Grocery War Erupts

Sixteen current and former operators of IGA grocery stores in Ontario have recently commenced a suit against Sobeys Inc., the second largest food distributor in Canada, and its Ontario subsidiary Sobeys Capital Incorporated, for over $250 million in a dispute over franchising agreements.

The plaintiff store operators have alleged that for over a decade they have been denied the benefit of rebates that The Oshawa Group, and more recently Sobeys Capital (which recently became the franchisor for almost 150 IGA franchise stores in Ontario after acquiring The Oshawa Group Limited in 1998), received from suppliers of merchandise to the IGA stores.

The plaintiffs claim that under their franchise agreements all supplier rebates should have been passed on to them but that The Oshawa Group increasingly retained the rebates for itself.

Sobeys has issued a press release stating that the allegations are without merit, and the defendants have recently served a wide-ranging motion to strike much of the plaintiffs’ statement of claim. Sobeys has also commenced a separate application to validate the termination of its relationships with the plaintiffs.

Acting for the plaintiffs are John Sotos and David Sterns of Sotos Associates and Nancy Spies and Christopher Wirth of Stockwood Spies. Sobeys and Sobeys Capital are represented by a team from Osler, Hoskin & Harcourt LLP, which includes Larry Lowenstein, Joseph Starkman and Derek Bell with corporate advice being provided by Frank Zaid and Ingrid Vanderelst of Oslers as well as Darrell Ewert, the General Counsel and Secretary of Sobeys Capital.