Last December, Loblaw and George Weston disclosed that
they had participated in an industry-wide bread price-fixing arrangement for
about 14 years but would receive immunity from prosecution by co-operating in
the Competition Bureau’s Immunity Program.
Since then, there has been a flurry of developments and
commentary on the case. This has included a (rather ingenious, I must say)
announcement by Loblaw that it will provide $25 compensation to consumers, an
unsuccessful court proceeding by class action counsel to challenge its offer, the
commencement of several class action lawsuits, denials of participation by
other retailers and media, academic and industry insider commentary.
To me, despite its pedestrian outer crust (sorry, couldn’t
resist), the case is a nearly perfect case study in competition/antitrust
cartels and how the Competition Bureau and other industry players operate in
the competition conspiracy microcosm.
First, the case is a good example of what gets the
Competition Bureau’s interest. While the
Bureau can commence investigations into virtually any product or service
market, bread is one of those mainstream consumer products — like gasoline,
telecommunications, airlines or real estate — that affects just about every
I can only imagine what the Bureau thought when one of
Canada’s leading grocers (or more accurately its counsel — initial Immunity
Program marker calls are made by applicants’ counsel) put in the first call to
the Bureau. Bread, a major grocery chain and a national market make for a bit
of a perfect storm for a competition enforcement agency.
Second, the bread price-fixing case shows the type of
products that are commonly subject to price-fixing agreements — namely,
homogenous products (e.g., commodities such as gasoline, cement, industrial
chemicals, etc.), in which it is difficult to compete other than on price.
Third, and unsurprisingly, class action firms quickly
launched several class cases against Loblaw and other competing retailers. It’s
a basic but important point that the conspiracy provision of the Competition
Act (s. 45) allows both Competition Bureau criminal enforcement and private
damages actions or class actions. Most,
though not all, such cases are commenced as “follow on” cases only after a
party has pleaded guilty or there has already been Competition Bureau or other
enforcement agency enforcement, such as by the Department of Justice in the
The prospect of class actions is an unpleasant reality
for companies considering whether or not to “go in” to the Bureau under its immunity
or leniency programs, given that neither program provides any safe harbour from
potential civil suits.
These various class action challenges will likely at some
point be consolidated and, like all past competition class actions in Canada,
lead to settlements if certified (there has not been, to date, any competition
law class action case decided on the merits yet in Canada). Any such settlements, however, are likely
still years away.
Fourth, the bread case has led to a fairly significant
volume of commentary on what price fixing is, how difficult it is to detect and
enforce, the impacts of price fixing on consumers and how prevalent price fixing
may be in Canada, which has ranged from accurate and insightful to frankly
unfounded and speculative.
For example, in one recent media report, a commentator
stated matter of factly that “there isn’t very much of it” (“it” being price fixing
among firms in Canada), that “at any one time, at any one year, there are 10,
12, 15 cases going on” and that “for every case that gets detected, there are
probably several cases that aren’t” [http://www.cbc.ca/news/business/price-fixing-explainer-1.4489213] Given that price fixing
and other conspiracies among competitors are by their nature conducted in
secret and there are no statistics or sources of information on active cartels,
such speculation on the level that Canadian markets may or may not be
cartelized is simply impossible to state with any certainty.
The reality is we have no idea how many active criminal
cartels are operating in Canada, given, among other things, the lack of
available data and fact that the Competition Bureau in contrast to some other
major jurisdictions such as the United States commences relatively few criminal
cartel cases each year (based, in part, to its smaller budget and more limited
Finally, the case is a very good example of both the
inherent instability of price fixing and other competition cartels and the
Competition Bureau’s Immunity Program. Generallly, in many cartels, at some
point, one of the parties will either internally detect a previously unknown
illegal arrangement or become nervous that the arrangement may either be
discovered or another party will seek immunity from prosecution.
The Bureau’s Immunity Program is a race in that only the
first in party to satisfy all of its requirements will receive full immunity
from prosecution. Loblaw likely had to analyze very quickly whether it was a
potential party to a criminal offence under the Competition Act and, if it was,
the potential civil exposure and impact to its brand and reputation. Once it
made its initial marker call (to secure a place in line in the Immunity
Program), it would have provided detailed proffer information relating to,
among other things, the duration of the cartel, affected products, geographic
markets, other parties and likely effects.
It is also very likely that, once any other parties to
the alleged agreement learned that Loblaw had sought immunity, they would also
be racing to secure second and subsequent places in line in the Bureau’s
Leniency Program, which allows co-operating parties to secure fine discounts in
exchange for pleading guilty to an offence and co-operating with the Bureau’s
If other major price-fixing cases in Canada are any
indicator, such as the ongoing Quebec-gasoline cartel or auto-parts
investigation, what we will likely see in this case in coming months (assuming
the Bureau has sufficient evidence to refer the matter for prosecution) is a
series of negotiated guilty pleas and fines.
It will also be interesting to see whether the Bureau
pursues any directors, officers or employees given its stated commitment over
the past several years to more aggressively seek penalties against individuals
and whether any other products will be added to the investigation (for example,
as a result of other parties seeking “immunity plus” under the Bureau’s
In sum, the bread case is, as I say, a very good
illustration of both how cartel investigations in Canada proceed and some of
the strategy of parties and counsel as a price-fixing case plays out. It is
also a good reminder of the potential risks associated with price fixing and other
conspiracies in Canada and as well as something of a road map to mitigate risk.