Canada Bread Co. will pay a fine of $50 million after pleading guilty to its role in a criminal price-fixing arrangement that raised the wholesale price of fresh commercial bread.Kelly Clark/The Canadian Press
The head of the Competition Bureau believes the $50-million fine handed down to Canada Bread this week “sends a strong message” to discourage other companies from colluding with competitors to fix prices – and warns that penalties for such behaviour could be much heftier in future.
The fine against Canada Bread announced Wednesday represented a major step forward in the bureau’s more-than-seven-year investigation into allegations of an industry-wide scheme to inflate the price of bread in Canada. And Commissioner of Competition Matthew Boswell made it clear that it is far from over.
“Now, we push forward with the remaining part of our investigation, that involves several other companies that are still under investigation,” Mr. Boswell said in an interview Thursday.
The Canada Bread fine was the largest imposed for price-fixing in Canadian history. But it was subject to a cap, which is changing this week: Under amendments the government made to the Competition Act last summer, which go into effect on Friday, there will be no maximum limits in the future.
“We have in the past bumped up against the maximum fine, on multiple cases,” Mr. Boswell said. “And I advocated publicly over several years leading up to this change, that we ought to remove the maximum fine for price-fixing offences.”
That change will only apply to wrongdoing that occurs after the amendments take effect, meaning that any further fines handed down in the bread price-fixing investigation – which is continuing – would be subject to the old limits.
A statement of agreed facts filed in Superior Court in Toronto on Wednesday detailed two counts of price-fixing arrangements in 2007, subject to a maximum fine of $10-million each, and two more counts in 2010 and 2011, after an amendment that took the fine up to $25-million each. Those arrangements led to two increases in the prices of bread products. The $70-million total was reduced as part of a leniency program for companies that co-operate with such investigations. The typical leniency reduction is roughly 50 per cent, Mr. Boswell said, though in this case the reduction was smaller to reflect the magnitude of the volume of commerce involved, and other aggravating factors in the case.
“I still think this is obviously a significant fine,” Mr. Boswell said. “It’s the largest fine for price fixing in Canadian history. It sends a message of deterrence both to Canada Bread and to others across the country in various industries who might consider engaging in price fixing.”
Mexico-based multinational Grupo Bimbo BMBOY, which acquired Canada Bread in 2014, has agreed to pay the fine, resolving the investigation into the company. According to the court document, Canada Bread’s former owner, Maple Leaf Foods Inc., did not disclose the conduct to Grupo Bimbo before the $1.83-billion acquisition, and the buyer was not aware of any possible wrongdoing until the investigation became public in 2017. A statement provided by Maple Leaf Wednesday denied awareness “of any wrongdoing by Canada Bread or its senior leadership during the time that we were a shareholder.”
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Mr. Boswell would not comment on the evidence presented by Canada Bread’s new owner as part of the settlement agreement. “But obviously, when you buy a company, what comes with that is all the information in possession of the company,” he said, adding that Grupo Bimbo “cooperated fully and in a timely manner” with the bureau.
The investigation began in January of 2016, after Loblaw Cos. Ltd. L-T and its parent company George Weston Ltd. disclosed a scheme to artificially inflate bread prices in exchange for immunity from criminal charges. The companies told the bureau that the price-fixing went on for years, between 2001 and 2015, and included both its own stores and the Weston Foods manufacturing business (which George Weston has since sold) as well as other retailers and Canada Bread.
“I understand people’s reaction that it’s been a long time, but this has been and continues to be a very large investigation that takes a great deal of work to be done properly,” Mr. Boswell said.
The bureau executed a number of search warrants from 2017 to 2019, he said, and seized more electronic evidence than in any criminal investigation the bureau has conducted in the past.
“At the end of the day, the bureau refers matters to the Public Prosecution Service of Canada for them to make decisions – whether to prosecute the case, decisions with respect to negotiations on a guilty plea – and rightly so, they’re operating in the criminal justice system that requires proof beyond a reasonable doubt,” he said. “They expect the bureau to do a thorough investigation that looks at all the evidence.”
The investigation is continuing into other companies including Metro Inc. MRU-T, Sobeys Inc. EMP-A-T, Walmart Canada Corp. WMT-NE, and Giant Tiger Stores Ltd. Representatives for all those retailers have denied any violation of competition law.
In addition, two class-action lawsuits have been certified in Ontario and Quebec over the price-fixing matter, and are continuing.
“It’s been a long time coming,” Jim Orr, a partner at Toronto-based Orr Taylor LLP and a lawyer for the plaintiffs in the Ontario case, said of Wednesday’s settlement. “It’s helpful, because there are five grocers and two bread makers involved, and now you’ve got two bread makers and one grocer admitting that it happened.”