Retailers Bitter About Price of Sweets

JULIE GALLAGHER

PITTSBURGH — Several retailers are seeking damages from major chocolate makers, which have been accused of anticompetitive collusion and price fixing.

The sixth and latest retailer-initiated suit was filed on behalf of Giant Eagle last month.

It claims the chain paid artificially inflated prices for chocolate bars, boxed chocolate and seasonal novelty chocolates produced by The Hershey Co., Hershey Canada, Mars Inc., Mars Canada, Nestlé Canada, Nestlé S.A., Nestlé USA, Cadbury Adams Canada and Cadbury Schweppes.

Publix Super Markets, Meijer, Kroger, Safeway, Walgreens, Hy-Vee, CVS/pharmacy, Rite Aid, Food Lion, Hannaford Bros. and Kash n' Karry Food Stores are plaintiffs in similar suits.

“We do expect other filings from” retailers, Linda Nussbaum, a partner with New York-based Kaplan Fox & Kilsheimer, told SN. She's among the attorneys who submitted suits on behalf of Publix and Meijer.

“This action arises out of an international conspiracy among the world's leading manufacturers of chocolate confectionary products to fix, raise, maintain or stabilize prices for those products in Canada and the U.S.,” reads Giant Eagle's suit.

It accuses the companies of parallel price increases resulting from anticompetitive behavior in the face of waning demand beginning in 2002 and continuing until at least 2008. Giant Eagle made over $200 million in chocolate purchases from the defendants during that time period. It is seeking three times the amount of damages it sustained to its business, plus legal fees. Spokesman Dan Donovan said the company couldn't comment.

Giant Eagle's suit quotes details of an ongoing investigation of the chocolate makers by the Canadian Competition Bureau, including information related to emails and meetings that allegedly detail plans to raise prices.

The U.S. Department of Justice's Antitrust Division and the European Commission are also investigating chocolate manufacturers' pricing practices, according to published reports.

None of the defendants returned SN's request for comment.

They collectively control about 50% of the global chocolate confectionery market and about 80% of the U.S. market.

“Hershey's and Mars' rivalry is up there with Coke and Pepsi's, so at first blush it seems odd that they'd be [accused] of colluding,” said Jim Hertel, managing partner of Barrington, Ill.-based Willard Bishop. “In oligopolist markets, where there are relatively few major players, it's not uncommon for someone to take the lead in pricing and see whether or not competitors follow suit, and if they don't, they withdraw the pricing increase.”

Giant Eagle cites examples in its suit of price increases that took place during the period in question. It said that on Dec. 23, 2004, Hershey increased its prices to the retailer by 16.7% and on Jan. 12, 2005, Nestlé increased its prices to Giant Eagle by 17.04%. Mars raised its prices to the retailer by 15.6% on March 6, 2005.

Last month, the flurry of lawsuits began. A suit seeking compensatory damages was filed on behalf of Kroger, Safeway, Walgreens and Hy-Vee on March 6.

Meijer and Publix Super Markets filed individual suits against the chocolate makers on March 7 and March 10, respectively.

Suits were also filed on behalf of CVS/pharmacy and Rite Aid on March 21 and for Food Lion, Hannaford Bros. and Kash n' Karry on March 25.

Legal actions have also been initiated by individual consumers, distributors and vending companies.