Maple Leaf Foods Inc. is suing Canada Bread Co. Ltd. and its parent, Mexico-based Grupo Bimbo, accusing the companies of defamation related to their assertions about Maple Leaf’s role in an alleged industry-wide scheme to fix bread prices from 2001 to 2015.
Maple Leaf, which was majority shareholder of Canada Bread before selling the business to Grupo Bimbo in 2014, filed a claim with the Ontario Superior Court of Justice in Toronto on Thursday seeking more than $200-million in damages, plus legal costs.
The lawsuit stems from allegations that Grupo Bimbo made against Maple Leaf in recent years, saying that Canada Bread participated in a scheme to fix the price of bread while Maple Leaf controlled the company, and that Maple Leaf failed to disclose the conduct to Grupo Bimbo before its $1.83-billion acquisition in 2014. Canada Bread, which owns Dempster’s and other brands, is a leading manufacturer of baked goods in Canada.
The country’s largest grocer, Loblaw Cos. Ltd., and its parent company George Weston Ltd. first reported the alleged industry-wide conspiracy to the federal Competition Bureau in 2015, in exchange for immunity from criminal charges. The federal watchdog then launched an investigation, which is continuing.
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.
Aside from Loblaw and George Weston, Canada Bread is the only other party to admit wrongdoing. Last year, Grupo Bimbo announced that it had resolved its part in the investigation, and agreed to pay a record $50-million fine.
As part of that settlement, Canada Bread acknowledged making “arrangements” with one or more senior executives at George Weston-owned competitor Weston Foods, 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 on Thursday, however, lawyers for Maple Leaf wrote that those allegations were “unfounded” and “defamatory.”
The defamation allegations have not been tested in court, and no statement of defence has been filed. A statement on Friday from Sylvia Sicuso, Canada Bread’s director of communications, said the company is aware of the case, and added that Maple Leaf’s claim “is completely without merit.” The company declined further comment on the substance of the allegations in the documents filed on Thursday.
According to Maple Leaf’s statement of claim, Canada Bread and Grupo Bimbo began negotiating leniency with the Competition Bureau in 2017, while ignoring “important information” from current and former Canada Bread executives at the time that confirmed the company was not involved in any collusion.
The court document goes on to state that the new owners had no evidence to show any wrongdoing at the company.
“In seeking and obtaining leniency from the Bureau, Canada Bread took the extraordinary step of admitting to wrongdoing it had not, in fact, engaged in,” the filing states. It adds that no price increases at any time were the result of collusion between Canada Bread and Weston Foods.
The statement of claim accuses Grupo Bimbo of “mismanagement” at Canada Bread, saying that the new owners replaced the leadership team with less knowledgeable managers who lacked relationships with Canada Bread’s key customers and suppliers.
It also accuses Grupo Bimbo of “blatant nepotism” in its appointment of Alejandro Pintado as president of Canada Bread. Mr. Pintado is the nephew of members of the Servitje family, who hold majority control of Grupo Bimbo. This “mismanagement” led to declining revenues and profitability at Canada Bread, the document alleges, and the company has sought to shift blame to Maple Leaf for the decline.
In a statement of agreed facts related to its settlement with the Competition Bureau, Canada Bread acknowledged four instances of discussions between senior executives at the company and at Weston Foods about co-ordinating commercial bread price increases. The court filing on Friday states that Canada Bread failed to provide evidence of those “allegedly improper discussions.”
“That is so for the simple reason that there is no such evidence. In fact, the discussions in question never happened,” the document states. It adds that neither Canada Bread, the Competition Bureau nor the Public Prosecution Service of Canada attempted to speak with the former president and CEO of Canada Bread, even though the admission of wrongdoing in the settlement related to that executive’s conduct at the company.
Two class-action lawsuits have been launched in Ontario and Quebec against a number of companies related to the Competition Bureau investigation, including major retailers and Canada Bread. In July, Loblaw and George Weston agreed to pay $500-million to reach a settlement in the lawsuits.
In a 2021 decision, the court did not certify the action against Maple Leaf. The plaintiffs had asked the court to reconsider that decision, but last month the judge in the case rejected that motion, writing in a decision that documents provided by Canada Bread in support of the motion revealed “ordinary business” of a wholesaler discussing prices with a retailer, and that they did not demonstrate conspiratorial or anti-competitive behaviour.
Canada Bread has launched its own legal action against Maple Leaf: In September, the company filed a crossclaim related to the class action, seeking damages from its former majority owner related to the $50-million fine, as well as any damages that may arise from the class action.
In that crossclaim, Canada Bread wrote that Maple Leaf “exercised control over the affairs and activities” of Canada Bread when it was controlling shareholder, and accused Maple Leaf of “breach of contract,” “fraudulent misrepresentation” and “unjust enrichment” related to the alleged scheme.
In Thursday’s court filing, Maple Leaf said that this crossclaim was part of a “campaign of defamation,” as it issued a press release about the legal action that was covered in news stories.
“Being accused falsely by Grupo Bimbo and Canada Bread of having participated in a secretive and unlawful criminal conspiracy has undermined unfairly and improperly the hard-earned reputation [Maple Leaf Foods] has cultivated carefully over more than 30 years,” the filing states.