Bread price-fixing in Canada - Wikipedia

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Bread price-fixing in Canada

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2018 scandal in Canada

The bread price-fixing scandal in Canada refers to a group of competing bread producers, retailers and supermarket chains who reached a secret agreement among themselves to artificially inflate the price of bread at the wholesale and retail levels from late 2001 to 2015[1] (some sources stated that the price fixing continued into 2017[2]). The Competition Bureau of Canada alleged, in court documents released 31 January 2018, that seven Canadian bread companies committed indictable offences[3] in what journalist Michael Enright later termed "the great Canadian bread price-fixing scandal" of 2018.[4] Penalties can range from $25 million to a prison term of 14 years.[4]

History<br>[edit]

Canadians had been victimized over a 14-year[3] or a 16-year[2] period, the Competition Bureau said, noting that the scheme inflated the price of bread by at least $1.50.[5] It became known to insiders as the "7/10 convention", according to the bureau documents: a usual seven cent price increase at wholesale and ten cent price bump for the consumer in stores, typically twice a year.[6] In addition to bread, other baked goods such as bagels, naans, English muffins, and tortillas were also affected by the price-fixing scheme.[2] Between 2001 and 2015, the consumer price index for bread, rolls, and buns rose by 96 per cent, according to Statistics Canada, while during that same time, the CPI for all food purchased from stores increased about 45 per cent.[2]

Scheme<br>[edit]

The Competition Bureau alleged that the senior officers of wholesale fresh bread rivals Canada Bread, owned by Maple Leaf Foods at the time and later became a Grupo Bimbo subsidiary since May 23, 2014,[7] and Weston Foods, then a sister company to Loblaw Companies under parent George Weston Limited, colluded to boost bread prices. Canada Bread and Weston Foods then met with retailers to increase their prices in tandem.[6] The retailers who participated in the scheme, including Loblaws, Walmart Canada, Giant Tiger, Sobeys and Metro, allegedly "demanded" that the bread suppliers manage actively their retail competition by co-ordinating bread prices between the retailers.[8]

According to evidences in court filing, at one point in 2012, Weston Foods had not announced a price increase for its bread products. Canada Bread, in turn, also cancelled its price hike which led to Weston Foods not going through the price hike. Afterwards, a Canada Bread employee approached a Weston Foods staff and expressed displeasure over the failed price hike. This led to a "sense of urgency" in the bakery industry around the scheduled price hike in October 2012.[8]

Informant tip-off<br>[edit]

The bureau was approached by informants from Loblaws in 2015 and filed the affidavit late in 2017 along with evidence in order to convince a judge to grant it search warrants, which it executed on 31 October 2017.[2] Loblaws and Weston Foods became aware of the investigation on 31 October 2017, and decided to co-operate with investigators in December in exchange for receiving immunity from prosecution.[6]

A statement issued by Canada Bread noted that the George Weston and Loblaws informants admitted to inappropriate conduct and accused "certain former Canada Bread executives" dating back to 2001 "while Canada Bread was under previous ownership."[6]

The affidavit by Loblaws also refers to a series of alleged incidents and emails that appear to implicate senior officials at bread suppliers and relevant category managers at the retailers:[5]

Retail customers would call threatening to reject a price increase if another retailer was offside in terms of pricing alignment. None of them wanted to be the first to implement the price increase. There was always a negotiation process going back and forth between the four retailers where the supplier was trying to coordinate it, because somebody had to be the first to move.

Analysis<br>[edit]

An academic from Dalhousie University, Sylvain Charlebois who is a professor of "food distribution and policy" said that he had previously been unaware of this issue, and "Now, I'm asking myself where else in the grocery store is there collusion other than bread. That's the real question, I think."[6]

In an analysis performed by Grier and published by Markusoff, the cost differential between actual and normative CPI data, of a weekly loaf purchase over the decade-and-a-half interval, was on the order of 400 dollars.[9] Markusoff notes that "According to the Bureau of Labor Statistics, American consumers saw bread prices rise half as fast as happened in Canada during the time of Loblaws' misconduct."[9]

Consequences<br>[edit]

On January 8, 2018 in an attempt to pacify public opinion, Loblaws...