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.
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
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.
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.
The Commissioner of Competition addressed innovation, enforcement and policy initiatives at the Competition Bureau in his keynote speech, "Strengthening Competition: Innovation, Collaboration and Transparency."
Used car listing website operator CarGurus Inc.'s attempt to force rival Trader Corporation to supply it with vehicle listing data has encountered a dead end as the Competition Tribunal denied it leave to commence a private application under several provisions of the Competition Act.
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