Appeals court upholds dismissal of price-fixing lawsuit against major U.S. candy makers
Judge affirms previous ruling involving The Hershey Co., Mars Inc. and Nestle USA, citing insufficient evidence.
The dismissal of lawsuits accusing top U.S. candy makers of price-fixing was upheld by the U.S. Court of Appeals for the Third Circuit.
According to The Patriot-News, 91 consolidated antitrust lawsuits filed by grocery and drug stores and other retailers against The Hershey Co., Mars Inc., and Nestle USA were dismissed in 2014 by Middle District Chief Judge Christopher C. Conner.
In his ruling, Judge Conner said that there was insufficient evidence to support claims that the candymakers had colluded on price increases three times between 2002 and 2007.
Appeals Court Circuit Judge D. Michael Fisher agreed with Conner's ruling, ending a 9-year legal battle that began in 2007.
The plaintiffs cited a Canadian price-fixing scandal involving Canadian subsidiaries of the U.S. companies as a basis for their case. But Judge Fisher dismissed the Canadian case as insufficient evidence given the different circumstances involved, according to the Courthouse News Service.
"First, the people involved in and the circumstances surrounding the Canadian conspiracy are different from those involved in and surrounding the purported U.S. conspiracy," Judge Fisher writes in the court's 52-page opinion on the case.
"Second, the evidence that the chocolate manufacturers in the United States knew of the unlawful Canadian conspiracy is weak and, in any event, relates only to Hershey," he says. "Because we also conclude that the Plaintiffs' other traditional conspiracy evidence is insufficient to create a reasonable inference of a U.S. price-fixing conspiracy, we will affirm."
According to the consolidated complaint, The Hershey Co., Mars Inc., and Nestle USA controlled 75 percent of the confectionery market between 2002 and 2007. But the court ruled that the available proof of a possible multi-national collusion could also be proof of interdependence.
"Given the market concentration and high barriers to entry, the U.S. chocolate confectionery market was ripe for collusion. But evidence of motive without more does not create a reasonable inference of concerted action because it merely restates interdependence," Fisher says.
The parallel prices increases that were supposed to be part of the companies' bargain was also considered too circumstantial to prove the conspiracy theory. The judges concluded that such price increases are not uncommon in the confectionery industry.
"Even though this practice of parallel pricing, known as 'conscious parallelism,' produces anticompetitive outcomes, it is lawful under the Sherman Act for two reasons," Fisher writes. "First, conscious parallelism is not an agreement, but 'can be a necessary fact of life.' Second, the "courts have no effective remedy for the problem."
Cadbury was also named a defendant in the lawsuit, but was dismissed from the action in 2011.