Bread price-fixing scandal settlement is outrageous

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This article was published 02/08/2024 (476 days ago), so information in it may no longer be current.

The bread price-fixing scandal, which has been unravelling since 2001, continues to leave a sour taste in the mouths of Canadians.

Despite the recent announcement that Loblaw and George Weston Limited will settle a class-action lawsuit by compensating Canadians approximately $500 million, the matter remains unresolved.

The scandal began when Loblaw and Weston Bakeries, then under the ownership of George Weston, admitted to colluding with other major grocers and Canada Bread to fix bread prices between 2001 and 2015. According to our calculations, this price-fixing scheme cost Canadian consumers between $4.3 to $4.9 billion due to inflated bread prices over 14 years. While the $500-million settlement might seem substantial, it pales in comparison to the true cost of the scheme.

In 2017, when Galen Weston first acknowledged the involvement of his companies in the scandal, about 3.84 million Canadians registered to receive a $25 gift card from Loblaw. This amounted to roughly $96 million in compensation, suggesting that Canadians should anticipate an additional $400 million once the courts approve the settlement.

Meanwhile, Loblaw’s recent financial performance indicates modest yet noteworthy growth in the retail sector. The company’s overall revenue in Q2 reached $13.95 billion, marking an increase of $209 million or 1.5 per cent, with retail segment sales rising by $187 million, or 1.4 per cent.

Specifically, according to Statistics Canada, Loblaw’s food retail division experienced an increase of 0.2 per cent in same-store sales despite a national decline in food and beverage sales by nearly one per cent since January. These figures suggest that the purported boycott of Loblaw, driven by allegations of profiteering, had minimal impact on the company’s financial health.

The narrative that social media platforms like Reddit fuelled the protest against Loblaw is largely inaccurate. It was, in fact, poor reporting by certain media outlets that gave rise to the movement. This protest was largely politically motivated and lacked substantial evidence, leading to misguided public outrage. However, the frustration and resentment toward the food industry are entirely understandable, given the lack of protection against such criminal behaviour.

The Competition Bureau has been investigating the bread price-fixing scandal for nine years. Thus far, Loblaw, Weston Bakeries and Canada Bread (which paid a record-breaking $50-million fine last year) have admitted their guilt. However, Walmart Canada, Sobeys, Metro and Giant Tiger, all of whom deny their involvement, remain under investigation. It is imperative that this investigation concludes promptly.

Canadians will receive an additional $400 million in compensation, thanks to the efforts of lawyers and the courts, not the Competition Bureau. This sum represents only about 10 per cent of the estimated $5 billion Canadians overpaid for bread over 14 years. The public’s outrage is justified.

Moreover, not a single executive has faced arrest, charges or conviction for price-fixing. In the United States, such behaviour is met with severe consequences. For instance, Chris Lischewski, the former CEO of Bumble Bee Foods, who was just released from custody, was sentenced to 40 months in prison for price-fixing canned tuna during a three-year period. In contrast, Galen Weston received immunity from the Competition Bureau despite admitting to 14 years of bread price-fixing.

Unless the total compensation approaches the $5-billion mark, Canadians have every right to remain skeptical and upset with the food industry. The current settlement is a step in the right direction, but it falls short of addressing the full extent of the damage caused by this prolonged price-fixing scheme.

» Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University.