Opinion ID: 2936316
Heading Depth: 2
Heading Rank: 2

Heading: The Purported U.S. Conspiracy

Text: 9 According to the Plaintiffs, the Chocolate Manufacturers conspired to raise U.S. list prices on chocolate candy products three times between 2002 and 2007. On December 7, 2002, following a seven-year period of stagnant prices, Mars announced list price increases on singles and six packs by 3.5 cents per bar effective December 9, 2002. On December 9, Hershey announced an identical price increase on singles and a slightly lesser price increase on six packs; in addition, Hershey announced price increases on kings and ten packs (all effective January 2003). On December 11, Nestlé USA’s prices moved too, effectively matching Mars and Hershey’s price increases on singles, Hershey’s price increase on kings, and Mars’s greater price increase on six packs. Days later, Mars matched Hershey’s increase on kings and exceeded Hershey’s increase on ten packs. Next, in November 2004, Mars initiated another price increase, this time on future consumption products. Nearly one month later, Hershey followed Mars’s price increase on future consumption products and also raised prices on singles, kings, and six packs. Soon after, Mars matched Hershey’s increases. Nestlé USA followed with nearly identical increases several days later. Finally, on March 23, 2007, Mars initiated the final increase during the alleged conspiracy period when it increased prices on singles and kings. Hershey matched the increases on April 4, and Nestlé USA followed the next day. The conspiracy was furthered, the Plaintiffs argue, by the Chocolate Manufacturers exchanging information on each other’s planned price increases before publicly announcing those increases. For example, an internal Hershey document shows that Hershey had information as early as September 2002 that Mars was “considering a price increase due to rising cocoa costs,” J.A. 5300, and in announcing the 2002 10 Mars price increase to the Hershey board of directors, Hershey’s CEO, Rick Lenny, characterized the Mars increase as “roughly in line with expectations,” J.A. 4620. In addition, the Plaintiffs highlight various opportunities the Chocolate Manufacturers had to conspire. For example, in 2002, at a time when the U.S. chocolate market was not thriving, the Hershey Trust, Hershey’s controlling shareholder, put Hershey up for sale. Hershey’s rivals, including Nestlé and Cadbury, were among the interested buyers. Through the proposed sale process, Nestlé and Cadbury obtained information about Hershey’s business, but the record is unclear to what extent Hershey’s most sensitive information, such as commodities cost coverage, changed hands and who received it. The Hershey Trust terminated the sale process in September 2002, shortly before the first price increase in the purported conspiracy. The Plaintiffs also point north to Canada, where the Canadian chocolate market was embroiled in its own antitrust conspiracy at the same time as the purported U.S. conspiracy. Like the U.S. market, the Canadian market is very concentrated, with the three Canadian Chocolate Manufacturers controlling roughly 66% of the market. Hershey is the parent company of Hershey Canada, and Mars is the parent company of Mars Canada. Hershey Canada and Mars Canada report to and need final approval from U.S.- based executives on pricing decisions, but the Canadian subsidiaries are separate legal entities, operate exclusively in Canada, and run their own day-to-day operations. Nestlé Canada, on the other hand, is a subsidiary of Switzerlandbased Nestlé S.A., so it is different from Hershey Canada and Mars Canada in that it does not report to a U.S. parent company. 11 From 2002 to 2007, Mars Canada, Hershey Canada, Nestlé Canada, and Cadbury Adams Canada (“Cadbury Canada”) allegedly conspired to limit competition on trade spend3 and to raise prices. The trade spend conspiracy began in 2002 when ITWAL, a direct purchaser and major distributor in Canada, sent notices to the Canadian Chocolate Manufacturers asking them to reign in trade spend. ITWAL’s efforts were successful, yielding commitments from the Canadian Chocolate Manufacturers that they would reduce trade spend. In April 2002, ITWAL’s president sent a notice to each of the Canadian Chocolate Manufacturers stating, “[I]t appears your efforts to ‘dry up’ this activity may be starting to work!” J.A. 7128. Driving home the point, ITWAL’s president sent another notice in December of that year to all the Canadian Chocolate Manufacturers stating, “I WOULD LIKE TO EXTEND CONGRATULATIONS TO YOU ALL AS WE WIND UP THE YEAR WITH RESPECT TO YOUR CONCERTED AND COMMITTED EFFORTS TO CLEAN UP THE DYSFUNCTIONAL RETAIL TRADE SPENDING.” J.A. 7157 (emphasis added). Additionally, there is evidence suggesting a pricefixing conspiracy among the Canadian Chocolate Manufacturers, including secret meetings involving pricing discussions. In 2005, for example, Nestlé Canada CEO Bob Leonidas told Cadbury Canada President David Sculthorpe that Nestlé Canada would be increasing prices and proved it with a copy of a not-yet-issued price-increase announcement, 3 Trade spend refers to rebates, allowances, discounts, and promotions that manufacturers individually negotiate with retailers that effectively lower the price that the customer pays. 12 and Sculthorpe promised that Cadbury Canada would follow. J.A. 11817–19. The Canadian scheme was ultimately the subject of a criminal investigation by the Canadian Competition Bureau. Cadbury Canada cooperated with the investigation, and Hershey Canada did as well, with Hershey pleading guilty to one count of price fixing stemming from a 2007 incident and paying a $4 million (Canadian) fine. J.A. 13564–65. In 2013, Nestlé Canada, Mars Canada, ITWAL, Leonidas, and ITWAL’s president were indicted in Canada. The Canadian case is still pending.