Hershey pleads guilty to chocolate price-fixing in Canada

Posted by AFN Staff Writers on 26th June 2013

Hershey Canada Inc. (Hershey) has pleaded guilty before the Ontario Superior Court of Justice in Toronto for its role in fixing the price of chocolate confectionery products in Canada contrary to the criminal conspiracy provision in the Canadian Competition Act. Hershey was fined $4 million.

The Canadian Competition Bureau said that because Hershey had co-operated with the Bureau’s investigation, and will co-operate with any subsequent prosecution, it recommended to the Public Prosecution Service of Canada (PPSC) that Hershey receive lenient treatment. Hershey admitted that it “conspired, agreed or arranged” to fix the price of chocolate confectionery products in Canada in 2007.

“Price-fixing is a serious criminal offence, regardless of whether it is in the chocolate confectionery market or any other industry,” said John Pecman, Commissioner of Competition. “The collaboration of organisations or individuals is one our best weapons to bring to light the illegal agreements between competitors, which are secretive in nature and very difficult to detect,” he said.

Hershey further admitted that in 2007 senior employees acting within the scope of their authority at Hershey communicated with other members of the alleged cartel to exchange competitively sensitive pricing information about chocolate confectionery products in Canada.

On 6 June 2013, charges were laid against three companies and three individuals. The companies were Nestle Canada Inc, Mars Canada Inc, ITWAL Limited (ITWAL), a national network of independent wholesale distributors. Individuals charged were Robert Leonidas, former President of Nestle Canada, Sandra Martinez, former President of Confectionery for Nestle Canada, and David Glenn Stevens, President and CEO of ITWAL.

The Bureau said it became aware of the conduct through its Immunity Program. Under the Immunity Program, the first party to disclose to the Bureau an offence not yet detected or to provide evidence leading to a referral of evidence to the PPSC may receive immunity from the PPSC, provided that it fully cooperates with the Bureau’s investigation and any later prosecution.

Subsequent co-operating parties may receive lenient treatment under the Bureau’s Leniency Program. The Bureau said these programs provide powerful incentives for organisations and individuals to come forward and co-operate with the Bureau’s investigations.

Under the current conspiracy provision in the Canadian Competition Act, it is a criminal offence for two or more competitors or potential competitors to conspire, agree or arrange to fix prices, allocate customers or markets, or restrict the output of a product. An offence under this provision is punishable by a fine of up to $25 million and/or imprisonment for a term of up to 14 years. In this case, the conduct occurred under the former conspiracy provision, which provides for a fine of up to $10 million and/or imprisonment for a term of up to five years.

To secure a conviction under the former conspiracy provision of the Act, the Bureau is required not only to prove an agreement between competitors to fix prices, but also that the agreement was likely to have an undue economic effect on competition in the market. This significantly increases the complexity of proving a violation of the Act.

The Canadian Competition Bureau, as an independent law enforcement agency, ensures that Canadian businesses and consumers prosper in a competitive and innovative marketplace.