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An honest crust? Grocers under investigation for alleged price fixing of bread

The Canadian Competition Bureau recently raided places of business as part of an investigation into alleged price fixing in the bread industry. But what is a food cartel, and how is it tackled?

Consumers lose out when retailers or big companies collude to fix prices.

KARL-JOSEF HILDENBRAND/AFP/Getty Images

Consumers lose out when retailers or big companies collude to fix prices.

The Canadian Competition Bureau shocked the grocery industry this week, raiding offices to investigate the possibility of price fixing in packaged bread.

No charges have been laid, but corporations that conspire to fix prices and engage in cartel activity can be fined up to $25 million and people can serve up to 14 years in jail, according to the bureau's website.

“Given the secretive nature of cartels, it is difficult to say whether they are on the rise, steady or on the decline,” spokesperson Marie-France Faucher said by email.

What is price fixing?

The bureau defines price fixing as an agreement “between two or more persons to prevent or unduly lessen competition or to unreasonably enhance the price of a product.” It can also include deliberately giving awaygeographic markets to one party or another.

Fixing might see retailer X and Y agree to set certain prices, and thereby cash in as shoppers suffer because of a lack of alternatives. Big players might also collude in a way that negatively impacts suppliers, by deciding in advance on prices they will pay for certain goods.

What are cartels, and why are they bad news?

We know them from Netflix’s Narcos, but in reality cartels are just groups of businesses who scheme to eliminate their competition.

In addition to price fixing, cartels are often involved in things like bid rigging — colluding to fix tendering processes. The Competition Bureau said cartel-related fines of $13.28 million were brought in 2016-2017, Torstar News Service reported.

“When cartel participants agree to engage in anti-competitive activities, they deprive consumers of the benefits of competition, such as competitive prices, increased product choice and greater innovation in the marketplace,” Faucher said.

How common is price fixing?

It's quite common across a wide range of industries. In 2013, an investigation into price fixing among Canadian chocolate makers ended with Nestlé, Cadbury, Hershey and Mars forking out $23 million to class-action claimants, though they denied guilt.

Last year, Germany slapped supermarkets with €90 million in fines for price-fixing certain Anheuser-Busch InBev beers.

How is price fixing discovered?

The Competition Bureau asks that concerned employees or executives contact them. A hotline is advertised online, and provisions in the Competition Act protect whistleblowers, including their identity.

“The bureau initiates investigations as the result of information it obtains through complaints, among other means,” Faucher said. “The bureau also administers an Immunity Program, which is the best weapon to combat criminal anti-competitive agreements.”

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