Sobeys assails Loblaw for throwing it ‘under the bus’ in bread probe

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Sobeys Inc., the country's second largest grocer, has come out on the counteroffensive, attacking leading food retailer Loblaw Cos. Ltd. for throwing it "under the bus" by saying major rivals conspired to fix the price of bread.

On Tuesday, Loblaw sent shock waves through the sector by admitting to participating in what the company described as an industry-wide scheme to jack up packaged bread prices over 14 years. The country's largest food retailer said it was co-operating with a Competition Bureau investigation into price-fixing in exchange for immunity from prosecution and providing information on rivals to the bureau.

Explainer: What is price-fixing and how does it work?

Now, Michael Medline, chief executive officer of archrival Sobeys, has asked Galen G. Weston, CEO of Loblaw, for a public and immediate retraction of his implication that Sobeys conducted itself in the same manner as Loblaw and its parent George Weston Ltd. in the price-fixing.

Mr. Weston is also CEO of George Weston, which runs bread maker Weston Bakeries and also admitted to being involved in the price-fixing.

In an angry letter to Mr. Weston on Thursday, Mr. Medline accused him of taking "the opportunity to throw so many other retailers under the bus with you. … To state that there was an 'industry-wide price-fixing arrangement' was unfair, unsubstantiated, and quite possibly defamatory," Mr. Medline wrote in his letter, dated Dec. 21 and obtained by The Globe and Mail.

"You presented it as a statement of fact, when you knew or should have known that your accusation could mislead the Canadian public; you more than implied that the 'court filings' contain more substance than they actually do."

Mr. Medline's broadside against Mr. Weston underscores the fissures emerging in the grocery sector even as the price-fixing inquiry raises questions among consumers about food retailers' pricing and reputation.

Loblaw spokesman Kevin Groh said on Thursday: "We stand by our statements." In its Tuesday statement, Loblaw didn't name any rivals.

Executives at Metro Inc. – the country's third-ranking grocer, which is also alleged to have participated in the price-fixing – echoed Mr. Medline's sense of outrage at Loblaw for implicating rivals in the scheme.

Metro spokeswoman Marie-Claude Bacon said in an interview that the grocer is "not pleased with what happened and what Loblaw did on Tuesday," especially making Metro appear "guilty by association. What they said is unacceptable." She said Metro finds it "disturbing" that even as Loblaw admits to wrongdoing, the grocer is gearing up to give out $25 gift cards to consumers as a goodwill gesture – essentially becoming a marketing and public-relations tool for Loblaw.

"They're guilty and they are allowed to flood the market with gift cards to salvage their reputation," she said.

The bureau is investigating allegations of packaged bread price-fixing at seven companies: the three largest grocers; the two biggest bread makers, Weston Bakeries and Canada Bread; and two major discount chains, Wal-Mart Canada Corp. and Giant Tiger, court documents show. Each company has said it is co-operating with the bureau's criminal probe, which is unresolved.

Mr. Medline wrote in his letter to Mr. Weston that "the allegation of price-fixing is a terrible charge and one that goes right to the trust that must exist between a retailer and its customers."

Mr. Medline said Sobeys doesn't believe it has violated the Competition Act after having had the chance to review court documents that were kept secret until Tuesday. Sobeys hasn't been charged or found guilty of any crime, he said.

"Your written and spoken words of December 19 can only be construed as a deliberate attempt to damage the reputations of Sobeys and, perhaps, other retailers. … We will be closely monitoring the impact of your words on our brand, our business results and our legal rights. We will hold you responsible for any damages we may incur due to your actions."