Hershey Pleads Guilty in Price-fixing Cartel

OTTAWA, ONTARIO--(Marketwired - June 21, 2013) - The Competition Bureau announced today that Hershey Canada Inc. (Hershey) 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 Competition Act. Hershey was fined $4 million.

As Hershey cooperated with the Bureau's investigation, and will cooperate with any subsequent prosecution, the Bureau 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 organizations or individuals is one of our best weapons to bring to light illegal agreements between competitors, which are secretive in nature and very difficult to detect."

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

The Bureau 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 cooperating parties may receive lenient treatment under the Bureau's Leniency Program. These programs provide powerful incentives for organizations and individuals to come forward and cooperate with the Bureau's investigations.

Under the current conspiracy provision in the 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 Competition Bureau, as an independent law enforcement agency, ensures that Canadian businesses and consumers prosper in a competitive and innovative marketplace.