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Chocolate titans in fresh antitrust lawsuit for alleged US price fixing

By Oliver Nieburg , 18-Apr-2012

The case being pursued in Kansas Federal Court by The Associated Wholesale Grocer
The case being pursued in Kansas Federal Court by The Associated Wholesale Grocer

Hershey, Nestle, Mars and Cadbury have been hit with a new antitrust lawsuit that alleges the companies conspired together to fix chocolate prices in the US between 2002 and 2008.

The Associated Wholesale Grocer (AWG), a retailer-owned cooperative that supplies retail member stores, brought the action in the District Court in Kansas through law firm Stueve Siegel Hanson LPP.

Hershey et al. are already defendants in an on-going class action law suit in Pennsylvania Federal Court, which consolidates around 80 separate cases alleging price fixing.

The allegation

AWG alleges that Hershey, Nestle, Mars and Cadbury worked together to artificially rise the price of chocolate on three occasions between 2002 and 2008 as growth slowed in the US chocolate market.

“In the face of this drop in demand and the prospect of declining revenue, defendants colluded in order to increase their prices, revenues and profit,” read the suit.

AWG added that the companies must have acted together because if they had not they would each of faced negative market percussions if they raised prices and their competitors did not.

The companies, which account for around 76% of the US chocolate market, contend that the price increases were introduced in response to rising raw materials and supply chain costs.

AWG alleges that prices for cocoa, which makes up around 25% of input costs for the companies, and sugar, which accounts for 16%, were stable during the period

The claimant said the companies’ actions breach The Sherman Act on illegal conspiring and the cooperative is seeking damages and trial by jury.

The grounds

AWG is relying on material collected in an ongoing investigation by the Canadian Competition Bureau against the chocolate companies that began in 2007.

The investigation related to alleged price fixing on the Canadian chocolate market, but AWG contends the companies could not have achieved parallel price increases in Canada without agreeing to fix prices together in the US.

The Canadian investigation unearthed letters and evidence of meetings that purportedly encouraged and showed signs of a conspiracy to fix prices.

The Canadian Competition Bureau was contacted but declined to comment on the ongoing investigation.

Defences

Edie Burge, Corporate & Brand Affairs at Nestlé USA told this site: "Nestlé USA denies all allegations of anticompetitive activity in the complaint and will vigorously defend itself.  It is our policy to follow all applicable laws and regulations wherever we do business."  

A Mars spokesperson said: “Mars is committed to fair and open competition.  It is Mars’ policy not to comment on any ongoing litigation.  Therefore we cannot comment on this case or anything related to it.”

ConfectioneryNews.com has asked Hershey for comment and is awaiting a response.

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