A worker restocks shelves in the bakery and bread aisle at an Atlantic Superstore, in Halifax, on Jan. 28, 2022.Kelly Clark/The Canadian Press
Mexico-based Grupo Bimbo is suing Maple Leaf Foods Inc. MFI-T and some of its senior officers and directors, including executive chair and former chief executive Michael McCain, seeking more than $2-billion in damages related to a continuing investigation into an alleged scheme to fix bread prices in Canada.
The Mexican multinational food giant acquired Canada Bread, one of the country’s largest bread manufacturers, from Maple Leaf in a $1.83-billion deal in 2014. In a statement of claim filed in the Ontario Superior Court of Justice on Thursday, Grupo Bimbo accused Canada Bread’s former majority owner of alleged “fraudulent and negligent misrepresentations” during that sale process. Mr. McCain responded on Friday, saying the claims were “without any merit whatsoever.”
The lawsuit is the latest legal salvo in a continuing dispute between the two companies over Canada Bread’s alleged culpability in a bread price-fixing scheme from 2001 to 2015. The documents were filed one week after Maple Leaf filed its own lawsuit against Canada Bread and Grupo Bimbo, accusing the companies of defamation related to their assertions about Maple Leaf’s conduct during that time. Maple Leaf is seeking more than $200-million in damages, plus legal costs.
Canada’s largest grocer, Loblaw Cos. Ltd. L-T, and its parent company, George Weston Ltd. WN-T, first reported the alleged industry-wide conspiracy to the Competition Bureau in 2015, in exchange for immunity from criminal charges. The federal watchdog then launched an investigation.
Grupo Bimbo first learned that Canada Bread and Maple Leaf were alleged parties to the conspiracy in October of 2017, when the Competition Bureau executed search warrants at Canada Bread’s offices, according to the statement of claim filed on Thursday.
Before the sale, Maple Leaf was the majority owner of Canada Bread. Grupo Bimbo’s lawsuit accuses the defendants of knowing about the alleged conspiracy and withholding information about it during the acquisition talks.
“But for the misrepresentations and omissions of the defendants, Grupo Bimbo would never have agreed to the terms of the Canada Bread acquisition, or indeed to acquire Canada Bread at all,” lawyers for Grupo Bimbo wrote in the court document. “Grupo Bimbo grossly overpaid for the Canada Bread shares under the circumstances.”
In addition to Mr. McCain, the lawsuit names Michael Vels, who served as chief financial officer of Maple Leaf and Canada Bread prior to the acquisition; Richard Lan, former chief operating officer at Maple Leaf and chief executive officer of Canada Bread; and two other executives. Mr. McCain, Mr. Lan and Mr. Vels also all sat on Canada Bread’s board of directors as of early 2014.
The overlap in executive and board positions was deliberate, according to the statement of claim, which refers to Maple Leaf as the “directing mind” of Canada Bread at the time. Those individual defendants “were directly involved in the price fixing conspiracy,” according to the statement of claim.
“Richard Lan categorically denies the irresponsible and defamatory allegation that he, at any time, engaged in fraudulent or negligent misrepresentations,” his lawyer Brian Greenspan wrote in a statement on his behalf on Friday. “It is reprehensible that Grupo Bimbo has falsely claimed that Mr. Lan was involved in any improper or inappropriate conduct.”
The allegations have not been tested in court, and no statement of defence has been filed. But Maple Leaf has repeatedly denied any knowledge of the alleged conspiracy in the past, and allegations to the contrary are the subject of the defamation lawsuit the company filed against Grupo Bimbo and Canada Bread last week. In that filing, Maple Leaf wrote that Grupo Bimbo has never produced evidence that Maple Leaf was involved.
“The Mexican company, Bimbo, is distracting attention from its own mismanagement of a Canadian business, by asserting ridiculous claims which are not even consistent with its own prior admissions,” Mr. McCain wrote in a statement on Friday. “To say we will defend against this frivolous action vigorously would be a colossal understatement. Maple Leaf Foods and its officers acted appropriately at all times, including with respect to making full, plain and true disclosure to Grupo Bimbo at the time of its acquisition of Canada Bread.”
Aside from Loblaw and George Weston, Canada Bread is the only other party to admit wrongdoing during the Competition Bureau’s investigation. Last year, Grupo Bimbo announced that it had agreed to pay a record $50-million fine to resolve its part in the matter.
As part of the settlement, Canada Bread said former executives had made “arrangements” with executives at competitor Weston Foods, which was owned by George Weston at the time, leading to two wholesale price increases in 2007 and 2011. A wholesale price is what retailers pay to buy goods from their suppliers, and it is factored into the retail price that stores charge to customers for those products.
In its court filing last week, lawyers for Maple Leaf wrote that those allegations were “unfounded” and “defamatory.”
Maple Leaf, based in Mississauga, remains under investigation by the Competition Bureau. Other companies also under investigation include Metro Inc., Sobeys Inc., Walmart Canada Corp. and Giant Tiger Stores Ltd. Representatives for all those companies have denied any violation of competition law.
Two class-action lawsuits have been launched in Ontario and Quebec against a number of companies related to the investigation, including Canada Bread. In July, Loblaw and George Weston agreed to pay $500-million to reach a settlement in the lawsuits. Grupo Bimbo is seeking damages for any amount that Canada Bread could be forced to pay related to the class action.