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The move means Canada Bread can no longer supply bread and rolls to the Department of National Defence, though the reputational harm could be the tougher blow. Even before that decision, credit rating agency DBRS Morningstar said Canada Bread’s situation was a cautionary tale of how unethical business conduct can “erode consumer confidence” and hurt a company’s overall credit risk profile.
“It’s not surprising,” said Robin Shaban, co-founder of the Canadian Anti-Monopoly Project, an Ottawa think-tank that focuses on competition policy reform. “If I was working in federal government procurement, I would totally blackball them.”
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PSPC spokesperson Jeremy Link said the government is committed to taking action “against improper, unethical and illegal business practices and holding companies accountable for such misconduct.”
In a statement, Canada Bread said it respects the government’s policy on ineligible suppliers and is “working within such policy.” The company has been controlled by Mexican baking giant Grupo Bimbo S.A.B. de C.V. since 2014. In court documents earlier this summer, the company said it only learned about the price-fixing activity in 2017 when the Competition Bureau, a federal law enforcement agency, executed a search warrant against Canada Bread.
The court documents said the bureau found that a senior officer at Canada Bread co-ordinated two wholesale price increases between 2007 and 2011 with executives at the company’s main competitor, Weston Foods — a major commercial bakery controlled at the time by George Weston Ltd., which also controls Canada’s largest retailer, Loblaw Cos. Ltd.
In 2017, the bureau granted immunity to Loblaw and Weston in exchange for their co-operation with the investigation. The immunity appears to have kept those companies off the government’s banned supplier list, since neither company was charged with one of the crimes that makes a supplier ineligible.
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Grupo Bimbo said it fully co-operated with the investigation, handing over documents that were not seized during the bureau’s raid. The company has publicly said the offences happened before Grupo Bimbo took over the bakery, when Canada Bread was majority owned and controlled by Maple Leaf Foods Inc.
“Grupo Bimbo is considering all legal options against those responsible for the conduct at issue,” the company said in a statement in June.
Maple Leaf Foods has said it was not aware of “any wrongdoing by Canada Bread or its senior leadership during the time that we were a shareholder.”
In exchange for Canada Bread’s co-operation, the bureau recommended leniency in sentencing. Ontario Superior Court Judge Maureen Forestell said Canada Bread’s fine of $50 million was below the maximum since the company’s co-operation and guilty plea saved “considerable time and costs.”
The judge said she took the bureau’s approach to leniency into consideration, since “much of the conduct would go undetected” without participants coming forward to confess in exchange for an easier sentence. Still, the $50-million fine was the highest on record, the bureau said.
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This was a fraud on the public
Maureen Forestell
“Effectively, this was a fraud on the public,” Forestall said in her reasons for sentencing. “These offences affected millions of consumers.”
Bureau spokesperson Sarah Brown said the agency isn’t involved in decisions about the government’s list of banned suppliers. But the bureau has previously advocated that anyone who gets immunity or leniency from the bureau shouldn’t be barred by the government.
As of now, only companies with immunity can avoid the list, according to John Pecman, the former head of the Competition Bureau who established the immunity and leniency program.
“We worked closely with Procurement Canada to ensure the immunity applicants would be excluded,” he said.
But parties who receive leniency — a lower tier in the bureau’s program — end up on the list because they’ve been convicted of one of the crimes that the government considers to be a red flag for suppliers.
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“That’s one of the consequences,” Pecman said. “It’s part of your penalty.”
Government records show that Canada Bread has supplied products to the defence department and Fisheries and Oceans Canada since 2008. The most recent supply contract was valued at $10,925 for Canada Bread Atlantic Ltd. to supply “miscellaneous food, food materials and food preparations” in July 2018.
— With files from Christopher Nardi and Barbara Shecter
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