Canada's big chocolate-bar makers have been colluding for years to fix prices and stop retailers from offering discounts to consumers, court filings allege.
Senior executives at Hershey Canada Inc., Mars Canada Inc. and Nestlé Canada Inc. met secretly in coffee shops, restaurants and at industry conventions to set prices, the documents say. At one point, the chief executive of Nestlé Canada is alleged to have handed envelopes stuffed with pricing information to a competitor, instructing the person not to be seen picking up the material in his office.
The collusion began in 2002 and continued until a few weeks ago, the documents allege. It also involved a major food distributor, ITWAL Ltd., whose president sent regular updates to participants.
The allegations are contained in two search warrants the federal Competition Bureau obtained last month as part of an investigation into the $2-billion-a-year chocolate industry. The U.S. Department of Justice has launched a similar inquiry as a result of the Canadian probe.
Court documents in the Canadian case, unsealed by an Ottawa judge yesterday, reveal that more than 30 bureau investigators are involved. The warrants authorized officials to seize thousands of corporate documents and computer files from Hershey, Mars, Nestlé and ITWAL.
None of the allegations have been proven. Officials from the chocolate companies declined to comment.
Each company said it is co-operating with the investigation. Glenn Stevens, the president of ITWAL, was not available for comment.
Cadbury Adams Canada Inc., Nestlé, Hershey and Mars control two-thirds of the chocolate market in Canada and make popular products such as Kit Kat, Oh Henry! and Snickers. However, chocolate makers everywhere are hurting because of health concerns, changing consumer preferences and rising costs. The bureau's investigation began in July with the help of a "co-operating" company involved in the plot. The company's identity was not revealed but the unsealed warrants did not name Cadbury. A spokeswoman for Cadbury declined to comment.
The bureau alleged the collusion started in February, 2002, and was initially co-ordinated by ITWAL. According to the court documents, ITWAL worked with the chocolate companies to force retailers to stop cutting prices for chocolate bars, which usually sell for about $1. Stores that didn't comply were cut off, the documents alleged.
"At the 'end of the day' it is only the suppliers' control and discipline of the [discounting]that can restore the functionality of the marketplace," Mr. Stevens wrote in a memo titled TAKE ACTION NOW!! to the chocolate makers on Feb. 21. 2002. The court documents also outlined several meetings involving senior executives of the chocolate companies.
"I want you to hear it from the top - I take my pricing seriously," Robert Leonidas, Nestlé's CEO, allegedly told a competitor during one meeting before handing him an envelope containing pricing information. The documents say that other meetings took place at a coffee shop in Toronto in 2006, Toronto's Auberge du Pommier restaurant in July, 2007, and at food conventions in Vancouver and Niagara-on-the-Lake, Ont., in 2007. When one participant balked at the discussions, Eric Lent, Hershey Canada's general manager allegedly replied: "Don't worry, we can talk about it. Bob [Leonidas]and I talk all the time."