In the United States, numerous poultry and pork producers in recent years have been accused of collusion in an effort to drive up the price of their products.
North of the border, one of Canada’s largest producers of both proteins is being investigated for alleged involvement in another sort of collusion investigation.
Maple Leaf Foods has had a search warrant executed against it, as well as Canada Bread Company, Weston Foods, Loblaw Companies, Metro Sobeys, Wal-Mart Canada, Giant Tiger, and Overwaitea Food Group Limited, according to a press release from Competition Bureau Canada.
Maple Leaf Foods was the majority stakeholder in Canada Bread during the times when the alleged conspiracy to raise bread prices took place, which according to the bureau occurred in 2007 and 2011. Canada Bread is now owned by Mexico-based Grupo Bimbo, and it has been since 2014.
Allegations and court action
According to the bureau, Canada Bread Company arranged with Weston Foods to increase prices for various sliced and bagged bread products. After an alleged agreement was reached, which is reported to have led to wholesale price increases for grocers in 2007 and 2011, which translated into retail price increases.
In 2017, Weston Foods and Loblaw Companies announced that they had participated in what they referred to as an industry-wide price-fixing arrangement, involving the coordination of retail and wholesale bread prices. In exchange for their full cooperation with the bureau’s investigation, both companies and their parent company, George Weston Limited (GWL), were granted immunity from prosecution.
Then, in June, Canada Bread pleaded guilty for charges related to price-fixing, and was fined CA$50 million (US$37 million). The bureau stated that Canada Bread was granted leniency in return for cooperating with the investigation, yet in the same press release, the fine against Canada Bread was described as the “highest price fixing fine imposed by a Canadian court to date."
Canada Bread’s case was heard in the Ontario Superior Court.
Maple Leaf Foods maintains innocence
Michael McCain executive chairman of Maple Leaf Foods, in a blog published on the company’s website on August 29, addressed the allegations, even though he acknowledged lawyers have urged him “to remain silent because of potential future litigation.”
But McCain wrote that he wanted to set the record straight, adding that “everything we do at Maple Leaf is firmly rooted in our values,” and those values require those within the company to “act lawfully, responsibly and with integrity.”
McCain, who retired as Maple Leaf Foods’ CEO in May, addressed that headlines have referenced an internal email on his behalf in 2007, and that email has been used as evidence that he was involved in “some sort of pricing conspiracy.”
“I am deeply concerned at how my words have been misconstrued and misunderstood in a way that has contributed to some people questioning their trust in our industry and in our company.”
McCain described his intentions with that email in question.
“It was a note sent to some members of the executive teams at both Maple Leaf Foods and Canada Bread when we were a shareholder. I was relaying a conversation that I had with a senior executive of a retail customer regarding a range of business activities, including category strategies, that the customer thought had been successful. My practice was to spend as much time as I could speaking to customers about strategy,” McCain wrote.
“What does this mean? The activities described in the email reflect basic category management, a very common practice used for decades in all food and consumer packaged goods businesses in Canada and elsewhere. Retailers expect their suppliers to provide value by making recommendations on how to effectively merchandise their products. Category management includes a combination of product innovation, stocking, product mix, placement, displays, promotional strategies and pricing, to maximize consumer experience, sales, profitability and operational efficiency. It is a routine and lawful part of retail merchandising.
“Talking about 'pricing' or 'managing category profit up' does not mean that something illegal was happening. At the end of the day, while a supplier like us can make recommendations, every retailer makes its own decisions on what it is going to sell, how it is going to sell those products, and the prices it charges.”
McCain added that the email was not a communication with any competitor, nor did it describe a communication with a competitor, nor was it about price fixing.
McCain says Canada Bread did nothing wrong
McCain also questioned why Canada Bread chose to plead guilty in the case.
“As for Canada Bread, what I can say with confidence is that the allegations simply do not line up with what I observed while we were a shareholder, nor do they line up with what we found in our records. We continue to believe that the pricing practices of Canada Bread were responsible, consistent with industry practice, and above all, lawful,” McCain wrote.
McCain concluded, saying regardless of any admissions of guilt made by Canada Bread, GWL or its subsidiaries, Maple Leaf Foods maintains its innocence, and “will defend allegations to the contrary as vigorously as humanly possible.”