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Loblaw says sorry for fixing bread prices for 14 years with a $25 gift card

This is the same company that complained about the minimum wage increase

by Vanmala Subramaniam
Dec 20 2017, 4:19pm

Grocery behemoth Loblaw Cos. Ltd, owned by the billionaire Weston family, has admitted to colluding with other big grocery chains to fix the price of bread. This scheme has been ongoing since 2001 — Loblaw claims it alerted the Competition Bureau in March 2015, immediately after discovering the collusion, upon which the price-fixing stopped.

Weston Bakeries, a major Canadian bread producer also owned by the Weston family acknowledged that they too had participated in the price-fixing scheme, coordinating bread price increases on a regular basis.

"This sort of behaviour is wrong and has no place in our business or Canada's grocery industry," Galen G. Weston, chairman and chief executive office of both Loblaw and George Weston, said in a statement late Tuesday.

The statement also claimed that the employees who orchestrated this illegal oligopolistic scheme are no longer employed by either company. It is unclear as to whether senior executives at George Weston Ltd., the parent company of both Weston Bakeries and Loblaw were aware of the scheme, or if it was merely an arrangement between lower level employees at both companies.

In a conciliatory move of sorts, Loblaw has promised to offer $25 gift cards to customers who paid an inflated price for bread. All it would require is for shoppers to log on to Loblawcard.ca starting January 8, enter an email address, declare that they are of age, and that they did indeed make a bread purchase before March 1, 2015 of yet unnamed brands, in specific (yet to be named) Loblaw locations across the country.

Loblaw is claiming that the “gesture” could cost the company as much as $150 million.

But 2017 was more than a good year for the grocery chain — in the third quarter of this year, Loblaw raked in a profit of $883 million, a 110.7 percent increase from the year prior. In the previous quarter, the company earned $358 million, a good 126.6 percent more than the second quarter of 2016.

Under the Competition Bureau’s “immunity and leniency” program, Loblaw and Weston Bakeries will not be punished for the price-fixing scheme, since they came clean as soon as found out about the collusion. The penalty for price-fixing schemes include fines of up to $24 million, imprisonment of a maximum of 14 years, or both, according to the Bureau.

But the investigation continues — Metro, Sobeys and Canada Bread have all been accused of being part of the same price-fixing scheme, although all say they are cooperating with the investigation. In an email to the Globe and Mail on Tuesday night, Sobeys said it has “no reason to believe that any of its employees have been involved in price-fixing”.

Earlier this year, Loblaw CEO Galen G. Weston expressed concern over Ontario’s minimum wage hike, claiming it would cost the company “an additional $190 million in expenses” in 2018. Ontario is set to raise minimum wage from $11.60 an hour to $14 by January 1, 2018, and then to $15 an hour the following year. At those wages, an Ontario-based Loblaw employee would take home $31,200 in before-tax income.

At current estimates, the Weston family is worth $10.4 billion. Galen G. Weston’s 2016 personal compensation was estimated to be just over $5 million.

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