Loblaw Companies Ltd (TSX:L) is at the center of a price-fixing investigation that could see other grocers get pulled into the scandal before all is said and done. The company alerted the Competition Bureau to the issue when it first learned about the activities, which was back in 2015.
Loblaw and George Weston Limited (TSX:WN) claim it was an industry-wide arrangement that lasted more than a decade. Both Empire Company Limited (TSX:EMP.A) and Metro, Inc. (TSX:MRU) dismiss the allegations and believe that they have acted in accordance with all laws and regulations.
For coming forward, Loblaw and George Weston will receive immunity and be able to avoid legal repercussions as a result of the scheme. Others, however, may not be so lucky.
The price-fixing arrangement was limited to certain types of bread and so it is hard to determine how much the companies benefited from the scheme.
What we do know is that the arrangement involves no less than seven companies, and includes other major grocers as well. The concern from an investor’s standpoint is that the industry already presents significant risk, especially with minimum wages set to rise in many provinces and competition continuing to get more intense. This latest scandal will only make retail stocks an even worse investment.
Loblaw has offered customers that have been impacted by the price fixing with gift cards of $25. Although it is a gesture, giving a $25 gift card to say sorry for 14 years of deceitful practices and overcharging its customers doesn’t seem like a fair trade, and is an easy way for the company to claim it has atoned for its mistakes.
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