It’s been more than five years since Canada’s Competition Bureau began its investigation into an alleged bread price-fixing scheme involving major grocery chains and bakeries countrywide.
But since then, no charges have been laid and the Bureau hasn’t released conclusions of its probe.
The vice-dean of research in Civil Law at the University of Ottawa says it raises questions about the watchdog’s ability to safeguard consumers or compel companies.
“It’s not clear what’s going on, and I don’t know that the Competition Bureau knows what they need to do to change the incentives,” associate professor Jennifer Quaid told CTV’s Your Morning on Tuesday, also referring to the watchdog’s examination of companies’ profits amid rising food prices.
HOW DID THE ALLEGED PRICE-FIXING OCCUR?
News of bread price-fixing emerged in 2015, when Loblaw alerted the Competition Bureau to its role in an alleged scheme that it claimed caused packaged bread prices to be artificially inflated between 2001 and 2015.
In court documents released in 2018, the Competition Bureau alleged that senior officers at Canada Bread Company Ltd. and George Weston Ltd. communicated with each other to agree to raise bread prices at least 15 times, with increases averaging about 10 cents.
According to the Bureau’s allegations within the court documents, the suppliers allegedly met with retailers to gain consensus approval for the price hikes in practices the watchdog believed continued into 2017.
“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.
Due to its co-operation in the probe, Loblaw received immunity. It also offered $25 gift cards to customers as a form of apology.
WHY HASN’T A CONCLUSION BEEN REACHED?
Now, years into the probe, observers have noticed the investigation is not “following the usual pattern of what’s expected when you grant immunity to one party,” said Quaid.
Typically, one party is provided with immunity and then other conspirators “line up” to make a deal, she explained.
The leniency program with the Competition Bureau usually grants immunity to the first party that comes forward, Quaid said. Subsequent parties will receive leniency in smaller and smaller amounts depending on how quickly they came forward and how many others came forward before they did.
“And whether there is an instigator, as instigators aren’t supposed to get any favourable treatment,” she said. “But the idea is, it’s supposed to precipitate a rush to make deals, and everyone comes forward. That’s not what happened here.”
This is now the challenge of a system that is based on voluntary co-operation, she said.
Since 2017, remediation agreements have been introduced that are meant to help solve crimes involving large companies. But competition offences are excluded from that, said Quaid.
“A remediation agreement actually gives you the chance to avoid a guilty plea, which means you can avoid being barred from tendering in public contracts,” she said. However, that might not be relevant to the bread industry, she said.
The most plausible explanation is that Loblaw has come forward, but the other companies don’t believe enough evidence is present and they are prepared to sit back, she said.
The pace of the bread price-fixing probe is occurring in the shadow of increased public concern over the impact of inflation on food prices, and another current investigation by the Competition Bureau into whether grocery stores are profiting excessively from rising prices.
Using criminal law to ensure companies do not take advantage of customers via prices may not be the best tool and instead, the economic system Canada relies on may need to be examined, said Quaid.
“Something that everyone has to remember is that we don’t set prices generally in Canada. We allow the market to determine prices,” she said.
“If there’s a need to intervene to make sure prices are at a low enough level, that starts to look like a different economic system, that may make some people worried, now the state is deciding what’s an affordable price,” she said.