So much for potential ongoing collusion?
Metro files lawsuit against Loblaw for reputational damage
Daniel Johnson , BNN Bloomberg
Metro Inc. is suing Loblaw's parent company and its subsidiaries for reputational damages, alleging it was falsely implicated by its competitor in a bread price-fixing conspiracy.
In a claim filed in Ontario Superior Court on Tuesday, Metro denied conspiring with other companies to fix the price of packaged bread in Canada and said the market was “competitive” during the time period in question.
The bread price-fixing scheme that first came to light in 2017, when the Competition Bureau announced its investigation into the matter.
Weston Foods and Loblaw Cos. Ltd., both subsidiaries of George Weston Ltd. at that time, admitted their participation in an “industry-wide price-fixing arrangement” involving the co-ordination of retail and wholesale bread prices. Those companies received immunity from prosecution in exchange for their co-operation with the Competition Bureau’s investigation.
In its court claim filed this week, Metro said it is seeking damages from the Loblaw companies for making statements to the public and to the competition commissioner that suggest its major competitors – including Metro – were involved in the criminal scheme.
The document alleged that Loblaw made false statements to promote its own business “at the expense” of its competitors.
Metro’s claim against George Weston Limited, Loblaw Companies Limited and Weston Foods (Canada) Inc. alleges that the company suffered “significant and unjustifiable damage” to its reputation as a result of its competitors’ statements, and argued Loblaw is liable to Metro.
None of the allegations have been tested in court, and Metro has not been found to have had any involvement in the price-fixing scheme.
“The Weston Defendants ultimately determined that they could not risk having Loblaw be the sole retailer facing the liability and reputational risks that would flow from its self-reporting to the Commissioner of Competition and subsequent public disclosure,” the court document read.
“Instead … Weston Defendants conspired with one another to falsely represent to the public and to the Commissioner of Competition that other retailers and their parent companies, including Metro, were participants in the conspiracy to which they were apparently confessing.”
Metro’s lawsuit alleges that Loblaw violated section 52 of the Competition Act, which forbids false or misleading public statements made for the purpose of promoting the supply or use of a product.
A spokesperson for Loblaw denied Metro’s allegations in a statement to BNNBloomberg.ca.
“Metro’s allegations are simply ridiculous and utterly untrue, as will be made clear in court,” Catherine Thomas said in a Wednesday email.
BREAD PRICE FIXING: WHAT WE KNOW
In June, Canada Bread Co. was fined $50 million – the largest price-fixing fine in Canadian history – after it pleaded guilty to its role in the scheme that increased bread prices in Canada for years.
The bread maker said in its plea that it conspired with Weston Foods (Canada) Inc. to raise prices for a series of bread products, according to the Competition Bureau. The scheme between the two companies spurred two price increases, one in 2007 and another in 2011.
The Competition Bureau said in June that it had ongoing investigations into other retail price-fixing at other food companies including Metro, Sobeys, Walmart Canada, Giant Tiger, and Maple Leaf Foods.
The competition watchdog has ongoing investigations into other retail price-fixing at other food companies, the agency confirmed to BNNBloomberg.ca on Wednesday, though no conclusions have been made in those investigations.
“The Competition Bureau continues to investigate alleged bread price-fixing by competitors, including Metro,” bureau spokesperson Yves Chartrand said in an email. “There is no conclusion of wrongdoing at this time.”
METRO’S RESPONSE
Metro’s legal claim filed in Ontario court this week is in part a response to a class action filed by consumers in Ontario related to the price-fixing scheme.
Chartrand said the Competition Bureau is “aware of ongoing private actions relating to alleged bread price-fixing in Canada,” but it is not a party to any private lawsuits related to the matter.
Metro argued in its legal claim that Weston companies and Canada Bread held “substantial market share” over the supply of packaged bread, “and thus maintained an ability to influence both wholesale pricing and retail pricing” during the period in question.
Metro claimed that it was limited in its options to respond to price increases from bread suppliers, but it referred to agreements with bread suppliers, including Canada Bread and Weston Bakeries, involving promotional rebates, referred to as “promotional spend.”
Those rebates were “vigorously negotiated,” Metro said.
It claimed in the court document that when responding to a “coordinated price increase” from suppliers, Metro would negotiate increased promotional spend to offset price increases. The company’s claim argued that this “had the effect of lowering prices for consumers due to Metro Ontario consistently advocating for increased promotional spend in the form of discounts and rebates.”