up to $25 million and imprisonment to a maximum term of 14 years, or both.
Under the Competition Bureau’s Immunity Program, the first party to disclose to the Competition Bureau an offence not yet detected, or to provide evidence leading to the lay- ing of charges, may receive immunity from prosecution.
“The Bureau’s Immunity and Leniency programs provide incentives for parties to come forward to secure immunity or leniency in return for their co-operation against others involved in the cartel,” according to the Competition Bureau. “Without them, many cartels would go undetected.”
At least one class action lawsuit has already been filed, naming as defendants George Weston Ltd., Loblaw Cos. Ltd., Weston Foods (Canada) Inc., Empire Co. Ltd., Sobeys Inc., Metro Inc., Walmart Canada Corp., Wal-Mart Stores, Inc., Giant Tiger Stores Limited, Canada Bread Co. Ltd. and its Mexican parent, Grupo Bimbo.
The products include fresh and frozen baked goods sold under the brands Dempster’s, Villagio, Vachon, Stonemill, Weston, Wonder, D’Italiano, Country Harvest and others.
The lawsuit, filed in Ontario Superior Court in Toronto, is seeking damages of $1 billion and punitive damages of $100 million. It was filed on behalf of a customer, Marcy David, a resident of Windsor.
“Their conduct was deliberate, wilful and motivated solely by economic considerations with callous disregard for the law,” says the claim, which has not been proven in court.
No statement of defence has yet been filed.
“This isn’t a new phenomenon and we probably haven’t seen the last of it, either,” said Robert Gain, an associate in the class actions department of Koskie Minsky, which is also looking into a class action suit.
His firm has been involved in several price-fixing cases, including price fixing of currency-exchange rates. Other recent cases have included air freight and car parts.
“For price-fixing cases there is typically a general format. It starts with a secret agreement between socalled competitors,” Gain said.
“They typically get together in secret and in private. They agree to either fix the prices of the goods that they make themselves, or to allocate territories or customers between themselves. As with any illegal enterprise, it only really comes to light when a regulator gets a tip and launches an investigation or one of the conspirators comes forward to the regulators as an amnesty applicant . . . the first one to confess gets the best deal.” How much is awarded to consumers varies widely, depending on the product and how long prices were fixed, Gain said.
“You imagine and formulate what the price of the product would have been but for the conspiracy, and then you compare it to the prices that were charged as a result of the conspiracy, and the difference between those two prices is a measure of damages,” he said.
The $25 gift cards being offered by Loblaw are a goodwill gesture, outside of the litigation context.
“I think it’s a PR move and they still face litigation risk,” Gain said. The Competition Bureau said Wednesday that the investigation is ongoing.