16-year price-fixing scheme

Photo: The Canadian Press

At least $1.50 has been artificially baked into the price of a loaf of bread during a 16-year-long bread price-fixing conspiracy involving the country's largest bakery wholesalers and grocery retailers, the federal competition watchdog alleged in court documents released Wednesday.

The Competition Bureau alleges that Canada Bread Company Ltd. and George Weston Ltd.'s senior officers communicated directly to raise prices at least 15 times — with an average increase of 10 cents per loaf passed on to consumers between about 2001 and 2016. The bureau believes the behaviour may have continued into 2017.

According to previously sealed documents, the pattern became colloquially known as the 7/10 convention — with an average seven cent price increase at wholesale and 10 cent price bump for the consumer in stores, resulting in an average margin increase of three cents per loaf for retailers.

The conversations around raising prices on baked goods including bread, buns, bagels, naan, English muffins and tortillas started months before the increase would hit the shelves, according to the documents.

After agreeing on a price increase, the suppliers allegedly met individually with their retail clients — including Loblaw Companies Ltd., Walmart Canada Corp., Sobeys Inc., Metro Inc. and Giant Tiger Stores Ltd. — to get their approval for the price hike. The retailers agreed to the boost on the condition their competitors would follow suit and demanded that the suppliers actively manage the process to ensure all retailers were co-operating, the documents said.

Overwaitea Food Group Ltd., a B.C.-based retailer, is not a target of the investigation, but may have relevant records to the inquiry, according to the documents.

"The alleged conspiracy was a deliberate attempt by management of Canada Bread and Weston Bakeries, along with the retailers, to suppress competition at both the wholesale and retail level and thereby increase the wholesale and retail prices of fresh commercial bread in Canada," wrote Simon Bessette, a senior competition law officer with the Competition Bureau's cartels and deceptive marketing practices branch.

The watchdog said it was approached by informants from Loblaw Companies Ltd. in 2015 and filed the affidavit late last year with evidence it had collected so far in its investigation in order to convince a judge to grant it search warrants, which it executed on Oct. 31. No charges have been filed and none of the allegations have been proven in court.

Between 2001 and 2015, the consumer price index for bread, rolls and buns rose 96 per cent, according to Statistics Canada. During that same time frame, CPI for all food increased about 45 per cent.

The Competition Bureau believes the wholesalers and grocers committed indictable offences under the Competition Act.

In December, Loblaw and George Weston admitted they sparked the investigation when they approached the watchdog after becoming aware of an allegedly industry-wide arrangement to co-ordinate some bread prices.

The two companies received immunity in exchange for their co-operation.