BUSINESS

Canada Chocolate Price Fixing: Nestle, Hershey Among Companies Charged

06/06/2013 12:30 EDT | Updated 08/06/2013 05:12 EDT
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The accused in a chocolate price-fixing case could face a bitter fate if convicted — millions of dollars in fines for the companies and potential jail time for the individuals.

Canada's Competition Bureau said Thursday it is laying criminal charges against Nestle Canada Inc., Mars Canada Inc. and ITWAL Ltd., a network of independent wholesale distributors.

Also charged are former Nestle Canada president Robert Leonidas; Sandra Martinez, former president of confectionery for Nestle Canada; and David Glenn Stevens, president and chief executive of ITWAL.

The companies and individuals are accused of conspiracy under the Competition Act.

In separate statements, both Nestle and Mars said they intend to "vigorously defend" themselves against the charges. Both said the allegations date back to 2007 and earlier.

A statement from ITWAL was not immediately available.

Hershey Canada Ltd. said it has reached a settlement with the Competition Bureau that will see it plead guilty to one count of price-fixing, which is subject to court approval.

The plea is related to communications Hershey had with Canadian competitors in 2007.

"Hershey Canada promptly reported the conduct to the Competition Bureau, co-operated fully with its investigation and did not implement the planned price increase that was the subject of the 2007 communications," the company said in a statement.

"Hershey Canada regrets its involvement in this incident as the communications were not in keeping with The Hershey Company's principles, global business practices and high ethical standards."

Hershey Canada said its current senior management team was not involved in the alleged price-fixing. It also said the conduct was limited to the Canadian division of the U.S. candy giant.

The bureau found out about the alleged scheme through its immunity program, under which the first party to disclose an offence or provide evidence may receive immunity, provided it fully co-operates.

Subsequent parties that help out in an investigation may receive lenient treatment, as Hershey did in this case.

"We are fully committed to pursuing those who engage in egregious anti-competitive behaviour that harms Canadian consumers," said interim competition commissioner John Pecman.

"Price-fixing is a serious criminal offence and today's charges demonstrate the Competition Bureau's resolve to stop cartel activity in Canada."

The Competition Act's current conspiracy provision could mean a $25-million fine and/or imprisonment of up to 14 years.

But since the price-fixing took place before tougher rules were introduced in 2010 and came into effect in 2012, the accused in this case face a fine of up to $10 million and/or a prison term of up to five years.

Under the new rules, the Competition Bureau won't have to prove anti-competitive behaviour had an "undue economic effect on the market."

But since the chocolate price fixing took place in 2007, the bureau's case must pass that test. That makes it more complicated to prove the accused broke the law.

It's tough to pin down just how much Canadian chocolate lovers overpaid for their treats as a result of the alleged price fixing.

"It's always the big tough question," said bureau spokesman Pierre-Yves Guay.

"When we're talking about overcharge, it's very difficult to estimate in this case, as true competitive prices are difficult to determine because of the complexity of the pricing in this market."

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