An advocacy group for small Ontario businesses says it wants to see immediate action and change from large retailers in light of a class action lawsuit ordering Loblaw to pay $500 million in settlement fees over a price fixing scandal.
Loblaw and its parent company George Weston Ltd. says they will pay the settlement in full for their role in a more than decade-long bread price fixing scheme.
The lawsuit was brought against George Weston Ltd, Loblaw and its subsidiaries, Walmart Canada, Metro, Giant Tiger, Sobeys and its parent company Empire Co. Ltd.
Plaintiffs allege that the aforementioned retailers participated in a 14-year industry-wide price fixing conspiracy leading to an artificial spike in packaged bread prices.
Parties have agreed to a settlement amount of $500 million, $404 million of which will be a cash payment by George Weston and Loblaw.
Galen Weston, who’s the chairman of Loblaw and chairman and chief executive officer of George Weston, has apologized for the part the grocery conglomerate played in the scandal.
“This behaviour should never have happened. We have the privilege of serving Canadians from coast to coast. That privilege needs to be earned each and every day,” he said in a press release.
“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,” Weston concluded.
But a spokesperson for advocacy group The Ontario Small Business Community (OSBC) says Canadians don’t want apologies, “they want action and change immediately.”
“If Loblaws and Galen Weston are really invested in repairing their relationship with Canadians they need to show serious action with proactive changes and bring back value to the communities they engage with and they profit from,” the advocacy group told Now Toronto on Thursday.
“They must foster fair and equitable business relationships. Become active contributors to Canadian communities through fair employment opportunities, improved environmental practices and community contributions. The opportunity for redemption is there for Loblaws and Galen Weston, if they are willing to do what is necessary to achieve it,” the OSBC concluded.
Meanwhile, the settlement is pending court approval, and is set to be the largest anti-trust payout in Canadian history, according to the plaintiffs lawyers, Strosberg Wingfield Sasso LLP.
The plaintiffs’ lawyers have now moved on to preparing for trial in the ongoing class actions against Canada Bread, Sobeys, Metro, Wal-Mart Canada, and Giant Tiger whom the plaintiffs allege were also involved in the industry-wide conspiracy, the law firm said in a press release on Thursday.
HOW DOES PRICE FIXING WORK?
The Ontario Small Business Community says suppliers play a role in ensuring they do not engage in anti-competitive practices but usually have limited leverage.
“Ultimately the retailer controls the negotiations,” the OSBC explained.
Often suppliers will give a suggested retail price for a product, according to the OSBC, but they don’t dictate the price a retailer chooses to sell their products for because it is antithetical to the rules of competition.
A common price fixing strategy is for retailers to collude with their competitors or umbrella brands to drive the value of a product down, the OSBC said.
Consequently, retailers can sell products for even less than what their suppliers will charge.
“What we see then is increased demand for the retailer and lessened for the supplier or producer, creating an environment where the producer or supplier becomes reliant on the retailer,” the OSBC continued.
This gives the retailer an opportunity to monopolize other businesses’ products and provides significant negotiation powers; creating an inflated demand based on a price, which then allows retailers to control the supply and ultimately generate more profit, the OSBC explained.
However, the upcoming introduction of the grocery code of conduct will limit grocery chains’ abilities to manipulate market conditions to artificially set prices.
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“Previously large corporate chains were answerable to no one and similarly their practices simply dictated as they saw fit,” the OSBC said.
The code will outline fair business practices and create a space for suppliers and retailers to settle disputes under the supervision of a regulatory body.
