Canada Bread price-fixing: a cautionary tale of how unethical business conduct can erode consumer confidence

In June, Canada Bread Co Ltd - which was acquired by Grupo Bimbo in 2014 - pleaded guilty to four counts of price-fixing​​ under the Competition Act.

It admitted a senior executive had arranged to increase prices for various bagged and sliced bread products with executives at its main competitor, Weston Foods (Canada) Inc.

The price-fixing scheme ​​- touted as ‘one of the most notorious price-fixing conspiracies in Canadian retail history’ - resulted in two price increases, in 2007 and again in 2011, according to Competition Bureau Canada.

At the time, Weston Foods was controlled by George Weston Limited, which also operates Canada’s largest retailer, Loblaw Companies Ltd. (In 2021, Weston offloaded the entire bakery business for an aggregate value of $1.57bn.)​​

While Weston and Loblaw admitted to their role in the price-fixing arrangement,​​ the bureau granted them immunity​​ in exchange for their cooperation.

“In March 2015, we uncovered information that raised concerns,”​ said Galen G. Weston, chairman and CEO of George Weston and Loblaw.

“We immediately reported what we had found to the Competition Bureau and have been cooperating fully with the Bureau since.”​

Committed to maintaining the trust of consumers

Grupo Bimbo, too, said it had fully cooperated with the investigation, handing over documents that were not seized during the bureau’s raid. The offences actually happened pre-Bimbo’s ownership, when Canada Bread was majority owned and controlled by Maple Leaf Foods.

In exchange for Canada Bread’s cooperation, Ontario Superior Court Judge Maureen Forestell set the fine below the maximum, but at CA$50m it is still the highest price-fixing fine imposed by a Canadian court.

In court documents, Bimbo said it only learned about the price-fixing activity after the Bureau executed a search warrant against Canada Bread in 2017.

“It is crucial to highlight that Grupo Bimbo was not aware of - nor did due diligence uncover - the conduct prior to its acquisition of the company,”​ the Mexican bakery giant said in a statement.

“It was only in 2017 that Canada Bread’s parent company learned about the conduct.​

“Since then, Canada Bread has provided full and consistent cooperation with the Competition Bureau.​

“Grupo Bimbo is considering all legal options against those responsible for the conduct at issue.”​

It added, “Canada Bread is committed to delivering high quality products and maintaining the trust of our customers. We take great pride that our products are made for Canadians, by Canadians.”​

For its part, Maple Leaf Foods said it was unaware of “any wrongdoing by Canada Bread or its senior leadership during the time that we were a shareholder.”​

The banned list

Now, the Canadian government has banned Canada Bread from bidding on government contracts for 10 years.

Government records show Canada Bread has supplied an assortment of products - from bread and rolls to fruits and vegetables - to the Department of National Defence and Fisheries and Oceans Canada since 2008, in contracts worth millions.

Canada Bread is one of just five companies on the federal government’s list of ‘ineligible and suspended suppliers’ - a programme formed by Public Services and Procurement Canada (PSPC) in 2015 to keep unethical players away from the public purse.

PSPC said the government will not do business with any companies that are convicted of offences like bid rigging, bribery or price fixing.

PSPC spokesperson Jeremy Link said the government is committed in taking action “against improper, unethical and illegal business practices and holding companies accountable for such misconduct.”​

In a statement, Canada Bread said it respects the government’s policy on ineligible suppliers and is “working within such policy.”​

The immunity appears to have kept Weston and Loblaw off the list, since neither company was charged with one of the crimes that makes a supplier ineligible.

Defrauding the public

While this is a major blow for Canada Bread, the reputational damage (for Weston and Loblaw, too) undoubtedly will have tendrils that will last much longer.

Credit rating agency DBRS Morningstar said Canada Bread’s situation is a cautionary tale of how unethical business conduct can “erode consumer confidence”​ and hurt its overall credit risk profile.

Judge Forestell noted “this [effectively] was a fraud on the public. These offences affected millions of consumers.”​

Matthew Boswell, commissioner of competition for the bureau, said fixing the price of bread - “a food staple of Canadian households” - ​is a serious criminal offence.

The bureau continues to investigate alleged price-fixing schemes by other companies, including Metro, Sobeys, Wal-Mart Canada and Giant Tiger Stores.

“Our continuing investigation remains a top priority. We are doing everything in our power to pursue those who engage in price-fixing,” ​added Boswell.