Crown prosecutors have abandoned a high-profile criminal price-fixing case against Nestlé Canada Inc. and the company's former president and chief executive officer, Robert (Bob) Leonidas, staying charges that they were involved in a conspiracy to inflate the price of chocolate bars.
The federal Competition Bureau, which investigated the allegations in a sprawling probe that began in 2007, announced on Wednesday that the Public Prosecution Service of Canada had stayed the charges – a decision that the bureau pointed out in its statement was "taken independently" by the prosecution service.
The move, which came in a brief Toronto court appearance on Tuesday, brings a final end to a case long delayed by procedural wrangling. It follows the Crown's staying of charges in September against the other defendants: Mars Canada Inc., wholesale distributor ITWAL Ltd., former Nestlé executive Sandra Martinez and ITWAL president and CEO Glenn Stevens.
A spokesman for the Public Prosecution Service confirmed Wednesday the case against Nestlé and Mr. Leonidas was abandoned because the Crown had concluded there was "no reasonable prospect of conviction," but, as is customary, would not go into further details. If convicted, the former CEO faced the prospect of a fine of up to $10-million and a prison sentence of up to five years.
Price-fixing cases are notoriously difficult to investigate and prosecute. But the Crown's surrender comes in a case with allegations that were walked into the Competition Bureau by Cadbury Adams Canada Inc., which was granted immunity for voluntarily providing details in 2007 of an alleged price-fixing cartel involving the company and the other large players in Canada's chocolate-bar business. Competition Bureau investigators subsequently raided the offices of Hershey Canada Inc., Nestlé, Mars and ITWAL.
Plus, the bureau also granted leniency to Hershey Canada for its co-operation in the investigation. The company pleaded guilty shortly after the criminal charges were laid in 2013 and agreed to pay a $4-million fine. The major chocolate makers had also agreed to pay a total of $23.2-million to settle a class-action case launched on behalf of customers, but did not admit to any wrongdoing.
When the first batch of criminal charges were dropped in September, Crown prosecutors had also told the court at that time that they were taking two months to re-evaluate the remaining allegations against Nestlé and Mr. Leonidas, a food-industry veteran and former Nestlé USA chief who left Nestlé Canada in 2010 and has since worked as a consultant in Toronto.
The allegations in the case were that Nestlé – the maker of chocolate bars such as Kit Kat and Big Turk – colluded with its major competitors in Canada to co-ordinate price increases ranging from 4 per cent to 8 per cent from 2002 to 2008.
In court filings seeking a warrant to raid the companies' offices in 2007, the bureau alleged that chocolate executives met in restaurants and at conventions to discuss price increases on both regular and seasonal products such as those aimed at Halloween and Easter.
The bureau also alleged in those court filings that it was told 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."
Robert Kwinter, lawyer with Blake Cassels & Graydon LLP that acted for Nestlé in the case, welcomed the stay of the charges by the Crown: "They said they had concluded they did not have sufficient evidence to secure a conviction.… At the end of the day, there's a difference between allegations and evidence."
Price-fixing cases are notoriously difficult to prove. Mere communication between competitors about prices is not enough, as prosecutors must show there was an actual agreement. As well, in cases like this one that predate legislative amendments made in 2010, the Crown still has to prove that the alleged price fixing created an "undue lessening of competition," and actually had a significant effect on prices in the marketplace.
In addition to taking five years for any charges to be filed, the criminal prosecution bogged down last year in a dispute over documents that Hershey and Cadbury had fought to keep sealed. In February, a judge ruled that information handed over by the two companies as they began to co-operate with Competition Bureau investigators could be given to the other defendants in the case.