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War of words erupts as Cadbury’s ill-fated Israel venture heads to court

By Oliver Nieburg+

16-Jan-2014
Last updated on 16-Jan-2014 at 12:25 GMT2014-01-16T12:25:34Z

Artillery fully-loaded ahead of Cadbury Israel court battle. Photo Credit: Flickr - Vlad the Impala
Artillery fully-loaded ahead of Cadbury Israel court battle. Photo Credit: Flickr - Vlad the Impala

Cadbury’s Israeli distributor Carmit Candy Industries has accused the Strauss Group of employing a war-like strategy to block Cadbury’s entry into Israel, while Strauss says Carmit only has itself to blame for Cadbury’s failings.

Carmit Candy launched civil action against Strauss Group subsidiary Elite two years ago for allegedly preventing Cadbury’s entry into Israel in 2002. The case will proceed in the Lod Central District Court on 12 February.

Carmit: ‘Misuse of monopoly power’

Zohar Lande, a partner at Barnea & Co, the law firm representing Carmit alleged that Strauss, which commands 60% of the Israeli chocolate market , used its dominance in breach of antitrust laws to prevent Cadbury products from entering the Israel. Carmit is seeking NIS 36 million ($10.3m) in damages.

“It’s a misuse of monopoly power. We have received documents from the antitrust commissioner that shows that Strauss has prepared for Cadbury’s entry into Israel as a war. But even in a war you have rules,” he told ConfectioneryNews.

Carmit claims to possess documents and affidavits filed with the court that alleges Strauss threatened to rescind discounts offered to retailers if they stocked Cadbury products – some of these documents have been leaked to the Israeli press .

In 2006, Israel’s Antitrust Authority fined Elite NIS 5 million ($1.1m) following the investigation. It was agreed that no criminal charges would proceed, but entitled Carmit to claim for civil damages.

Strauss: ‘Failure begins and ends with Carmit’

Strauss accounts for 60% of the Israeli chocolate market through Elite brands such as Pesek Zman.

Strauss said in an emailed statement that it was being used as a scapegoat for Carmit’s failings.

“Carmit's lawyers' attempt to deal with words rather than the substance is designed to cover the echoes of a failing business that begins and ends in Carmit, its managers and products. In all their company documents, Carmit and its managers used words like ‘war’, ‘blocked’ and ‘artillery’.  After failing, they attack us [Elite] for using the same words – it is cheap hypocrisy.”

Strauss argues that sales for Cadbury milk chocolate fell below expectations in Israel because products were priced higher than the market average and were introduced as non-kosher products in the lead up to Passover.

“Elite has never stopped the sales of Carmit, has not damaged retailers, has not broken the law against wholesalers and most importantly – has not prevented any consumer from purchasing any product of Carmit. Carmit's failure begin and end with its conduct,” said Strauss.

David and Goliath?

Carmit’s lawyers disagree. “Every argument that Strauss has outlined has changed throughout the process. The problem is not pricing. Strauss has managed to make sure that clients don’t see the products,” said Lande.

“It’s a David and Goliath story where Goliath has taken all manner of unlawful measures.”

Cadbury owner Mondelez International was contacted, but declined to comment. The case begins next month.

In 2012, consumer group Emun Hatzibur (Public Trust) filed a complaint with Israel antitrust authority alleging that Strauss had exploited its market power to artificially raise the price of chocolate in Israel to around a third more than global norms – a claim Strauss denies.

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