Toronto – George Weston Ltd. and Loblaw Companies Ltd. revealed Tuesday they participated in an industry-wide bread price-fixing arrangement over several years but will receive immunity after alerting the Competition Bureau early in its investigation.
In a news release, George Weston and Loblaw announced actions they have taken to address their role in the arrangement and to prevent it happening again.
The Competition Bureau has been investigating a price-fixing arrangement involving the co-ordination of retail and wholesale prices of certain packaged bread products over a period extending from late 2001 to March 2015.
Under the arrangement, the release said, the participants regularly increased prices on a co-ordinated basis. The participants included Loblaw and the Weston Bakeries division of George Weston as well as other major grocery retailers and another bread wholesaler, some of which have acknowledged being searched by the bureau as part of its ongoing investigation.
The searches were conducted under court filings made by the Competition Bureau that, though sealed under a court order, were made available on Dec. 19 to the companies and other affected parties for review.
Galen G. Weston, chairman and chief executive officer of both companies, commented on the investigation, in which they have been co-operating as an immunity applicant since March 2015.
“This sort of behaviour is wrong and has no place in our business or Canada’s grocery industry,” Weston said. “This should never have happened.”
The companies announced four steps they have taken four steps in response.
First, upon discovering this anti-competitive behaviour in March 2015, the companies immediately reported it to the Competition Bureau and they have been co-operating fully with the bureau. In doing so, the boards of directors initiated a thorough investigation to get to the bottom of what happened, address it and report to the bureau. During the period in which the companies were awaiting the bureau’s determination as to whether it would proceed against other parties, Loblaw and Weston were required under competition legislation to keep their co-operation confidential.
Second, the employees responsible for Weston Bakeries’ and Loblaw’s role in this arrangement are no longer with the companies.
Third, Loblaw is offering customers a $25 Loblaw card, which can be used to purchase items sold in Loblaw grocery stores across Canada. Starting on Jan. 8, 2018, Loblaw customers can visit www.LoblawCard.ca to register and, if eligible, receive a card.
Fourth, the companies have enhanced their compliance programs. They established an independent compliance office to oversee implementation of enterprise-wide policies; put sales and marketing personnel at Weston, merchants and store managers at Loblaw and senior leaders at George Weston, Weston Bakeries and Loblaw intensive compliance retraining and certification, with ongoing updates and monitoring; and began implementation of ISO 19600 for competition compliance program certification, which will provide independent, third-party validation.
Class action lawsuits have been commenced against the companies as well as a number of major grocery retailers and another bread wholesaler on the basis of the searches initiated by the Competition Bureau. Those lawsuits and others are expected to proceed on the basis of the detailed information in the court filings.
The companies said they do not expect the ultimate resolution of the legal proceedings will have a material adverse impact on its financial condition or prospects. They expect that Loblaw’s exposure will be somewhat larger than George Weston’s because the majority of the overcharge accrued to retailers.
Loblaw will take a provision this quarter in relation to the card program, which is expected to cost between $75 and $150 million depending on customer take-up and to be an offset against civil liability Loblaw may face in this matter. In addition to the card program, each of the companies may take a charge in the period in which they can reliably estimate damages or the matter is ultimately resolved. The companies said the card program cost should not be viewed as an estimate of damages.
According to the release, George Weston anticipates no impact on its dividend or dividend policy. Loblaw anticipates no impact on its dividend, dividend policy or share buy-back plan.
“As a result of their admission that they participated in the arrangement and their co-operation with the Competition Bureau’s investigation, the companies will not face criminal charges or penalties,” the release said.
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