A $727m chocolate price fixing lawsuit against Hershey, Mars and Nestlé has been thrown out by the district court in Pennsylvania.
The chocolate firms, which command 75% of the US market, were liable for $727m in damages for alleged conspiracy to raise chocolate prices in the US between 2002 and 2007.
Mondelez International-owned Cadbury was a defendant in the initial allegation brought in 2007, but settled for $1.3m in 2012.
‘Probata could not match the allegata’
Chief Judge Conner ruled yesterday in the US District Court for the Middle District of Pennsylvania that the claimants, a class of 91 that purchased chocolate from the companies, had failed to establish that the firms’ actions were the result of concerted and collusive action.
“Nothing scandalous or improper has been discovered within our borders, and no evidence permits a reasonable inference of a price-fixing agreement,” he concluded.
The judge said that as the three companies had been criminally charged with price fixing in Canada, it was plausible that the same thing happened in the US. “But, at the end of the day, the probata could not match the allegata.”
The antitrust litigation was therefore dismissed. But claimants hold the right to appeal.
Canadian price fixing
In 2013, eleven chocolate companies including Nestlé and Kraft (now Mondelez) were fined over €60m ($82m) for colluding to raise chocolate prices in Germany in 2007. Nestle said it would appeal, while Mondelez accepted the fine. Mars escaped financial penalty as one of the initial whistleblowers.
The claimants had alleged that the chocolatiers were spurred by the success of a price-fixing conspiracy among affiliates in Canada and agreed to collude to raise prices in tandem during discussions at trade shows and association events.
Prior to the US case, Mars, Nestlé, Hershey Canada and Cadbury Adams all settled class action lawsuits in Canada over chocolate price fixing allegations in 2007.
Canada’s Competition Bureau laid criminal charges against Nestlé Canada and Mars Canada last year, which both intend to fight. Hershey was dealt with leniently after cooperating with authorities and accepted a $4m fine.
Rising ingredient costs
In yesterday’s Re: Chocolate Confectionary Antitrust Litigation case, the claimants did not dispute that cocoa prices were on the rise when the chocolate companies implemented price increases. However, the companies did not pay futures exchange prices because of hedging.
The chocolate firms contended that the price increases, which were between 2-4 cents extra on singles and king-sizes, were in part motivated by rising ingredient, manufacturing and distribution costs.
Yesterday’s ruling does not affect a separate class action brought by the Associated Wholesale Grocer (AWG), a retailer-owned cooperative that supplies retail member stores, in the District Court in Kansas in 2012, which accuses Hershey, Nestle, Mars and Cadbury of chocolate price fixing on three occasions between 2002 and 2008.