Cyclists pass a Loblaws in downtown Toronto on July 25. Loblaw Co. and its parent company George Weston Ltd. have agreed to pay $500-million to settle bread price-fixing lawsuits.Sammy Kogan/The Globe and Mail
Lawyers for the plaintiffs in a class-action lawsuit over an alleged conspiracy to fix bread prices in Canada are now setting their sights on other industry players, after a $500-million settlement with Loblaw Cos. Ltd. L-T and George Weston Ltd. WN-T.
An important part of the agreement – which was announced on Thursday and represents one of the largest class-action settlements in Canadian history – is a commitment by Loblaw and George Weston to co-operate with the plaintiffs by providing information. The lawyers say that will strengthen their case against other defendants.
“Our plan now is to use the information that we’re going to be getting, and prepare for trial,” said Jay Strosberg, a managing partner at Strosberg Wingfield Sasso LLP. Mr. Strosberg is representing the plaintiffs in the class-action suit certified in Ontario; a second lawsuit in Quebec was also covered by the settlement.
The defendants in the Ontario case are Canada Bread Co. Ltd., Metro Inc. MRU-T, Sobeys Inc. EMP-A-T, Walmart Canada WMT-N and Giant Tiger Stores Ltd. Canada Bread pleaded guilty last year to participating in the scheme and paid a record $50-million fine to resolve its part in a continuing Competition Bureau investigation into the matter. Others named in the lawsuit have denied participating in the alleged scheme.
The lawsuits stem from Loblaw’s and George Weston’s public admission in 2017 that the companies had participated in an alleged “industry-wide” scheme that artificially raised prices on packaged breads, buns, bagels, rolls, naan, English muffins, wraps, pitas and tortillas. The companies first reported the alleged scheme to the Competition Bureau in 2015, leading to its investigation. The federal watchdog confirmed on Thursday that its investigation is continuing into alleged price-fixing by companies including Metro, Sobeys, Walmart Canada, Giant Tiger and Maple Leaf Foods Inc.
“There is no conclusion of wrongdoing at this time and no charges have been laid against those parties,” the bureau wrote in a statement.
Loblaw executives on Thursday said that they were pleased to put the matter behind them with this settlement.
“It’s over,” chief financial officer Richard Dufresne said during a conference call to discuss Loblaw’s second-quarter earnings. But the agreement brings further scrutiny to Loblaw, at a time when the company has faced calls to boycott its stores, and pushback from consumers and politicians over whether the company did enough to rein in food price increases. While the rate of food inflation has slowed considerably in recent months, food prices are now more than 22 per cent higher than they were four years ago.
Loblaw will pay $156.5-million in cash in the settlement, and George Weston will pay $247.5-million in cash. The settlement also includes $96-million already paid out by Loblaw in the form of $25 gift cards to its own stores, distributed in 2018 as compensation for its role in the price-fixing scheme.
On Thursday, Loblaw released its second-quarter financial results, and reported that the settlement negatively affected earnings by $121-million in the quarter ended June 15, driving profits down by 10 per cent.
The company reported its net earnings available to common shareholders were $457-million or $1.48 per share for the quarter ended June 15, compared to $508-million or $1.58 per share in the same period the prior year.
The Ontario lawsuit estimated that Canadian consumers were overcharged by as much as $5-billion in total as a result of the scheme to manipulate prices.
NDP Leader Jagmeet Singh expressed skepticism that the settlement would change anything.
“The penalties are so weak that these large corporations know they can just rip off people and the small fines they have to pay, especially when they are stretched out over a large time, are just the cost of doing business,” he said at a news conference outside a Loblaws store in downtown Toronto Thursday.
One of the next steps in the case will be a hearing in September, where an Ontario judge will consider a motion to amend the certification order to include Maple Leaf Foods Inc. as a defendant in the case. (Maple Leaf owned a majority stake in Canada Bread before Mexico-based Grupo Bimbo acquired the company in 2014.)
The court previously dismissed a motion to certify the action against Maple Leaf, but plaintiffs argue that Canada Bread’s guilty plea implicates Maple Leaf. After its settlement with the Competition Bureau, Canada Bread also voluntarily disclosed information to the plaintiffs. Its amended statement of claim, filed earlier this year, cites e-mails describing meetings between Loblaw chairman Galen Weston and Maple Leaf’s executive chair and former chief executive Michael McCain, which occurred in 2007 and 2010. The executives “discussed packaged bread pricing and the general retail landscape” at the 2007 meeting, according to one e-mail. Loblaw, Maple Leaf and Mr. McCain have all denied that the two executives engaged in any unlawful behaviour.
The decision to leave Maple Leaf out of the case should stand, Maple Leaf’s senior vice-president and general counsel, Suzanne Hathaway, wrote in an e-mailed statement on Thursday. “The attempt to relitigate this court ruling by the Plaintiffs and Canada Bread is an abuse of the court process,” Ms. Hathaway added. “There is no new evidence and no basis to try to take a second kick at the can.” The company has repeatedly said that Canada Bread’s conduct was lawful at the time it was a majority shareholder.
In addition to that motion, the lawyers expect that co-operation from Loblaw and George Weston could lead to further pressure on other defendants.
“I actually don’t care if these people want to come forward and want to settle,” Mr. Strosberg said. “If they do, great. But we’re not looking for any deals at this point. We want to go to trial with the information that we’re going to be getting.”
There are outstanding appeals in the case, and it will be at least a couple of years before any trial would occur, he added.
Metro, Sobeys, Walmart and Giant Tiger all reiterated on Thursday that they had no part in the scheme and plan to defend against the claims. Both Metro and Sobeys have filed statements of defence and crossclaims accusing Weston and Loblaw of “falsely” implicating other companies in the alleged scheme, in a bid to deflect some of the public backlash over the scandal. Grupo Bimbo spokesperson Sylvia Sicuso declined to comment on the Loblaw-Weston settlement on Thursday or to say whether the company has engaged in mediation processes in the lawsuits.
“This is not over,” said Jim Orr, a partner at Orr Taylor LLP who is also representing plaintiffs in the class action. “It’s the first step in getting accountability for the entire process. And one of the things the settlement is supposed to do is deter future conduct. So to the extent that it sends a message out to the business community that large settlements are going to result from matters that arise out of price fixing, then it’s a good message.”
With a report from Chris Hannay