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How Unethical Business Conduct Can Deteriorate Consumer Confidence: A Cautionary Tale

How Unethical Business Conduct Can Deteriorate Consumer Confidence: A Cautionary Tale Bread, Canada bread company, Competition Bureau Canada, Consumer trust, Editor's Choice, George weston foods, Grupo Bimbo, Ingredients, Loblaw, Manufacturers, Markets, Price fixing, Regulation & Safety Food and Beverage Business Unethical Business COnduct

In June, Canada Bread Co Ltd – now owned by Grupo Bimbo – admitted to four counts of price-fixing under the Competition Act. The company pleaded guilty to arranging price increases for various bagged and sliced bread products with its main competitor, Weston Foods (Canada) Inc.

According to the Competition Bureau Canada, this price-fixing scheme, described as one of the most notorious in Canadian retail history, led to two price increases in 2007 and 2011. At the time, Weston Foods was controlled by George Weston Limited, the parent company of Loblaw Companies Ltd.

Although Weston and Loblaw admitted their role in the price-fixing arrangement, they were granted immunity by the bureau in exchange for their cooperation. Galen G. Weston, chairman and CEO of George Weston and Loblaw, stated that they reported the wrongdoing to the Competition Bureau and have been fully cooperating with the investigation.

The compliance of Grupo Bimbo and Canada Bread with the investigation resulted in a fine of CA$50m, the highest price-fixing fine imposed by a Canadian court. Grupo Bimbo emphasized that they were unaware of the price-fixing activity prior to acquiring Canada Bread and are considering legal action against those responsible.

In a separate development, the Canadian government has banned Canada Bread from bidding on government contracts for ten years. This action was taken as part of the government’s efforts to prevent unethical players from accessing public funds.

The reputational damage caused by this price-fixing scandal will have long-lasting effects for Canada Bread, Weston, and Loblaw. Credit rating agency DBRS Morningstar highlighted how unethical business conduct can erode consumer confidence and impact the credit risk profile. The judge noted that these price-fixing offenses were effectively a fraud on the public and affected millions of consumers.

Moving forward, the Competition Bureau continues to investigate alleged price-fixing schemes by other companies in the food industry. The bureau has identified Metro, Sobeys, Wal-Mart Canada, and Giant Tiger Stores as potential subjects of the investigation.

It is worth mentioning that Grupo Bimbo acquired Canada Bread in 2014 for CA$1.83 billion. Canada Bread operates independently and employs 4,800 people across 17 bakeries in the country, producing packaged fresh bread and bakery products under brand names like Dempster’s and Villaggio.

The former executive responsible for the price-fixing scheme is no longer with the company.

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