Loblaw and parent company George Weston have agreed to pay a class-action settlement of $500 million for a 14-year scheme to “artificially” raise the price of bread.
The lawsuits, which came to light in late 2017, involve some of Canada’s largest grocers and claim that they secretly arranged price increases with suppliers, an illegal practice known as price-fixing.
“For our part in this industry-wide arrangement that we discovered and self-reported in 2015, we sincerely apologize,” Loblaw spokesperson Catherine Thomas wrote in a statement.
“We know we have more to do to regain the trust of our customers and we’re committed to doing that.”
Pending court approval, the settlement will have George Weston pay $247.5 million in cash to eligible customers, and Loblaw pay $252.5 million, of which $96 million was previously paid under the $25 Loblaw Card program.
The lawyers representing the plaintiffs say it is the largest antitrust settlement in Canadian history.
It’s “a significant milestone,” said Jay Strosberg, managing partner of Strosberg Wingfield Sasso LLP, and “sends a strong message that conduct that harms consumers will not be tolerated.”
Emily Johnson, who organized a boycott against Loblaw in May with the support from thousands of Canadians, worries that a history of malpractice, including price-fixing behaviour, could translate into a failure from the company to uphold the Grocery Code of Conduct — a set of new rules for grocery retailers about fees they can charge suppliers, which has the potential to lower the price of groceries.
She said that while the settlement is a step “in the right direction,” there have been no talks of ending the boycott.
If anything, “it’s continuing to renew the resolve to boycott overall,” she said. “I still can’t afford my groceries.”
Both Loblaw and George Weston have admitted to participating in the price-fixing scheme and received immunity from prosecution from the Competition Bureau.
The price increases were, on average, about 10 cents per product per year, with seven cents going to the suppliers and three cents to the retailers — a behaviour referred to informally as “the 7/10 convention,” according to court documents.
The suits were filed on behalf of anyone residing in Canada as of Dec. 31, 2021, who purchased packaged bread indirectly or directly from one of the retailers between November 2001 and December 2021.
Retailers Canada Bread, Sobeys, Metro, Walmart Canada and Giant Tiger will be taken to trial, said Strosberg, and the allegations have not been proven in court.
Sobeys, Metro, Walmart and Giant Tiger deny the claims of an “industry-wide” conspiracy, and plan to defend their positions against the class actions.
Canada Bread, which was fined $50 million by the Competition Bureau last year for arranging prices with Weston Foods — a subsidiary of George Weston — declined to comment.
On Thursday, Loblaw also reported its second-quarter financial results. Revenue was up 1.5 per cent to $13.9 billion from $13.7 billion.
Profits, however, declined to $457 million, a decrease of $51 million or 10 per cent. In a conference call, the company said this was mainly explained by charges related to the settlement of the class-action lawsuits, adding that the payouts will not impact prices for consumers at both Loblaw and George Weston, nor will they impact dividends and its financial outlook.
Food retail sales increased by 0.2 per cent, compared with 6.1 per cent last year, while Shoppers Drug Mart sales increased by 1.5 per cent, compared with 5.7 per cent last year, with pharmacy and health-care services leading growth.
Loblaw CEO Per Bank said in the call that the overall financial impact of the May boycott was hardly felt.
