Qualifying for a $25 gift card from Loblaw Cos. Ltd. issued as a goodwill gesture to help offset 14 years of price-fixing has turned out to be more complicated than shoppers were originally led to believe, and has already led to a court challenge.

Lawyers in a proposed class action lawsuit against Loblaw Cos. and other grocers were in Ontario Superior Court on Monday arguing that restrictions Loblaw has attached to claiming the $25 card should be struck down.

When it was announced in December, the $25 was described by Loblaw as a gift card. But the form to claim the card, released Monday, requires consumers to waive their rights to the first $25 of any future financial settlement that may arise.

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“We don’t think it’s a gift card at all. There is no gift here, that is part of the problem, this is a coupon,” said Jay Strosberg, a partner at Strosberg Sasso Sutts LLP. “It’s a coupon to be used in their stores and in return they want a reduction in their liability.”

Loblaw expects that as many as six million people will apply for the $25 card and plans to treat that as a $150-million reduction in any damages that might be awarded, according to David R. Wingfield, also a partner at Strosberg Sasso Sutts.

“We made the argument that people are being misled because they thought this was a gift card, that it was actually a goodwill gesture by Loblaws, and it turns out it’s not,” Wingfield said.

“It’s an important issue and Loblaws, of course, delayed telling people about the fact that they were going to ask for a release.”

Loblaw decline to comment on the court matter.

The competition bureau's investigation into alleged bread price-fixing involves at least seven companies. George Weston Ltd. and Loblaw Companies Ltd. admitted to participating in the arrangement. (The Canadian Press)

By offering the $25 coupon in exchange for a reduction in liability, Loblaw is attempting to dictate the terms of a future settlement, Strosberg added.

“Maybe the consumer would rather have $25 in cash to pay for gasoline or maybe the consumer would rather have $25 to pay for utilities.”

Loblaw also stands to profit from issuing the coupons, as they can be used only in stores in the Loblaw family of companies.

The company is also collecting names, addresses and birth dates from customers who want to qualify for a coupon — which in itself is valuable information, Strosberg pointed out.

“All of it is structured to benefit the Loblaw group of companies. It’s not structured to benefit anyone other than them.”

Strosberg Sasso Sutts filed a class action lawsuit against Loblaw Cos. Ltd. and other grocers in December, following an admission by Loblaw that it had been fixing the price of bread with competitors for 14 years, a crime that can result in fines of up to $25 million and imprisonment to a maximum term of 14 years, or both.

The class action lawsuit has not been certified. Strosberg said Loblaw has indicated it would not file a statement of defence until a judge agrees the class action lawsuit can proceed.

Loblaw turned itself in to the Competition Bureau in December to win immunity from prosecution.

“We are hearing that customers understand and appreciate the value we are offering,” a Loblaw spokesperson, Kevin Groh, said Monday.

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“With a program of this sort, we naturally require some conditions. However, we have been consistent that accepting a $25 Loblaw card would not restrict customers from receiving incremental compensation through a class action settlement.

“We have also said there would be an offset against civil liability. That means, in effect, we would not have to pay customers the same amount twice. The $25 Loblaw card would represent an advance payment against any settlement that a court may require. It would be deducted — to the extent of $25 — from that settlement.”

The restrictions led to criticism on Twitter from consumers, including a complaint that Loblaw is asking for too much information in exchange for awarding the $25 cards.

“They can get each person a card with a lot less information than this,” wrote Joseph V.@UrbanArtPhoto, who describes himself as a poverty activist. “Companies pay millions of dollars to get this much information on people … Is your personal information only worth that?”

Lesli Boldt, president, Boldt Communications, said the move by Loblaws now looks less about saying sorry and more about protecting the company.

“Having said that, it seems like a wise thing to do, from a legal standpoint, protect the company,” Boldt said. “I don’t think most customers will think about it that much. I think a lot of people will just want the $25, particularly since they don’t have to provide proof of purchase.”

Loblaw also said it reserves the right to limit the number of cards it distributes, although Groh said more than one adult from the same household may apply.

Customers won’t be able to use the $25 card to purchase certain products, including alcohol or tobacco, because federal and provincial regulations do not allow the purchase of alcohol or tobacco with cards of this sort, Groh said.

Loblaw is the only grocer to admit to bread price-fixing.

Representatives from Sobeys and Metro have denied allegations by Loblaw chairman and chief executive officer Galen G. Weston that the problem was industry-wide.

Read more:

What you need to know about the $25 Loblaw card

Loblaw hit with backlash over response to bread price-fixing scheme

Opinion | Vinay Menon: Price-fixing scandal must extend beyond the bread aisle — just follow the dough

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