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Report On Business Loblaw’s bread-fixing gift card assailed as ‘deceitful public relations’ campaign

The Loblaws store located at Church and Carlton Streets in Toronto, photographed on Nov. 15 2017.

Fred Lum/The Globe and Mail

Loblaw Cos. Ltd.'s offer of free $25 gift cards to make amends for fixing bread prices over 14 years is "a misleading and deceitful public relations" campaign designed to benefit the grocer, says a complainant seeking to launch a class-action lawsuit against the retailer.

As a result, the complainant asked an Ontario Superior Court judge on Monday to prevent Loblaw from demanding that consumers who receive the gift card have the $25 deducted from any future legal settlement or award. The court reserved its judgment.

Loblaw stands to profit from the gift-card program by forcing consumers to spend their $25 – and potentially more – at its stores, which include its namesake banner, Real Canadian Superstores, No Frills and Provigo, David Wingfield, a lawyer at Strosberg Sasso Sutts LLP, which has launched the bid for class-action certification, told the court on Monday.

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But Loblaw lawyer Robert Russell countered the retailer is required under law to make the $25 deduction in case of a class-action award and simply wants to be "crystal clear" with consumers. "This is not a settlement offer," said Mr. Russell of law firm Borden Ladner Gervais LLP. " … It's not a free ticket."

He said the allegations of deceit are "completely unsubstantiated and unwarranted."

Loblaw and its parent, George Weston Ltd., sent shock waves through the retail sector last month when they disclosed they had been part of what they called an industrywide bread price-fixing scheme over 14 years – from 2001 to 2015 – that involved other grocers and another bread maker. (George Weston owns bread producer Weston Foods; its major rival is Canada Bread Co., which is also a target of the lawsuit.)

Loblaw and Weston had gone to the Competition Bureau about the conspiracy and agreed to co-operate with the bureau's price-fixing investigation in exchange for immunity from criminal prosecution. As well, Loblaw said it would start offering the $25 coupons on Jan. 8.

When the grocer began registration for the $25 gift cards on Monday, it announced several restrictions tied to it, including that possible damages awarded to customers in the future would be lowered by $25. It also said card recipients can still participate in a class-action lawsuit.

Mr. Russell revealed that Loblaw, Weston and other companies so far have been hit with seven legal actions attempting to get class-action status, including the one from the Strosberg Sasso complainant.

Loblaw said it reserves the right to limit the number of cards it distributes. The company estimated last month that three to six million consumers would sign up and receive the card, costing Loblaw $75-million to $150-million.

The country's largest grocer also said customers won't be able to use the $25 card for buying some items, such as alcohol or tobacco.

Mr. Wingfield argued Loblaw should not be allowed to demand the $25 deduction from a possible class-action award because of the retailer's 14-year involvement in the criminal price-fixing conspiracy; its attempt to dictate where consumers must spend their compensation; its refusal to disclose details about the conspiracy or its economic effects; and "the fact that Loblaw stands to profit from the gift card program."

He said Loblaw will benefit from "additional revenue" from the gift cards rather than giving consumers the money to spend as they wish.

Mr. Russell said Loblaw has gone out of its way to avoid using the word "gift card" instead describing it as a $25 free coupon.

"Participation in the card program will not abrogate the legal rights or interests of participants and does not require them to //forego [forgo] participation in any class proceeding or any incremental amount above the $25 value of the card that may be assessed in damages by the court or provided in a future settlement," he said in a court document.

He said the Loblaw card is equivalent to cash as it will provide Loblaw shoppers with $25 full cash value (without any discount for class counsel fees) to purchase products available in Loblaw grocery stores across Canada."

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The bureau is continuing its inquiry after having executed search warrants at the offices of Loblaw and other grocers, retailers and bread makers, with a ban still in effect "by the searched parties" on disclosing many of the facts surrounding the investigation, he said.

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