Unwrapping a possible conspiracy

Chocolate prices spark investigations

Regulators in three nations are investigating claims chocolate makers, such as Mars and Nestle, fixed prices. Regulators in three nations are investigating claims chocolate makers, such as Mars and Nestle, fixed prices. (MARTIN MEISSNER/ASSOCIATED PRESS)
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Associated Press / February 14, 2008

NEWARK, N.J. - If you feel your Valentine's Day chocolates are not such a sweet deal this year, you're not alone. Regulators are investigating price fixing among candy makers in at least three different countries.

In the last week, the German Federal Cartel Office raided the offices of seven leading chocolate companies including Mars Inc., Kraft Foods Inc., and Nestle SA searching for documents. Three months ago, Canada's Competition Bureau searched the offices of several companies.

The Canadian investigation sparked several American lawsuits accusing the world's biggest chocolate companies of violating antitrust laws.

The US Department of Justice declined to confirm it is investigating, yet several companies confirmed receiving inquiries.

The retailers and consumers who filed suit allege the companies needed to fix prices because while the costs for raw materials such as milk and cacao have increased, sales of chocolate in the United States have remained relatively flat in recent years. Chocolate manufacturer sales grew by 2.9 percent in 2007 to $16.3 billion, according to the National Confectioners Association.

The cases detail how informants kept letters, showing that Canadian executives exchanged confidential pricing information dating back to 2002.

Marilyne Nahum, a spokeswoman for the Competition Bureau, declined to discuss the investigation and said no charges have been filed. The companies could face criminal conspiracy charges, which carry penalties of up to $10 million Canadian dollars and five years in prison.

According to affidavits submitted in an Ontario court, top executives at Hershey Co., Mars, and Nestle met secretly to set prices. The volume of commerce involved is potentially in the billions of dollars per year.

The German Cartel Office has said it suspected the companies had conspired to raise their prices even higher than the increase in the price of raw materials would have demanded. If the office finds evidence of collaboration, the companies face possible fines of up to 10 percent of their annual income.

Several of the companies say they are cooperating with investigators.

Mars North America was contacted in early December by the US Justice Department about a preliminary inquiry concerning pricing practices in the US chocolate confectionery industry, said spokeswoman Alice Nathanson. "We will fully cooperate with any investigation that may be launched," she said.

She also confirmed German officials visited the company's offices in Viersen last week. In Canada, Mars continues to cooperate with investigators.

Edie Burge, a spokeswoman for Nestle USA, said the company "is aware of a preliminary investigation into marketing practices in the US," and will cooperate with any investigation, but has not been contacted.

A spokesman for Hershey declined to comment.

In addition, the companies are facing lawsuits from a gaggle of plaintiffs.

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