Weston, McCain met to discuss bread prices, plaintiffs in class-action lawsuit allege

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Plaintiffs in an Ontario class-action lawsuit have alleged that Loblaw Cos. Ltd. L-T chairman Galen Weston met in person to discuss bread prices with Michael McCain, Maple Leaf Foods Inc.’s MFI-T executive chair and former chief executive, while an alleged bread price-fixing scheme was in place.

The meetings between executives with two of the industry’s biggest players were referred to in internal e-mails filed with the Ontario Superior Court of Justice by lawyers for the plaintiffs. The e-mails between executives for Canada Bread Co. Ltd. and its majority owner at the time, Maple Leaf Foods, included preparations for one meeting in 2007, planning to point out the growing profits Loblaw had earned from sales of packaged bread. Maple Leaf has repeatedly stated that such meetings between a supplier and a retailer are routine in the industry and do not indicate wrongdoing.

The Ontario lawsuit stems from a Competition Bureau investigation that began in 2016, after Loblaw and its parent company, George Weston Ltd., alerted the federal watchdog about “an industry-wide price-fixing arrangement involving certain packaged bread products” between 2001 and 2015. Loblaw and George Weston were granted immunity from criminal charges and have since been co-operating with the investigation, which is continuing. Another lawsuit has been certified in Quebec.

In addition to bread manufacturers, the allegations involved major grocery retailers, which remain under investigation by the bureau. Other retailers have denied any wrongdoing.

In a statement of defence filed this month as part of the lawsuit, Loblaw and its parent company denied Mr. Weston was involved in any arrangements regarding commercial packaged bread. Mr. McCain has previously denied engaging in any unlawful behaviour.

“This is another example of class action lawyers making patently false claims,” Loblaw spokesperson Catherine Thomas wrote in a statement on Wednesday. “Mr. Weston had no part in any of this.”

Last June, Canada Bread pleaded guilty to a criminal scheme to fix bread prices and agreed to pay a $50-million fine. Mexico-based parent company Grupo Bimbo acknowledged that Canada Bread, which it acquired in 2014, had made “arrangements” with one or more unnamed senior executives at competitor Weston Foods, leading to two wholesale price increases in 2007 and 2011. Maple Leaf Foods, which owned a majority stake in Canada Bread at the time, has repeatedly denied claims of unlawful behaviour at Canada Bread while it was a shareholder.

Following the settlement, in November, 2023, and January, 2024, Canada Bread voluntarily disclosed information to the plaintiffs in the Ontario class-action lawsuit, according to an amended statement of claim filed by the plaintiffs in Ontario Superior Court last month.

That included information about the meetings that occurred between Mr. McCain and Mr. Weston in 2007 and 2010. According to internal e-mails, the executives “discussed packaged bread pricing and the general retail landscape” at the 2007 meeting.

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A presentation prepared by Canada Bread for that meeting estimated that Loblaw’s profit margin in the commercial bread category had expanded by $103-million between 2001 and 2006. Providing feedback about that presentation, Mr. McCain wrote in an e-mail to Canada Bread chief executive Richard Lan that the “story line” to present to Loblaw and Mr. Weston should include that “sales are growing; pricing is rising; margins have ballooned … made you a lot of money” and expressed in “one tidy chart.” In preparation for the 2010 meeting, Maple Leaf executives exchanged e-mails with plans to discuss a price increase for packaged bread that year.

The statement of claim also refers to a 2007 meeting between Mr. McCain and Paul del Duca, a senior vice-president at Metro Inc., “to discuss, among other things, past and future packaged bread price increases.” That meeting was previously disclosed in a sworn statement as part of a 2019 search warrant application by the Competition Bureau, which stated it believed Mr. McCain was aware of alleged arrangements to fix bread prices.

Mr. McCain has previously stated that his discussion with Mr. del Duca was part of the normal course of doing business, adding that all consumer packaged goods suppliers have discussions about products and pricing with the retailers they sell to. Metro has denied that any employees were involved in price-fixing or violated competition law.

George Weston and Loblaw “expressly deny that Galen G. Weston played any role in relation to any arrangements regarding commercial packaged bread, or engaged in any improper or unlawful activity, as alleged in the claim, or at all,” according to an amended statement of defence filed with the Ontario Superior Court on March 7.

Such meetings are “a routine and lawful part of retail merchandising in a highly competitive environment,” Maple Leaf’s general counsel, Suzanne Hathaway, wrote in a statement on Wednesday. “While a supplier can make recommendations, every retailer makes its own decisions on what it is going to sell, how it is going to sell those products and the prices it charges.”

The lawsuit argues that the defendants were “unjustly enriched” by the alleged scheme, and that it has led to artificial increases in bread prices.

The Ontario class-action was certified against defendants Loblaw, George Weston and its former subsidiaries Weston Foods (Canada) Inc. and Weston Bakeries, Canada Bread, Sobeys Inc., Metro, Walmart Canada Corp. and Giant Tiger Stores Ltd. In a 2021 decision, the court did not certify the action against Maple Leaf, but last August, the plaintiffs asked the court to reconsider that decision.

In her statement on Wednesday, Ms. Hathaway wrote that the amended statement of claim “is a frivolous attempt to try to bring Maple Leaf Foods back into the litigation and is an abuse of the courts’ processes.”

George Weston and Loblaw’s statement of defence admits to information included in an “agreed statement of facts” related to the Canada Bread settlement. Specifically, the statement says that in relation to two price increases in 2007 and 2011, the CEO of Canada Bread and “one or more senior executive(s)” at George Weston, Weston Foods and Weston Bakeries “engaged in arrangements relating to the wholesale prices of certain commercial packaged bread” sold to grocery retailers.

George Weston and Loblaw’s statement of defence argues that the lawsuit’s allegations of wrongdoing are “overly broad,” and that it has not been proven that any other wholesale or retail price increases were unlawful. (The wholesale price is what retailers pay to suppliers for products; retailers then set the retail price charged to consumers.)

In “information to obtain” (ITO) documents filed in the past by the Competition Bureau in support of search warrant applications, the federal watchdog has alleged that the bread manufacturers agreed on wholesale price increases. The ITOs alleged that grocery retailers accepted those increases on the condition that their competitors would do the same.

But George Weston and Loblaw’s statement of defence points out that those ITOs reflect the Competition Bureau’s beliefs at the time, and “did not constitute conclusions of law or any determination of any court of law that would be binding upon any party.” The allegations have not been proven in court.

The statement of defence also denies that the plaintiffs and a class of consumers that they seek to represent suffered damages, and stresses that George Weston and Loblaw already compensated customers in 2018, after the companies disclosed their role in the alleged price-fixing scheme. At the time, the companies offered customers a $25 Loblaw card to purchase items in its stores.