Opinion ID: 2936316
Heading Depth: 3
Heading Rank: 2

Heading: Possession of advance pricing

Text: information The Plaintiffs also highlight evidence that they argue shows that the Chocolate Manufacturers exchanged pricing information before they publicly announced the price increases. Specifically, the Plaintiffs point to an internal Hershey document from 2002 reflecting that Hershey knew as early as September 2002 that “Mars [wa]s considering a price increase due to rising cocoa costs,” J.A. 5300, even though Mars did not publicly announce a price increase until December. According to the Direct Purchaser Class, only a small group of Mars senior executives knew about the planned price increase in September, and Hershey reacted by changing its internal pricing system in anticipation of a price increase, both of which, the Direct Purchaser Class argues, support an inference that the information was more than rumor and came from Mars executives. Hershey insists that it did not obtain the information from Mars, citing an internal pricing presentation from October 2002 stating that “[third] party cocoa suppliers believe Mars will soon take a price increase.” J.A. 4606. That Hershey had advance warning of Mars’s price increase is further supported, the Plaintiffs contend, by a memo from Hershey CEO Lenny to the Hershey board stating that the Mars 2002 price increase was “roughly in line with expectations,” J.A. 4620. Additionally, the Direct Purchaser Class points to a 2004 Hershey memo, again from Lenny to the Hershey board, stating that Hershey “received confirmation that both Mars and Nestl[é] have also raised their prices on loose bars.” J.A. 42 5276. Lenny’s statement came two days before Nestlé USA publicly announced its price increase. According to the Hershey vice president who passed the information about Nestlé USA’s price increase on to Lenny, the information came from a customer, not Nestlé USA. See J.A. 12999. The “mere possession of competitive memoranda” is not evidence of concerted action to fix prices. Baby Food, 166 F.3d at 126. In Baby Food, the plaintiffs also relied on the defendants’ possession of documents that contained competitor pricing information in advance of any public announcements. Low-level employees gathered some of the information, but the defendants provided no explanation as to how they obtained other information. Still, we decided that this evidence did not support the plaintiffs’ conspiracy claim. Id. For information that came from low-level employees, we viewed it as less worrisome than if it had come from upperlevel executives. Id. at 125–26 & n.8. We also insisted on proof that such information “had an impact on pricing decisions.” Id. at 125. Even for the advance information from unexplained sources, we noted that “it makes common sense to obtain as much information as possible of the pricing policies and marketing strategies of one’s competitors.” Id. at 126. In Flat Glass, we distinguished Baby Food and held that the evidence showing possession of advance pricing information supported an inference of conspiracy. The evidence in Flat Glass showed that the information exchanges occurred among the conspiring companies’ upper ranks and that the exchanges affected prices. See 385 F.3d at 369 (citing example of a fax from one competitor to another revealing the sender’s planned price increase and noting that the fax recipient announced an identical price increase before the fax sender). We summarized the evidence: 43 [H]ere the exchanges of information are more tightly linked with concerted behavior and therefore they appear more purposive. Several of the key documents emphasize that the relevant price increases were not economically justified or supportable, but required competitors to hold the line. Others suggest not just foreknowledge of a single competitor’s pricing plans, but of the plans of multiple competitors. Predictions of price behavior were followed by actual price changes. The inference of concerted rather than interdependent action is therefore stronger. Id. On the spectrum of advance pricing evidence, the Plaintiff’s evidence here is much closer to the evidence in Baby Food than to the evidence in Flat Glass. The Plaintiffs have no direct or strong circumstantial evidence that the information came from Hershey’s competitors, much less their upper-level executives. The information is also limited to advance pricing information and, unlike in Flat Glass, does not reveal pricing plans dependent on others following. Furthermore, the two-day notice of Nestlé USA’s 2004 price increase came after Hershey had already announced its price increase, so it is hard to say it affected Hershey’s pricing decision. Finally, the record shows that the Chocolate Manufacturers’ pricing actions were intended to, and in some cases did, catch their rivals by surprise. See J.A. 1261 (Mars 2002 internal document explaining how Mars leading a price increase could “disrupt[] distracted competition”); J.A. 3641 (Hershey 2004 email from David West stating he was “[a]ngry at [him]self” that Hershey did not anticipate Mars’s 2004 price increase on packaged products); J.A. 5274 (Mars 44 2007 email from Gamgort praising Mars’s 2007 price increase as brilliantly timed because it “caught [Hershey] and [Nestlé USA] totally by surprise”). In sum, gathering the price information of competitors can be just as consistent with lawful interdependence as with a price-fixing conspiracy. See Baby Food, 166 F.3d at 126. The evidence summarized above does not support an inference of a conspiracy.