Loblaw parent company alerted competition watchdog to bread price-fixing

George Weston Ltd. revealed Tuesday the bakery owner and grocer Loblaw Companies Ltd. alerted the Competition Bureau after discovering a more than decade-long bread price-fixing arrangement and will receive immunity from criminal charges.

The companies said in a joint statement Tuesday that they became aware of an arrangement involving the co-ordination of retail and wholesale prices of some packaged breads from late 2001 to March 2015. As a result of their admission to the competition watchdog, neither company will face criminal charges or penalties, they said.

"This sort of behaviour is wrong and has no place in our business or Canada's grocery industry," said Galen Weston, chairman and chief executive officer of both companies.

"This should never have happened."

The participants regularly increased prices on a co-ordinated basis, and participants included both companies, as well as other major grocery retailers and another bread wholesaler, the statement said.

Last month, the Competition Bureau executed warrants to search the offices of certain grocers to gather evidence, but that there had been no conclusion of wrongdoing and no charges had been laid.

Both the competition watchdog and Canadian retailers have remained tight-lipped on further details.

Metro Inc. said at the time that the investigation concerns certain suppliers and Canadian retailers, and that it was fully co-operating. A spokeswoman said the company would not comment on Loblaw's release Tuesday.

Sobeys Inc., Canada Bread and Walmart Canada also said they were fully co-operating.

The statement issued Tuesday by Loblaw and George Weston said the employees responsible for Weston Bakeries and Loblaw's role in the arrangement are no longer employed by the companies and that the companies have beefed up compliance programs.

The companies established an independent compliance office earlier this year and provided compliance training and re-certification to marketing personnel at Weston Bakeries and all merchants and store managers at Loblaw, as well as senior managers at both companies and at parent company George Weston.

Loblaw is offering eligible customers who register online at LoblawCard.ca before May a $25 gift card that can be used at its grocery stores across Canada. Loblaw will book a $75 million to $150 million quarterly charge in relation to the program.

The companies might also book charges related to damages in the coming quarters but said their cash balances "far exceed any realistic damages scenario."

The added disclosure came after sealed court filings into the matter were made available to the companies and other affected parties for review.

The companies said they do not expect the outcome of class actions filed in relation to the investigation to have a material impact on their finances. However, they added Loblaw is likely more exposed because the majority of the overcharging on bread accrued to retailers.

Canada's Competition Act prohibits agreements that "prevent or unduly lessen competition or to unreasonably enhance the price of a product," according to the bureau.

That could include agreements between competitors to fix prices, or to restrict production of a product by setting quotas or other means, which would be considered cartel activities. Penalties for price fixing could include fines of up to $25 million, imprisonment to a maximum term of 14 years, or both.

However, the bureau says price-fixing conspiracies are, by their nature, difficult to detect and prove.