Last week, the Competition Bureau (the “Bureau”) announced that in the context of its long-running prosecution of an alleged price-fixing cartel in the chocolate industry, the Public Prosecution Service of Canada (the “PPSC”) stayed the proceedings against ITWAL Ltd., Mars Canada Inc., and two of the three individuals being prosecuted (former executives of ITWAL and Nestlé Canada Inc.). The prosecution will continue against Nestlé Canada Inc. and Robert Leonidas, the former President for Nestlé Canada Inc.

Background

In June 2013, the Bureau laid charges against three companies and three individuals accused of conspiracy under the Competition Act for their alleged role in fixing the price of chocolate confectionary products in Canada. It is worth noting that the investigation was first announced by the Bureau in November 2007.

The conduct was brought to the Bureau’s attention by Cadbury Adams Canada, Inc. through the Immunity Program. The second party to cooperate with the Bureau’s investigation was Hershey Canada Inc. under the Bureau’s Leniency Program (under this program cooperating parties receive reduced penalties and can typically avoid jail sentences).

According to court materials and media reports, the Bureau found evidence suggesting that the accused conspired, agreed or arranged to fix prices of chocolate products. Specifically, the chocolate company executives met in restaurants and at trade shows to discuss price increases, ranging from 4 to 8%, on both regular and seasonal (e.g., as Halloween and Easter) chocolates and other confectionary items. Following its investigation, the Bureau referred the matter to the Director of PPSC. The PPSC is responsible for prosecuting cases on behalf of the Attorney General of Canada.

In this case, the conduct occurred under the prior conspiracy provision (prior to March 2010, the prosecution had to prove that the conduct had resulted in an undue lessening of competition, in contract to the current per se standard) and the accused face the possibility of a fine of up to $10 million and/or imprisonment for a term of up to five years. Under the current conspiracy provision, the accused can face fines of up to $25 million and/or imprisonment for a term of up to 14 years. In addition to criminal sanctions, the Competition Act allows for private actions to be brought for damages incurred as a result of criminal conduct prohibited by the Competition Act (including conspiracy to fix prices). In 2013, the four largest chocolate makers (i.e., Cadbury Adams, Hershey, Nestlé and distributor ITWAL) agreed to pay approximately $23 million to settle a class-action lawsuit stemming from the Bureau’s investigation in price-fixing in the Canadian market.

Key Takeaway

Neither the Bureau nor the PPSC provided any reasons explaining why it has stayed prosecutions against certain companies and individuals and not others. However, it’s decision is likely based on who the PPSC believes it has the best case against based on the evidence available to it. 

Nevertheless, the case highlights the fact that cartel detection and enforcement action remains a priority for the Commissioner of Competition. It is also underscores the importance for businesses to remain vigilant when it comes to their interactions with competitors by having clear protocols and training for staff participating in trade association meetings and/or otherwise interacting with competitors. Further, given that this case has been ongoing since 2007, it reinforces the unfortunate reality, that unlike your favourite chocolate bar, a price-fixing case will leave a bad taste for many years.

For a link to the Bureau’s press release, please click here.