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Feb 1, 2018

Sobeys defends ‘valued’ employees as Canada’s bread scandal widens

A Sobeys grocery store in Halifax

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Sobeys (EMPa.TO) is striking a defiant tone as it gets dragged deeper in Canada's bread price-fixing scandal.

The grocer was identified by the Competition Bureau in newly-released court documents as one of five retailers and two wholesalers - Walmart Canada (WMT.N), Metro (MRU.TO), Giant Tiger, Loblaw (L.TO), Canada Bread and George Weston (WN.TO) - that are alleged to have committed indictable offences under the Competition Act.

The competition watchdog alleges Canada Bread and George Weston's senior officers agreed to boost baked good prices in tandem, typically by seven cents, for more than a decade starting in 2001, according to the court documents.

The suppliers then allegedly met individually with their retail customers to get their approval for the price hike. The retailers agreed to the boost on the condition their competitors would as well to maintain a fixed price in the market.

The pattern became colloquially known as the 7/10 convention, according to the documents -- with a usual seven cent price increase at wholesale and 10 cent price bump for the consumer in stores.

The latest developments sparked a vehement response from Nova Scotia-based Sobeys, which had already taken umbrage with Loblaw after its rival came clean last year and declared the pricing scheme was “industry-wide”. 

"As we’ve said, and we remain confident in our position, Sobeys has no reason to believe that it or any of its employees violated the Competition Act," Sobeys spokesperson Cynthia Thompson said in a statement released Wednesday. 

"There are very few references to Sobeys in the documents," she added. "The Sobeys employees named are valued members of our team and we are confident that they did nothing that contravenes the Competition Act."

In December, Loblaw and George Weston admitted they sparked the investigation when they approached the watchdog after becoming aware of an allegedly industry-wide arrangement to co-ordinate retail and wholesale prices of some packaged bread products from late 2001 to March 2015.

Loblaw and Weston did not name any of their rivals as participants in the arrangement, but said it involved “other major grocery retailers and another bread wholesaler.”

The two companies received immunity in exchange for their co-operation. The remaining five companies have previously said they're co-operating with the investigation, and some have outright denied any wrongdoing.

"We constantly communicate with and push our suppliers so that we can buy from them at the lowest possible cost, which allows us to offer competitive prices to our customers," Atwood added in her statement on behalf of Sobeys.

"It’s typical in the grocery industry, and I would say broad retail industry, for employees to regularly monitor and spot check pricing in the marketplace to ensure competitive pricing to customers."

Sobeys added that it's calling on the court to release unredacted documents and said it will continue cooperating with the Competion Bureau's probe.

Canada Bread, meanwhile, issued a statement shortly after the documents were released saying it first learned of the claims in December but was not allowed to discuss them until the information was made public.

It noted that the George Weston and Loblaw informants admitted to inappropriate conduct and accused "certain former Canada Bread executives" dating back to 2001 "while Canada Bread was under previous ownership."

Maple Leaf Foods sold its majority share in Canada Bread to Mexico's Grupo Bimbo in 2014.

With files from BNN