Loblaw, Parent George Weston to Pay C$500 Million to Settle Price-Fixing Suit — 3rd Update

By Robb M. Stewart

Canadian grocery giant Loblaw Cos. and its parent company have agreed to pay 500 million Canadian dollars, the equivalent of about US$362 million, for their role in a decades-old bread price-fixing arrangement.

George Weston and its majority-owned Loblaw arm said Thursday they agreed to settle a nationwide class-action lawsuit against them for their part in industry-wide price fixing between 2001 and 2015 that involved certain packaged-bread products. In a statement, the companies apologized for their role in the arrangement.

Law firms for the plaintiffs said the agreement marks the largest anti-trust settlement in Canadian history.

The two companies will in total pay C$404 million in cash, in addition to C$96 million already paid out through a previous Loblaw customer-card program.

The settlement was negotiated with the plaintiffs' lawyers in mediation presided over by the chief justice of the Ontario Superior Court of Justice. It remains subject to the finalization of a binding settlement deal.

The suit against a number of the country's big food retailers was launched in late 2017 after Canada's competition regulator raided corporate head offices as part of a criminal investigation looking into alleged price fixing of packaged bread. The suit, which was certified as a class proceeding at the end of 2021, accuses the companies--along with others such as Empire Co.-unit Sobeys, Metro and Walmart Canada--of conspiring to fix bread prices since late 2001.

Loblaw and George Weston remained defendants after admitting their participation in the price-fixing scheme. Canada Bread plead guilty in mid-2023 to participating in an arrangement to fix prices and was fined C$50 million by the Ontario Superior Court of Justice.

Lawyers for the plaintiffs said they will now prepare for trial in the actions against the other companies.

"The settlement provides access to evidence to be used in pursuing the case against the remaining defendants," said Jim Orr, a partner at Orr Taylor, one of the firms behind the class action.

Empire last year launched a lawsuit against Loblaw related to its implication in the matter. The company said it would continue to defend itself against the class-action claims.

"We have seen no evidence that our company, or any of our employees, contravened the Competition Act," said Andrew Walker, vice president of communications and corporate affairs at Sobeys.

Montreal-based food retailer Metro also plans to continue to defend its position against the actions, and said it wasn't party to any industrywide conspiracy to fix the price of bread.

Walmart said it hasn't been charged with any wrongdoing in the matter and the allegations against it are unfounded, so it too will defend against the civil actions.

"This behaviour should never have happened," said Galen Weston, chairman and chief executive of George Weston and chairman of Loblaw. "Reaching a settlement on this matter was the right thing to do in response to previous behaviour that did not meet our values and ethical standards."

Loblaw and George Weston said that when they learned of the bread price-fixing arrangement in March 2015, they immediately reported it to the country's Competition Bureau. The companies said they took a number of steps in response, including overhauling how pricing was managed and enhancing their compliance programs. The measures included establishing an independent compliance office, reporting to the Loblaw board.

Founded in 1882, George Weston controls two operating arms, Loblaw and Choice Properties Real Estate Investment Trust. Loblaw has more than 2,400 corporate and franchised retail locations in Canada, as well as pharmacies that include the Shoppers Drug Mart chain.

George Weston agreed to pay C$247.5 million in cash and Loblaw will pay C$156.5 million on top of credit for the amount previously paid to customers.

A charge booked for the settlement and related costs weighed on Loblaw's profit in the latest quarter. The company Thursday reported earnings of C$457 million, or C$1.48 a share, for the fiscal second quarter, down from C$508 million, or C$1.58 a share, a year earlier. Revenue was up 1.5% on last year at C$13.95 billion, below the C$14.17 billion penciled in by analysts polled by FactSet.

Canada's Competition Bureau is also investigating Empire and George Weston to determine if the companies have used restrictions on the use of real estate to restrict or exclude competition, and in June it obtained two court orders requiring the companies to produce records and information as part of the probe.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

July 25, 2024 15:24 ET (19:24 GMT)

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