Under investigation by the Competition Bureau for seven years, Canada Bread (Bon Matin, POM, Vachon and Villaggio) pleaded guilty on Wednesday and will pay a $50 million fine for its role in a scheme which had the effect of increasing the price of fresh commercial bread sold wholesale.
This is the most severe fine to date imposed by Canadian justice in a price-fixing case.
Canada Bread acknowledges having entered into an arrangement with its competitor Weston to fix the price of various sliced and packaged bread products, such as sandwich buns, hot dog buns and buns.
According to the facts reported, in 2007 and 2010-2011, one or more senior executives of Weston made price arrangements directly with Richard Lan, the CEO of Canada Bread at the time. These arrangements led to price increases in 2007 and 2011.
“The breaches involved a high degree of planning and coordination on the part of the former Canada Bread boss and one or more senior Weston executives to facilitate the arrangements described, including direct communication about the realization of the breaches,” reads a legal document obtained Wednesday by La Presse.
“The former boss of Canada Bread has contacted one or more senior Weston executives to work out the arrangements,” it said.
At the time of these maneuvers, Canada Bread was a company listed on the Toronto Stock Exchange, 90% of whose shares were controlled by Maple Leaf Foods. Mexican company Grupo Bimbo bought Canada Bread in 2014 in a deal valued at $1.8 billion.
Grupo Bimbo maintains that it was not informed of the prior conduct, that it was not discovered during the purchase process, and that it only became aware of the bread price manipulation scheme in 2017.
“Fixing the price of bread – a staple for many Canadian households – is a serious criminal offence. Continuing our investigation remains one of our top priorities. We are doing everything in our power to prosecute people who engage in price-fixing,” said Competition Commissioner Matthew Boswell.
Weston and Loblaw announced in 2017 that they received immunity from criminal prosecution in exchange for their cooperation with the Competition Bureau.
It was then said that the scheme at the heart of the investigation involved the coordination of retail and wholesale prices of certain packaged bakery products for a 14-year period extending from the end of 2001 to March 2015.
Loblaw had offered its customers a $25 gift card that could be used to purchase items sold at its supermarkets across the country. In particular, it was specified that the employees responsible for the role of Weston and Loblaw in this agreement were dismissed.
Walmart, Sobeys, Metro, Giant Tiger, Overwaitea Food Group and Maple Leaf Foods have all found themselves in the crosshairs of the Competition Bureau in this case. Searches were also carried out in each of these companies by the Competition Bureau.
The Bureau continues to investigate allegations of price fixing against Metro, Sobeys, Walmart, Giant Tiger, and Maple Leaf.
Canada Bread said it did not have an independent legal and compliance department responsible for its business and market practices before its acquisition by Grupo Bimbo in 2014. The company adds that controls and a compliance program have since been put in place.
Grupo Bimbo says it is considering all legal options against those responsible for the conduct that led to the Competition Bureau’s investigation.
Canada Bread makes its products in 17 bakeries, distributed by 14 sales centers and offered in 191 depots across the country. The company employs approximately 4,400 people.