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. 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.
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.
Who would have thought bread was so interesting?
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 consumer.
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 United States.
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 resources).
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 investigation.
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 Leniency Program).
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.