March 31 - 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.
Giant Eagle Inc., a Pittsburgh supermarket chain, filed suit last week in U.S. District Court in Pittsburgh against Hershey Co., Mars Inc., Nestle SA, Cadbury Schweppes PLC and Itwal Ltd., a Canadian network of distributors, accusing the companies of colluding since 2002.
"The chocolate confectionery product market was ripe for collusion," the lawsuit says. "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 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.
The U.S. Justice Department also has inquired into the chocolate makers' pricing practices, according to Mars, Nestle and Hershey. In February, the German Federal Cartel Office raided the offices of seven candy makers, including Hershey, Mars and Nestle. Also in February, Hershey disclosed in its annual report that the European Commission had requested information on its pricing practices.
Nestle spokeswoman Patricia Bowles said she hadn't seen the lawsuits and can't comment on litigation in general, but "we plan to cooperate fully with this investigation as we have from the get-go."
Hershey said it didn't make any agreements with competitors to set prices in the U.S. "None of the lawsuit complaints contain any facts or evidence to suggest otherwise," said Hershey spokesman Kirk Saville. "The lawsuits are based on unfounded allegations. We intend to vigorously defend against them and are confident we will prevail."
Spokeswomen for Mars and Cadbury declined to comment. Itwal didn't return calls for comment.
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. In the latest lawsuit, Giant Eagle claims it purchased more than $200 million worth of chocolate from Hershey, Mars and Nestle 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, Nestle increased its prices to Giant Eagle by 17%, and less than two months after that Mars increased its prices by almost 16%
Another lawsuit filed jointly last month by Safeway Inc., Walgreen Co., Hy-Vee Inc. and Kroger Co., the second-largest U.S. food retailer by sales behind Wal-Mart Stores Inc., describes chocolate as "the prize of youngsters and the secret craving of adults. But chocolate is big business. The business of manufacturing, pricing and marketing chocolate confectionery products is susceptible to the same kinds of sinister market forces that infect other businesses as well."