Mexico’s Grupo Bimbo has initiated a significant legal action against Maple Leaf Foods and several former executives. The lawsuit seeks an imposing C$2 billion (approximately $1.4 billion) in damages connected to the contentious sale of Canada Bread.
This legal action, formally dubbed a “statement of claim,” has been launched in the Ontario Superior Court of Justice. It asserts allegations of “fraudulent and negligent misrepresentation” during the 2014 sale of Canada Bread, a company previously under the majority ownership of Maple Leaf Foods.
During that time, Maple Leaf Foods maintained a 90% stake in Canada Bread, thereby overseeing negotiations and conducting due diligence, as stated by the renowned Mexican bakery giant, Grupo Bimbo.
The backdrop of this lawsuit is significant; it follows an investigation led by Canada’s Competition Bureau probing alleged price-fixing within the commercial bread industry. Notably, several firms, including Canada Bread, have found themselves implicated in these serious allegations.
In a prior admission, Canada Bread pleaded guilty to four charges of price-fixing, incurring a hefty C$50 million fine as a consequence.
In response to Grupo Bimbo’s hefty damages claims, Maple Leaf Foods’ Executive Chair, Michael McCain, has dismissed these allegations outright. In his statement, he characterized the lawsuit as “an abuse of judicial process, without any merit whatsoever.” He continued, stating that the Mexican company, Bimbo, seeks to divert attention from its poor management of a Canadian business with baseless claims that contradict its own previous admissions.
McCain further asserted, “To say we will defend against this frivolous action vigorously would be a colossal understatement. Maple Leaf Foods and its officers acted appropriately at all times, including with respect to making full, plain and true disclosure to Grupo Bimbo at the time of its acquisition of Canada Bread.”
Interestingly, the countersuit from Grupo Bimbo follows Maple Leaf Foods’ own legal initiative in which they filed a C$200 million defamation suit against both Grupo Bimbo and Canada Bread in November.
Filed on November 21 in the Ontario Superior Court of Justice, Maple Leaf Foods accuses Grupo Bimbo and Canada Bread of falsely alleging that Maple Leaf used Canada Bread as a “shield” to escape accountability for the bread price-fixing scandal.
The suit not only alleges defamation but includes competition violations and conspiracy related to the bread price-fixing initiative. Furthermore, it demands C$10 million in punitive damages.
The investigation surrounding the price-fixing allegations is extensive and dates back nearly a decade. This long-standing inquiry was initiated by the Competition Bureau of Canada in 2015, targeting price-fixing allegations involving Canada Bread, Weston Foods, and Loblaw, both of which are subsidiaries of George Weston.
Additionally, Maple Leaf Foods, as the former owner of Canada Bread, found itself entangled in this investigation, alongside retail giants like Metro, Sobeys, Wal-Mart Canada, and Giant Tiger Stores.
In December 2017, Weston Foods and Loblaw admitted to their involvement in what they described as an “industry-wide price-fixing arrangement.” In exchange for their complete cooperation with the Bureau’s investigation, they received immunity from prosecution.
Fast forward to September of this year, Canada Bread filed a lawsuit against Maple Leaf Foods, seeking damages related to the fine it incurred from the price-fixing case. The lawsuit argues that “Maple Leaf failed to act in accordance with the law and breached its management agreements with Canada Bread.” This breach allegedly occurred during the time Maple Leaf was the controlling shareholder, where they appointed directors to Canada Bread’s board and positioned senior officers of Maple Leaf to operate Canada Bread.
Subsequently, an Ontario court dismissed a motion from plaintiffs representing Canada Bread aimed at including Maple Leaf Foods in a class-action lawsuit tied to the price-fixing scandal, contradicting a December 2021 ruling that had previously excluded the firm from the case.
