WASHINGTON -- Chocolate companies already under scrutiny by U.S., Canadian and European antitrust authorities now are getting hit with lawsuits alleging they engaged in price fixing, with the latest complaints coming from major retail customers, reported the Wall Street Journal. The U.S. Department of Justice (DOJ) confirmed for the newspaper on Tuesday that it is conducting an investigation into possible price-fixing in the chocolate industry.
"The Department of Justice antitrust division is investigating the possibility of anticompetitive practices in the chocolate manufacturing industry," [image-nocss] a department spokesperson, Gina Talamona, told the Journal. She declined to elaborate.
Giant Eagle Inc., a Pittsburgh supermarket chain, filed suit last week in U.S. District Court in Pittsburgh against Hershey Co., Mars Inc., Nestlé SA, Cadbury Schweppes PLC and Itwal Ltd., a Canadian network of distributors, accusing the companies of colluding since 2002.
In recent weeks, the companies have been sued by their major customers, including Meijer Inc., Publix Super Markets Inc., CVS Pharmacy Inc. and Rite Aid Corp. Another lawsuit was filed jointly last month by Safeway Inc., Walgreen Co., Hy-Vee Inc. and Kroger Co.
In the latest lawsuit, Giant Eagle claims it purchased more than $200 million worth of chocolate from Hershey, Mars and Nestlé between 2002 and 2007, during which time the chain claims the companies instituted several price increases. On Dec. 23, 2004, Hershey increased its prices to Giant Eagle by almost 17%, according to the complaint; a few weeks later, Nestlé increased its prices to Giant Eagle by 17%, and less than two months after that Mars increased its prices by almost 16%.
"The chocolate confectionery product market was ripe for collusion," the new lawsuit said, according to the report. "In addition to the collective market power exercised by the defendants...defendants' profits from these products have suffered in recent years because of increasing health concerns, and changing consumer preferences, with respect to chocolate consumption."
About 50 civil suits have been filed against Hershey and other chocolate companies, many of them on behalf of consumers and resellers, the report added. The suits come on the heels of federal investigations into the pricing actions of these companies. In November, Canadian regulators began probing whether the Canadian divisions of Hershey, Mars and Nestle fixed prices. In February, the German Federal Cartel Office raided the offices of seven candy makers, including Hershey, Mars and Nestlé. Also in February, Hershey disclosed in its annual report that the European Commission had requested information on its pricing practices.
Nestlé spokesperson Patricia Bowles told the Journal that she had not seen the lawsuits and could not comment on litigation in general, but "we plan to cooperate fully with this investigation as we have from the get-go."
Hershey said it did not make any agreements with competitors to set prices in the United States. "None of the lawsuit complaints contain any facts or evidence to suggest otherwise," Hershey spokesperson Kirk Saville told the newspaper. "The lawsuits are based on unfounded allegations. We intend to vigorously defend against them and are confident we will prevail."
Mars and Cadbury declined to comment to the Journal, and Itwal did not return calls for comment.
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