MDL Court Finds Chocolate Cos. Did Not Conspire to Increase Prices

A federal multidistrict litigation (MDL) court in Pennsylvania has determined
that individual-purchaser plaintiffs and a direct-purchaser class failed to
discover evidence that U.S. chocolate companies conspired to increase prices
for immediate-consumption products between 2002 and 2007, and, with
“nothing more than speculation as to the who, what, when, where, and how
of communications that allegedly facilitated the parallel price increases,” the
court was compelled to grant the defendants’ motions for summary judgment
on the plaintiffs’ Section 1 antitrust claims under the Sherman Act. See In re
Chocolate Confectionery Antitrust Litig., MDL No. 1935 (M.D. Pa.,
decided February 26, 2014).

The litigation involves some 91 lawsuits transferred to the MDL court for
pre-trial proceedings. Defendants Nestlé U.S.A., Inc., The Hershey Co., and
Mars, Inc. and Mars Snackfood U.S. LLC control about 75 percent of the U.S.
chocolate-products market, and during the relevant time period, which saw
prices for cocoa increase 53 percent, raised prices for their products nearly in
lockstep three times. To prove a U.S. conspiracy, the plaintiffs sought to rely on
actions occurring in the Canadian market at this time resulting in charges by
that country’s competition bureau of conspiracy to restrict competition and
fix prices for chocolate products.

According to the court, the plaintiffs’ “cross-border theory has evolved almost beyond recognition.” First, they alleged that the overlap of economic, operational and managerial factors between the two markets was so extensive “as to effectively eviscerate the border between the countries, merging the domestic and Canadian chocolate markets into a ‘single market.’ This theory quickly withered on the vine in the absence of any factual support,” the court said.

Next, the plaintiffs claimed that “as a result of ‘significantly integrated’ crossborder management, senior executives in the United States ‘were aware of and condoned’ the conspiracy in Canada, making it ‘plausible’ that ‘the same executives’ conspired in the United States. . . . In essence, plaintiffs asserted that management simply would not have taken advantage of an opportunity to conspire in one market without also conspiring in the United States. Discovery produced no evidence of ‘significantly integrated’ cross-border management, and this theory was subsequently jettisoned.”

Finally, the plaintiffs presented an “actuation” theory to support their
conspiracy claims, offering expert reports and testimony with what the court
characterized as the “novel theory” that “the domestic defendants’ awareness
of the nature and success of the trade spend conspiracy in Canada, may have
‘actuated’ a domestic price-fixing conspiracy.” While the court concluded in
the context of Rule 702 motion practice that this theory could support the
antitrust claims if supported by record evidence, “[f]actual support never
materialized.” Thus, “this failure to produce any record evidence of a causal
connection between Canadian trade spend conspiracy and plaintiffs’ allegations
of an American pricing conspiracy is fatal to plaintiffs’ antitrust claims.”

Issue 515