The bread price scandal, which has been going on since 2001, continues to leave a bitter taste in consumers’ mouths. Despite the recent announcement that Loblaw and George Weston will settle a class action lawsuit by compensating Canadians to the tune of approximately $500 million, the case is far from over.
The scandal began when Loblaw and Weston Bakeries, then owned by George Weston, admitted to conspiring with other major grocers and Canada Bread to fix bread prices between 2001 and 2015. This price-fixing scheme, by our calculations, cost consumers between $4.3 billion and $4.9 billion in inflated bread prices over 14 years.
While the $500 million settlement may seem substantial, it pales in comparison to the true cost of this scheme.
In 2017, when Galen Weston first acknowledged his companies’ involvement in the scandal, about 3.84 million Canadians signed up to receive a $25 Loblaw gift card. That amounted to about $96 million in compensation. With the new compensation, Canadians should expect an additional $400 million once the courts approve the settlement.
Meanwhile, Loblaw’s recent financial performance points to modest but notable growth in the retail sector. The company’s total revenue in the second quarter was $13.9 billion, an increase of $209 million or 1.5%.
Retail sales rose $187 million, or 1.4%, with Loblaw’s food division seeing a 0.2% increase in same-store sales, despite a national decline in food and beverage sales of nearly 1% since January, according to Statistics Canada.
In other words, the alleged boycott of Loblaw had no impact on the company’s finances. However, the frustration is understandable, given the lack of protection against such behavior.
The Competition Bureau has been investigating the bread price-fixing scandal for nine years. So far, Loblaw, Weston Bakeries and Canada Bread (which paid a record $50 million fine last year) have admitted guilt. Meanwhile, Walmart Canada, Sobeys (IGA), Metro and Giant Tiger deny their involvement in the affair, but are still under investigation. It is imperative that this investigation be concluded quickly.
Sadly, the Competition Bureau has not played the role that might have been expected, as consumers will receive additional compensation only through the efforts of lawyers and the courts.
This amount represents only about 10% of the $5 billion that Canadians have overpaid for bread over 14 years. The public outrage is fully justified.
Furthermore, no executive has been arrested, charged, or convicted for price fixing. In the United States, such behavior would be severely punished. For example, Chris Lischewski, former CEO of Bumble Bee Foods, who was recently released from prison, was sentenced to 40 months in prison for fixing the price of canned tuna over a three-year period.
In contrast, former Loblaw CEO Galen Weston was granted immunity from the Competition Bureau, despite admitting to fixing bread prices for 14 years.
Unless the total compensation approaches $5 billion, Canadians have every reason to remain skeptical and angry at the food industry. The current settlement is a step in the right direction, but it is not enough to address the magnitude of the damage done.