A former president and CEO at Nestlé Canada Inc. and Nestlé USA – who also headed up the iconic Laura Secord brand – now faces the prospect of jail time for allegedly taking part in a conspiracy with his competitors to fix chocolate prices in Canada.
The federal Competition Bureau said Thursday criminal price-fixing charges have been laid against the executive, Robert (Bob) Leonidas, as well as Nestlé Canada, its competitor, Mars Canada Inc., and a wholesale distributors network called ITWAL Ltd. Also facing charges are Sandra Martinez, former president of confectionary for Nestlé Canada, and Glenn Stevens, president and chief executive officer of ITWAL.
Allegations that executives with Nestlé, the maker of chocolate products such as Kit Kat, Coffee Crisp and Big Turk, colluded with competitors in Canada to co-ordinate price increases ranging from 4 per cent to 8 per cent were first revealed in 2007, after Competition Bureau investigators raided the Canadian offices of Nestlé, Hershey, Mars and ITWAL, and court filings used to obtain those search warrants were released.
In those court filings, the bureau alleged executives met in restaurants and at conventions to discuss price increases on both regular and seasonal chocolates, such as those aimed at Halloween and Easter. The bureau alleged in those filings that Mr. Leonidas once handed a competitor an envelope stuffed with his firm’s pricing information, saying: “I want you to hear it from the top – I take my pricing seriously.”
Mr. Leonidas, a food-industry veteran who was head of Nestlé Canada from 2006 to 2010 and now works as a consultant and sits on a handful of corporate boards, vowed through his lawyer, Jay Naster, to fight the charges: “Mr. Leonidas looks forward to his day in court where we intend to vigorously defend against these allegations.”
Nestlé and Mars, ITWAL and Mr. Stevens also pledged to defend themselves against the allegations. Ms. Martinez could not be reached.
The charges come after a complex six-year probe, with some of the alleged price fixing dating back to 2002. Thursday’s announcement also comes more than a year after lawyers for the Competition Bureau told a court hearing that charges for Mr. Leonidas would be coming “shortly.”
It’s the latest prosecution from a federal free-market watchdog both lauded and criticized for taking a much more aggressive stance in recent years, and it follows a series of price-fixing busts in the gas-station business in Eastern Ontario and Quebec.
The maximum penalties those charged face include a fine of up to $10-million and a prison sentence of up to five years, the bureau said. (More recently, the maximum penalties were increased to $25-million, and 14 years in prison.)
The bureau revealed that the alleged price-fixing conspiracy came to light under its “immunity program,” which grants freedom from prosecution to the first participant to alert the bureau. The bureau did not reveal who that person or company was.
But it did say that Hershey Canada Inc. had co-operated with the investigation, and that the bureau would be recommending lenient treatment for Hershey. The company was expected to plead guilty for its role in the alleged price-fixing conspiracy on June 21, the bureau said.
Hershey issued a statement saying it had settled with the Competition Bureau and agreed to plead guilty to one count of price fixing. The company also said it “did not implement the planned price increase” in 2007 at the centre of the allegations.
All of the companies, as well as Cadbury Canada – which is not mentioned in the Competition Bureau’s allegations – have recently paid $23.2-million between them to settle class-action cases launched on behalf of chocolate buyers in Canada over the alleged price fixing. As is typical, the companies do not admit to any wrongdoing in the settlements.
A spokesperson for Cadbury could not be reached. In court documents filed in a U.S. class action against the chocolate companies alleging price fixing, the company is identified as “likely to be the party co-operating with Canadian authorities,” as it was not named in the Competition Bureau’s 2007 search warrants.