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Sobeys threatens George Weston, Loblaw with legal action over price-fixing claim

Last Updated Feb 2, 2018 at 8:40 am EDT

A woman walks pass a Metro grocery store in Toronto on Wednesday Nov. 1, 2017. The CEO of Empire Company Ltd. and Sobeys Inc. says George Weston Ltd. "should keep checking the mail room" for upcoming legal action the grocer will take over being implicated by its competitor in an alleged industry-wide bread price-fixing scheme. THE CANADIAN PRESS/Doug Ives

George Weston Ltd. and Loblaw Companies Ltd. “should keep checking the mailroom” for upcoming legal action after they implicated Sobeys Inc. in an alleged industry-wide bread price-fixing scheme that goes “right to the heart of the trust” between Canadians and their grocers, the CEO of the grocery chain said Thursday.

“I have been in way too many meetings with lawyers,” said Michael Medline, CEO of Empire Company Ltd. and Sobeys. The meetings have ramped up since Wednesday, when court documents containing the nature of the allegations were made public, he added.

“We are assessing all of our options,” he said. “I’m not going to tip our hand in terms of what our entire strategy is, but I think Weston (and Loblaw) should keep checking the mailroom.”

Kevin Groh, a Loblaw spokesman who is also speaking on behalf of parent company George Weston, did not respond to Medline’s comments directly.

“The Competition Bureau — a federal investigator — has publicly concluded it has evidence that seven companies have committed a criminal offence. This is the bureau’s investigation not ours,” he said in a statement.

In December, bakery operator George Weston and retailer Loblaw admitted their participation in what they say is an industry-wide arrangement to co-ordinate the price of bread for at least 14 years.

They brought the information to the Competition Bureau in exchange for immunity from criminal proceedings, sparking the watchdog’s ongoing investigation into an alleged cartel composed of the two informants, as well as Canada Bread Company Ltd., Walmart Canada Corp., Sobeys Inc., Metro Inc. and Giant Tiger Stores Ltd.

Walmart has declined to comment, while the others have denied contravening the Competition Act.

Documents released Wednesday related to the investigation alleged a more than decade-long arrangement to bump prices at least 15 times in a pattern that became colloquially known as the 7/10 convention — seven cents more at wholesale and 10 cents for consumers in stores.

The information to obtain documents contained the Competition Bureau’s reasoning for requesting search warrants in the case based on information it had collected so far in its investigation, largely gathered from interviews with two witnesses.

While their names are blacked out, the records indicate they are affiliated with the immunity applicant of George Weston and Loblaw. An unidentified applicant had requested their anonymity, which has been granted while the court waits to hear the full application. Other sections, including one detailing the genesis of the allegations, are also redacted.

Sobeys and Metro have both filed applications for unredacted versions that disclose the names to the public, and a hearing will be held on Feb. 14.

“We want to know who’s first of all accusing us,” Medline said.

Metro believes the public should see the documents in full, spokeswoman Marie-Claude Bacon said in an email.

“In our view, selective disclosures, redactions and secrecy are not conducive to rebuilding trust,” she said, adding consumer confidence has been understandably shaken by Loblaw and George Weston’s admissions.

Medline agreed the information should be made public.

“We want everyone to see everything that led to the Halloween searches,” he said of the date the Competition Bureau executed its search warrants.

Sobeys believes there’s some useful and interesting information being withheld that will better pinpoint what was actually happening that will be instrumental as it challenges the allegations levied against it, said Medline.

The Competition Bureau said it is aware of Sobeys and Metro’s applications, but can not comment further for confidentiality reasons.

The bureau’s normal practice is to protect informants through redaction, said Loblaw’s Groh, adding the retailer informants waived their rights to have their company names redacted.

“This is now an issue of the rights of individuals and the court process to properly deal with those rights is already underway.”

Sobeys will be very aggressive in making applications to release that information, said Medline, and “could absolutely” take legal action against George Weston before the bureau’s investigation — which he expects to be lengthy — wraps up.

The Competition Bureau did not offer a timeline for when charges may be laid, but said the investigation is ongoing and there is no conclusion of wrongdoing at this time.

If investigators secure sufficient evidence, the commissioner may refer the case to the director of public prosecutions who will decide if charges will be laid, said spokeswoman Veronique Aupry in an email.

The case would be heard in a criminal court, she said, and penalties for price-fixing include fines of up to $25 million and up to 14 years in prison — or both.

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Companies in this story: (TSX:L, TSX:WN, TSX:EMP.A, TSX:MRU )