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Canada price fixing woes: Chocolate titans settle class action but still face criminal charges

By Kacey Culliney , 19-Sep-2013
Last updated the 19-Sep-2013 at 11:39 GMT

Despite Mars and Nestlé Canada's class action pay out, the two firms still face criminal charges under a separate Competition Bureau investigation
Despite Mars and Nestlé Canada's class action pay out, the two firms still face criminal charges under a separate Competition Bureau investigation

Mars and Nestlé have opted to settle a class action lawsuit over price fixing allegations in Canada but both still face criminal charges in a separate investigation from the Competition Bureau.

The class-action lawsuit, filed in 2008, alleges that the chocolate majors conspired to fix and maintain prices of their confectionery products in Canada along with Hershey, Cadbury and national distribution network ITWAL Limited. Allegations suggest that the cartel caused consumers to pay artificially high prices.

Mars Canada and Nestlé Canada both deny any wrongdoing and have said their settlements represent “resolution of disputed claims”.

Mars has agreed to pay C$3.2m and Nestlé C$9m in exchange for a full release of the alleged claims against them and their respected entities, including Mars Incorporated and Nestlé SA.

These payments join previous settlements from Hershey Canada (C$5.3m) and Cadbury Adams (C$5.7m) – totalling C$23.2m (US$22.4m).

However, following a separate investigation conducted by Canada’s Competition Bureau, Nestlé and Mars Canada both still face criminal charges and a court hearing on October 3.

Court hearing, fines, imprisonment

Under the Competition Bureau’s investigation, Nestlé, Mars, ITWAL and three individuals have been charged for alleged price fixing following a cartel investigation that started in July 2007. The individuals involved are Robert Leonidas, former president of Nestlé Canada; Sandra Martinez, former president of confectionery for Nestlé Canada; and David Glenn Stevens, president and CEO of ITWAL.

Nestlé and Mars Canada previously told ConfectioneryNews.com that they planned to “vigorously defend” these charges .

Hershey was initially part of the Competition Bureau’s investigation but after pleading guilty and paying C$4m in fines , is no longer part of the criminal case. Hershey admitted it had conspired, agreed or arranged to fix the price of chocolate in Canada in 2007.

Mars and Nestlé Canada, ITWAL and the three individuals could now face fines of up to C$25m and/or prison of up to 14 years. Initially the law meant the companies faced fines of up to C$10m and five years' imprisonment, but in light of amendments that came into force in 2010 fines and prison time are higher.

However, Gabrielle Tassé senior communications advisor at Canada’s Competition Bureau, said that little is expected to happen on October 3 aside from settling another date for the trial.

Class action settlement fees to reach consumers

The decision from the chocolate majors to settle their separate class action lawsuit over similar allegations means that any consumer in Canada who purchased Cadbury, Hershey, Mars or Nestlé confectionery products between February 1, 2001 and December 31, 2008, can claim money back.

The settlement terms will ensure that 90% of the pay-out (less fees) – approximately C$17.3m – will directly compensate consumers.  

The remaining 10% will be allocated as indirect compensation paid out to consumer organizations that will use the money to fund programs and initiatives across Canada related to competition and consumer education.

Consumers who want to make direct compensation claims must do so by December 15, 2013. Only customers who can establish purchases in excess of C$1,000 between October 2005 to September 2007 are eligible for direct compensation. Customers who purchased products but have no proof can receive a maximum of C$50.

Questions on the class-action settlement and criminal charges to Nestlé Canada and Mars Canada went unanswered prior to publication. 

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