Retailers Sue Chocolate Companies Over Alleged Price Fixing
Retailers including CVS, Delhaize (Food Lion, Hannaford and Sweetbay), Giant Eagle, Hy-Vee, Kroger, Meijer, Publix, Rite Aid, Safeway and Walgreens, have all recently filed lawsuits alleging that the major chocolate companies selling products in the U.S. have engaged in price-fixing.
A lawsuit filed last week by Giant Eagle against Cadbury Schweppes, Hershey, Mars and Nestle alleges that the companies have colluded on prices going back to 2002.
The suit, as reported by The Wall Street Journal, contends, “The chocolate confectionery product market was ripe for collusion. 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.”
Suits filed in U.S. courts along with investigations launched by Canadian and European authorities have caught the attention of the Justice Department.
A spokesperson for the department, Gina Talamona, said its “antitrust division is investigating the possibility of anticompetitive practices in the chocolate manufacturing industry.”
According to The Journal report, the German Federal Cartel Office raided the offices of seven different candy makers in that country. Hershey, Mars and Nestle were among the companies investigated.
Kirk Saville, a spokesperson for Hershey, denied the collusion allegations made against the company.
“None of the lawsuit complaints contain any facts or evidence to suggest otherwise,” he told The Journal. “The lawsuits are based on unfounded allegations. We intend to vigorously defend against them and are confident we will prevail.”
Nestle has not commented on any of the pending suits against it in U.S. courts but has maintained that it is cooperating fully with investigators.
If any of the companies were found to have engaged in price-fixing, then it is likely fines would be imposed. It is also possible that executives involved in the activity could face jail sentences.
Discussion Questions: Isn’t it common in commodity-based categories such as cocoa, coffee, paper, oil, wheat, etc. that prices rise or fall across the board at roughly the same rate and pace? Why do you see retailers filing suits against chocolate manufacturers when they have not done the same in other categories where competing companies take price increases on virtually the same schedule?
- Retailers’ Lawsuits Accuse ?Candy Makers of Fixing Prices – The Wall Street Journal (sub. required)
- U.S. Probes Chocolate Price Fixing – The Wall Street Journal (sub. required)