At the beginning of the summer, Canada’s Competition Bureau won a court judgement that some view as groundbreaking. Canada Bread was fined $50 million for its involvement in the fixing of bread prices with competitors over the span of 15 years.
It is indeed a lengthy saga, one that tells the tale of collusion, years of investigations by the Competition Bureau, and the granting of immunity to corporations that tipped off the bureau and cooperated in the investigations.
The Competition Bureau launched its investigation into bread price-fixing in 2015, and during the course of the eight-year investigation the bureau named Canada Bread, Loblaws, George Weston Ltd., and several other companies that might be involved.
Price-fixing, most commonly, is when two or more competitors deliberately set a price for a product or service that they should each be selling competitively. In this way, the companies manage to make more profits through price increases without sacrificing their market share. It’s an all-too-common practice, and one which is also very difficult to prove.
The $50 million dollars fine charged to Canada Bread is the highest price-fixing fine imposed by a Canadian court to date.
In 2017 George Weston Ltd. and Loblaw Companies Ltd. revealed their involvement in price-fixing to the Competition Bureau. Because these corporations tipped off the Bureau about the decades-long, industry-wide bread price-fixing scheme, and because of their on-going cooperation in the subsequent investigation, Loblaw and Weston received immunity and were not charged or fined.
The fixing of bread prices among competitors began as early as 2001 and continued for close to15 years, culminating in the $50 million dollar fine charged to Canada Bread, which was bought by Grupo Bimbo in 2014, but owned by Maple Leaf Foods during the period involved in the collusion.
Between 2001 and 2015, across the bread industry, prices were fixed several times, sometimes by as much as $0.14, and totalled more than $1.50 per item over the course of the 15 years. After being tipped off by Weston and Loblaw companies, the Competition Bureau executed search warrants against Canada Bread and numerous companies, including Weston, Loblaw, Metro Inc., Sobeys Inc., Walmart Canada, Giant Tiger Stores Ltd., Overwaitea Food Group and Canada Bread. The investigation into some of these companies is ongoing.
Price-fixing is hard to prove — so hats off to the Competition Bureau for its work on this. But I have to say, it seems to me that the fines imposed likely pale in comparison to the profits made over 15 years. Why should corporations obey competition laws, when it is likely that they won’t get caught, and even likelier that the fines will just be seen as the cost of doing business!
And then, if you squeal on yourself, well the leniency allowed for cooperation might just get you off completely. Of course, it takes years to investigate and to have even a solid case wend its way through the courts.
There are a lot of holes in the ability to curtail price fixing… and it is likely happening much more than we actually know. And then there is the increasing costs of food more generally.
A previous rabble.ca column – “Who is taking the bread?” analyzes the rising food prices in recent years. The question becomes: how much competition really exists in our food industry?
When it comes to the food industry, there is the illusion of competition. While bread is a staple and price-fixing in that market is indeed a very serious offense, food is also a necessity.
What of the lack of competition within the food production, distribution and retail sectors of the food industry? Is lack of competition the same, and even worse, than price fixing. When do we begin applying laws and regulations related to corporate concentration in the food industry?
Most of Canada’s food stores are owned by a handful of grocery giants – namely Loblaws, Sobeys, and Metro – and together these corporate food giants tallied more than $100 billion in sales and $3.6 billion in profits last year, according a recently released report by the Competition Bureau which investigated whether corporate concentration at the retail level is contributing to soaring levels of food-flation. Published on June 27, the report called “Canada needs more grocery competition,” notes that when the Competition Act came into place in 1986, there were at least eight major grocers in Canada. In 2023, that number has dwindled to just five. The Competition Bureau report makes several recommendations and urges the government to make it easier for more players to enter the market.
Also in late June, the Federal Standing Committee on Agriculture and Agri-Food released its report on the rising costs of food in Canada.
Titled “Grocery affordability: Examining rising food costs in Canada”, the report includes 13 wide-ranging recommendations including this ninth recommendation:
“The Committee recommends that, if the Competition Bureau finds evidence in its upcoming market study that large grocery chains are generating excess profits on food items, the Government of Canada should consider introducing a windfall profits tax on large, price-setting corporations to disincentivize excess hikes in their profit margins for these items.”
All that to say that there is a huge need for an overhaul in the food sector more generally and that both of these reports offer some good suggestions on how we might grapple with some of the issues.
Meanwhile – $50 million in fines seems to be a pittance given the profits made over those 15 years. And where will that $50 million dollars go? The fines imposed may be issues that are looked at when the federal government reviews the Competition Act in upcoming Parliamentary sessions.
Might I suggest that the more than 4,750 food banks across the country could use donations — $10,000 or so would be nice — but if the fines were doubled it would actually mean more like $20,000 for each of those food banks. That donation won’t solve the problem, but at least it will go toward those who could least afford the price-fixing that has occurred.
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Nick Seebruch, editor
