Judge Chomps Chocolate Price-Fixing Class Action Lawsuits

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Chocolate antitrust class action lawsuits accuse Nestle, Hershey and Mars of conspiring to raise the price of chocolate products in the United States.

A Pennsylvania federal judge has dismissed a class action lawsuit accusing the three dominate chocolate makers in the United States of conspiring to raise the price of chocolate, ruling that the plaintiffs didn’t present sufficient evidence of the alleged collusion.

The Feb. 25 ruling affects 91 separate class action lawsuits accusing Nestle USA Inc., The Hershey Co. and Mars Inc. of entering into a price-fixing scheme that inflated the price of chocolate by nearly 34% between 2004 and 2008.

The chocolate antitrust class action lawsuits were filed on behalf of two separate groups — individual consumes purchasers of chocolate products and direct purchasers of chocolate products — which were certified in 2012.

The chocolate buyers alleged that on three separate occasions, Mars, Hershey and Nestlé sought to collude on pricing when each of the three companies increased prices within days of each other in 2002, 2006 and 2007.

However, U.S. District Court Judge Christopher C. Conner decided that while the plaintiffs had alleged sufficient evidence to survive an earlier motion to dismiss, there were gaps in meeting the standards of an antitrust lawsuit, especially affirmative “non-economic” evidence of conspiracy.

The purchasers in both Classes had adequately described a motive for the three defendants to “enter into a price-fixing conspiracy,” Judge Conner said, noting that they dominated the market with about a 75 percent combined share; the class action lawsuits pointed to a link between Canadian entities of the parent companies, which had demonstrated evidence of collusion.

Yet Judge Conner determined that there were not “extensive interactions” between the U.S. and Canadian subsidiaries that indicated a pattern of collusion. Further, while expert witnesses for the plaintiffs and the defendants agreed that the market “was riper for conclusion,” there was not evidence that the behavior was against the firms’ own business interests.

As an example, company officials at both Hershey and Nestlé stated that they were considering chocolate price increases in 2002 because, while ingredients were relatively inexpensive, they forecasted higher costs. Moreover, they were following the example of Mars, a dominant presence in the industry. Company officials also may have reached the same conclusions based on internally-developed information, such as in March of 2003 when Hershey forecast higher cocoa prices in 2004, at the time of a price increase among the three firms.

In summation, Judge Conner wrote that the plaintiffs alleging collusion and a price-fixing conspiracy in spite of the fact that “the overt evidence before the court establishes that defendants’ actions, while parallel, were nonetheless the result of reasoned, independent business mindedness. Quite simply, plaintiffs have failed to establish that defendants’ actions were unreasonable or irrational in the competitive market.”

The chocolate antitrust class action lawsuits originally included Cadbury as a defendant, but the company reached a $2 million class action settlement in 2011 to extract itself from the litigation. [See “Cadbury Chocolate Price-Fixing Class Action Settlement.”]

The lead plaintiffs’ class action attorneys are Berger & Montague PC and Hausfeld LLP.

The centralized Chocolate Antitrust Class Action Lawsuits are In re: Chocolate Confectionery Antitrust Litigation, MDL No. 1935, U.S. District Court, Middle District of Pennsylvania.