A worker restocks shelves in the bakery and bread aisle at an Atlantic Superstore grocery in Halifax, on Jan. 28, 2022.Kelly Clark/The Canadian Press
Canada Bread Co. Ltd. is seeking damages from its former majority owner Maple Leaf Foods Inc. MFI-T, related to an alleged industry-wide bread price fixing scheme – including a record $50-million fine that Canada Bread’s new owners agreed to pay last year to settle its part in a Competition Bureau investigation into the matter.
Canada Bread’s parent company, Mexico-based Grupo Bimbo BMBOY, has previously said that it was unaware of the company’s role in fixing bread prices before its $1.83-billion acquisition in 2014, and was unaware of the details of the price-fixing arrangements until the bureau’s investigation became public in 2017.
In June of 2023, the company pleaded guilty to the criminal scheme, acknowledging that Canada Bread made “arrangements” with one or more senior executives at competitor Weston Foods leading to two wholesale price increases in 2007 and 2011. The wholesale price is what retailers pay to buy products from manufacturers, and in turn it factors into the prices those stores charge to consumers.
In a court filing on Thursday, Canada Bread argued that it is entitled to damages from Maple Leaf related to that investigation, including the fine; further damages for “breach of contract,” “fraudulent misrepresentation” and “unjust enrichment”; as well as any damages that may arise from a continuing class-action lawsuit related to the alleged scheme.
But Canada Bread is arguing that it is not liable to the plaintiffs in that lawsuit because, “until May of 2014, Maple Leaf – then the company’s controlling shareholder – exercised control over the affairs and activities” of Canada Bread.
In its amended statement of defence and crossclaim related to the class action, which was filed with the Ontario Superior Court of Justice on Thursday, Canada Bread alleged that it was “a victim of a scheme conceived by Maple Leaf” to use it as a “shield” for unlawful conduct.
“Maple Leaf, through its personnel acting as senior officers or members of the Board of Directors controlling and directing Canada Bread, knew or ought to have known of any anti-competitive conduct by Canada Bread,” the company stated in the court document.
Maple Leaf has repeatedly denied any unlawful conduct at Canada Bread while it was a shareholder.
“We reject these claims in their entirety,” Maple Leaf senior vice-president and general counsel Suzanne Hathaway wrote in a statement on Thursday. “Maple Leaf Foods acted appropriately at all times, including with respect to making full, plain and true disclosure to Grupo Bimbo at the time of its acquisition of Canada Bread.”
The Ontario lawsuit, and a related class action in Quebec, have already led to a significant settlement: In July, Loblaw Cos. Ltd. L-T and its parent company, George Weston Ltd., agreed to pay $500-million to settle the two cases.
In addition to Canada Bread, defendants in the Ontario case include retailers Metro Inc., Sobeys Inc., Walmart Canada and Giant Tiger Stores Ltd. Others named in the suit have denied participating in the alleged scheme. In a 2021 decision, the court did not certify the action against Maple Leaf. The plaintiffs have asked the court to reconsider that decision. Maple Leaf is fighting that request, calling it an “abuse of the court’s processes.”
Loblaw and George Weston were the first to report the alleged “industry-wide” conspiracy – lasting from 2001 to 2015 – to the federal Competition Bureau, in exchange for immunity from criminal charges. The two companies publicly acknowledged their participation in price fixing in 2017. The bureau’s investigation is continuing.
In previous court filings related to the class action, Canada Bread has specified that a majority of the senior officers on its board of directors during the time of the alleged scheme were also senior officers at Maple Leaf.
In Thursday’s filing, Canada Bread also specifies that it had two agreements in place with Maple Leaf during the time of the alleged scheme, under which senior management of Maple Leaf served on the board of directors of Canada Bread, and provided management and consulting services to the bread producer.
Canada Bread also argues that any “improper or unlawful activities in relation to its pricing activities” at the time were the result of the management provided by Maple Leaf under those agreements. Canada Bread also accuses Maple Leaf of breaching those contracts, which required Maple Leaf to comply with applicable laws and with its own code of conduct.