Canadian food retailers George Weston Ltd. and Loblaw Companies Ltd admitted Dec. 19 to their involvement in a bread price-fixing scheme spanning 13 years and revealed that they have been cooperating with Canadian authorities in an investigation and will receive immunity.
The two companies said in a joint statement that they first discovered the price-fixing arrangement in March 2015 and immediately alerted the Canadian Competition Bureau. George Weston is the parent company of Loblaw.
The scheme allegedly involved the coordination among a group of companies that regularly increased the wholesale and retail prices for certain packaged bread products from late 2001 to March 2015, according to their statement.
The food retailers alleged that the participants in the arrangement included not only employees at Loblaw stores and the Weston Bakeries division of George Weston, but also those at other "major grocery retailers and another bread wholesaler."
The George Weston and Loblaw employees involved in the scheme have been let go, the companies said.
"This sort of behavior is wrong and has no place in our business or Canada's grocery industry," said Galen Weston, chairman and CEO of both companies. "This never should have happened."
Loblaw and George Weston said the Competition Bureau has conducted searches under court orders, which remain sealed. The companies stated that their disclosure of the scheme and any details related to the investigation are based solely on their own knowledge of the bureau's investigation, one in which they said they have been cooperating as an "immunity applicant" since March 2015. However, the retailers said they did receive the confidential court filings by the bureau on Dec. 19 and have reviewed them.
It is not the first news of the investigation into price-fixing in Canada's food industry. The two companies confirmed Oct. 31. that they knew about the investigation by Canadian authorities.
Class-action lawsuits have also been filed against Loblaw, George Weston and several other major retailers over the bread price-fixing scheme, the companies said. Loblaw's exposure is expected to be larger than that of George Weston.
Loblaw said it will take a provision in the current quarter related to its card program, which is expected to cost between C$75 million and C$150 million, depending on customers' response. It will also serve as "an offset against civil liability" that Loblaw might encounter.
Both food retailers may take a charge within the time they can properly estimate company damages or until the issue is resolved. The companies said it should not be considered as part of the estimate for damages.
The two retailers said they are cooperating with the Canadian bureau and will not face criminal charges or penalties because they admitted to participating in the scheme.
"Neither of the companies believes that the ultimate resolution of such legal proceedings will have a material adverse impact on its financial condition or prospects," they said. George Weston expects that its dividend and dividend policy will not be affected, and Lowblaw expects no impact on its dividend, dividend policy or share buyback plan.
Loblaw and George Weston said they are taking several steps to address the anti-competitive behavior, including offering customers a $25 Loblaw card, which can be used to purchase items at Loblaw grocery stores across Canada. Customers can register for a card on LoblawCard's online portal beginning Jan. 8, 2018.
Both companies have strengthened their compliance programs, including: implementing measures such as establishing a compliance office with a chief compliance officer that reports directly to the board; making all employees of both companies go through a compliance retraining program with updates and monitoring; and implementing the international standard for compliance management program called ISO 19600.