Chocolate price-fixing probe ends
Crown gives no explanation for dropping final conspiracy charge in case against candy-bar execs
An eight-year probe into allegations of price-fixing in Canada’s multi-million-dollar chocolate bar industry has ended with the last charges being dropped, Canada’s competition watchdog said Wednesday.
The Public Prosecution Service of Canada entered a stay of proceedings against Nestlé Canada and former president Robert Leonidas, the Competition Bureau said in a brief statement Wednesday.
Leonidas was one of three industry executives at three different companies charged in 2013 with conspiring to fix chocolate prices between 2002 and 2008. No reason was given for the Crown’s decision. Charges against Mars Canada, former Nestlé Canada executive Sandra Martinez, candy distributor ITWAL Ltd. and its former CEO, David Glenn Stevens, were also dropped on Sept. 8. Stevens is now ITWAL’s chairman. No explanation was offered. The case against the chocolate industry began after Cadbury Adams brought the matter to the bureau’s attention in 2007. The chocolate-maker received immunity from prosecution.
Hershey Canada Inc. pleaded guilty to one count of price-fixing related to communications with competitors in 2007 and was fined $4 million on June 22, 2013, in an Ontario Superior Court of Justice.
The maximum penalties under the act in force at the time of the alleged misconduct occurred were $10 million and/or five years in prison.
The other three companies, Mars, Nestlé and ITWAL, and their three executives continued to defend against the allegations.
All four companies settled class-action lawsuits without admitting guilt. Nestlé Canada settled for $9 million, Cadbury Adams Canada for $5.7 million, Hershey Canada for $5.3 million and Mars Canada for $3.2 million.
Hershey’s sentencing hearing provided a glimpse of the allegations the companies were facing.
At the time, the four largest chocolatemakers accounted for 75.3 per cent of chocolate sales in Canada, a market valued at $840 million, court heard. Nestlé was the market leader, court heard.
During the period, senior employees at Hershey and their counterparts at other chocolate companies exchanged competitive pricing information, either directly or through their distributor ITWAL, court heard.
On Nov. 22, 2007, this conduct led to an explicit agreement during a call between a senior manager at Hershey and senior officer at Nestlé, court heard. During the call, the Nestlé officer alluded to a previous conversation in which Nestlé had disclosed its pricing plans, court heard. In response, the senior manager at Hershey said Hershey planned to follow suit.
However, Hershey did not raise its prices in 2007, has expressed its remorse and fired the individuals involved, lawyer Martin Low, a partner at McMillan, told the court.
Earlier in the bureau’s investigation, court documents that were unsealed in December 2007 contained allegations of senior executives at Hershey, Mars and Nestlé allegedly meeting in secret in coffee shops, restaurants and at industry conventions to set prices.
At one point, the head of Nestlé Canada allegedly handed envelopes stuffed with pricing information to a competitor, instructing the person not to be seen picking up the material in his office, according to the court filings. However, the allegations were never proven in court.
The bureau said Tuesday that its immunity and leniency programs offer powerful incentives for organizations and individuals to come forward and co-operate with bureau investigators. The program has proven to be among its best weapons to combat criminal cartels under the Competition Act.
The bureau said it considers the chocolate case closed.