a warning about how unethical business conduct can erode consumer trust
In June, Canada Bread Co Ltd – acquired by Grupo Bimbo in 2014 – pleaded guilty to four counts of price fixing under the Competition Act.
She admitted that a senior executive arranged to raise prices on various bagged and sliced bread products with executives of its main competitor, Weston Foods (Canada) Inc.
The pricing system- billed 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 the 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 sold its entire bakery business for a total value of $1.57 billion.)
While Weston and Loblaw admitted their role in the price-fixing conspiracy,office granted them immunity in exchange for their cooperation.
“In March 2015, we discovered information that raised concerns” said Galen G. Weston, President and CEO of George Weston and Loblaw.
“We immediately reported what we discovered to the Competition Bureau and have been fully cooperating with the Bureau ever since. »
Committed to maintaining consumer trust
Grupo Bimbo also said it cooperated fully with the investigation, handing over documents that were not seized during the office search. The violations occurred before Bimbo’s arrival, when Canada Bread was majority owned and controlled by Maple Leaf Foods.
In exchange for Canada Bread’s cooperation, Ontario Superior Court Justice Maureen Forestell set the fine lower than the maximum, but at C$50 million, it is still the fine the highest imposed by a Canadian court for price fixing.
In court documents, Bimbo said he only became aware of the price-fixing activity after the Bureau executed a search warrant against Canada Bread in 2017.
“It is crucial to emphasize that Grupo Bimbo was not aware of – and was not brought to light through due diligence – the conduct prior to the acquisition of the company,” said the Mexican baking giant in a statement.
“It was not until 2017 that Canada Bread’s parent company became aware of this behavior.
“Since then, Canada Bread has cooperated fully and constantly with the Competition Bureau.
“Grupo Bimbo is considering all legal options against those responsible for the behavior in question.”
He added, “Canada Bread is committed to providing high-quality products and maintaining the trust of our customers. We are very proud that our products are made for Canadians, by Canadians.
For its part, Maple Leaf Foods declared that it was not aware “any wrongdoing by Canada Bread or its senior officers during the period we were a shareholder.”
The list of prohibited
Today, the Canadian government banned Canada Bread from bidding on government contracts for 10 years.
Government documents show Canada Bread has supplied an assortment of products – from bread and rolls to fruits and vegetables – to the Department of National Defense and Fisheries and Oceans Canada since 2008, under contracts worth few millions.
Canada Bread is one of five companies on the federal government’s list of “inadmissible and suspended suppliers” – a program created by Public Services and Procurement Canada (PSPC) in 2015 to keep unethical actors out of public funds .
PSPC said the government will not do business with any company found guilty of offenses such as bid rigging, bribery or price fixing.
PSPC spokesperson Jeremy Link said the government was committed to action. “against improper, unethical and illegal business practices and holding companies accountable for such misconduct. »
In a statement, Canada Bread said it respected the government’s policy regarding ineligible suppliers and that it “work within the framework of such a policy”.
Immunity appears to have kept Weston and Loblaw off the list, since neither company has been charged with any of the crimes that make a supplier ineligible.
Fraud the public
While this is a major blow to Canada Bread, the reputational damage (to Weston and Loblaw as well) will undoubtedly have repercussions that will last much longer.
Credit rating agency DBRS Morningstar said Canada Bread’s situation serves as a warning about how unethical business conduct can “eroding consumer confidence” and harmed its overall credit risk profile.
Justice Forestell noted “It was (in fact) a fraud on the public. These offenses affected millions of consumers.
Matthew Boswell, the bureau’s competition commissioner, said that bread pricing: “a staple food for Canadian households” – is a serious criminal offense.
The office continues to investigate alleged price-fixing schemes by other companies, including Metro, Sobeys, Wal-Mart Canada and Giant Tiger Stores.
“Continuing our investigation remains a top priority. We are doing everything in our power to pursue those who engage in price fixing. » » added Boswell.
Canada Bread was acquired by Grupo Bimbo in 2014 for CA$1.83. It operates as an independent business unit and currently has a workforce of 4,800 producing fresh packaged bread and baked goods – under major brands like Dempster’s and Villaggio, among others – in 17 bakeries across the country.
The Canada Bread executive responsible for setting prices is no longer with the company.
