Canada Bread Company agreed to pay a $50 million fine after pleading guilty to fixing the price of bread earlier this year. This fine is the highest ever imposed for a cartel offence in Canada.
Canada Bread’s plea deal is a significant development in the ongoing investigation by the Competition Bureau into an alleged conspiracy.
The plea proves the price-fixing scheme did exist, which could prompt admissions by others.
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But despite the eye-popping amount, the fine didn’t receive much applause. Instead, many questioned why the $50 million is going to the government and not to those who overpaid. Others wondered why the money couldn’t be used for something more productive, like food banks.
These questions challenge some basic principles of sentencing law in Canada. They are worth examining because they raise legitimate questions.
Canadians first learned about the bread-fixing scheme in 2017 when Loblaw and George Weston revealed their part in it. As the first ones to co-operate with investigators, Loblaw was granted immunity from prosecution under the Competition Bureau’s Immunity and Leniency Program. Since cartels are difficult to detect from the outside, immunity is often used to encourage insiders to spill the beans.
Once immunity has been granted, the remaining cartel members are typically motivated to seek leniency by co-operating. In this case, however, no one took the bait.
With nothing to back up Loblaw’s claims, the investigation went quiet for six years and revived only recently.
By default, fines are paid either to the provincial treasurer or the receiver general of Canada, depending on the offence. Exceptions are rare and the Canada Bread case did not fit any of them.
While the Criminal Code does allow for restitution in appropriate cases, it’s limited to those that fit the following criteria: it’s easy to determine the dollar amount of harm or loss suffered; the victim can be identified; and there is a clear connection between the crime and harm caused.
Imagine trying to calculate how many consumers overpaid for bread, how much extra they paid for it and how often it happened. Since most people won’t have receipts, the best we can do is a rough estimate.
Trying to use illegal gains as a substitute measure is no better. How do we determine what portion of grocery and bakery profits are linked to overpriced bread?
Given these challenges, aggrieved consumers bring class actions in civil courts that have the expertise to handle complex liability matters. While class actions can take time, they can increase the chances of a settlement.
If direct compensation to victims is best left to civil courts, what about using criminal fines to address social problems exacerbated by the crime?
Paying fines to entities other than the government, such as charities, is an example of an alternative measure. While they tend to be used for specific offender types (youth, those with limited means, and those with mental health or addiction issues) and less serious crimes, alternative measures are also used against corporate offenders in some areas.
Allowing such measures for regulatory offences makes sense because they are designed to promote better compliance and harm prevention. Though not perfect, they are seen as more constructive.
Since many regulatory sanctions are remedial, it wasn’t hard for courts to start ordering that fines be used to fund research studies at universities, create new training programs or develop updated industry-wide standards, instead of being paid to the government.
Making orders like these is easier in places where governments have created dedicated funds to support remediation and prevention efforts.
When it comes to serious economic crimes like cartels, fraud and corruption, however, my research shows that creative sanctions have rarely been used.
But the idea of using fines to fix problems made worse by economic crime is catching on, such as a proposal to create an international development fund supported by fines from foreign corruption cases.
Courts, prosecutors and defence counsels are also more open to exploring innovative sanctions.
These trends suggest that directing fines into a fund to support consumer issues, food banks or similar measures is possible, should the provinces be willing to set them up.
– Jennifer Quaid is an associate professor and vice-dean research, Civil Law Section, Faculty of Law, L’Université d’Ottawa/University of Ottawa.
