Subpoenas Ordered in Chocolate Cartel Case


     (CN) – Accused of running a worldwide chocolate cartel, Hershey, Mars and Nestle can reopen discovery to subpoena certain third-party direct purchasers, a federal judge ruled.
     The antitrust action over chocolate pricing has been ongoing since 2007 when a class accused Hershey, Mars, Nestle and Cadbury of a five-year conspiracy.
     Since a few manufacturers control a large percentage of the market for chocolate, they can prevent demand from fluctuating by exploiting an industry structure that is conducive to collusive behavior, according to the complaint.
     After the Judicial Panel on Multidistrict Litigation consolidated all pretrial matters for 91 related actions in April 2008, Cadbury settled for $1.3 million and was dismissed from the case in December 2011.
     U.S. District Judge Christopher Conner, in Scranton, Pa., certified a class of direct purchasers in December 2012, holding that the ultimate damages amassed for candy bars will total roughly $726 million.
     Indirect purchaser plaintiffs in turn sought class certification on May 1, and served their expert witness, Dr. Bruce Owen, the next day.
     Hershey, Mars, and Nestle – which produce about 75 percent of the U.S. chocolate market – claimed that Owen relied on the as-yet undisclosed data from M.R. Williams Inc. and Farner-Bocken Co., two third-party direct purchasers that distribute chocolate across 13 states.
     While the defendants said the data includes more than 17 million transactions and no customer information, the indirect purchasers called that figure deceptive. They said most of the data is irrelevant and can easily be searched and sorted.
     The confectioneries asked to subpoena and depose M.R. Williams and Farner-Bocken representatives regarding the data, but the class refused and allegedly offered to produce another set of data from another direct purchaser, Chicago Vending Supply.
     The defendants said the Chicago Vend data ultimately arrived just a few days before they moved for additional discovery into the transaction data regarding the customers of M.R. Williams and Farner-Bocken. They say they have not yet had sufficient time to assess the more-than 230,000 new documents.
     Conner granted the motion Thursday, tossing aside a claim from the indirect purchaser plaintiffs (IPRs) that the defendants should have sought similar data from direct purchaser Vistar in 2011.
     “Notably distinct from the MRW and Farner-Bocken data, the Vistar production contained customer names, from which class of trade and location could be independently derived,” Conner wrote. “Indeed, IPR plaintiffs tacitly concede this fact by recognizing that they determined the location of Vistar’s vending customers through an internet search. They were able to do so because the Vistar data included customer names, which the MRW and Farner-Bocken data do not. This fact alone renders IPR plaintiffs comparison inapposite.”
     The defendants need to determine whether the claims of the named indirect purchasers are typical of putative class members across three separate industries, the judgment states.
     “Defendants contend that Dr. Owen assumed that all of MRW’s customers are convenience stores, and that he extrapolated the prices MRW applies to all of its customers to a class that is limited to vending machine operators, grocery stores, and convenience stores,” Connor wrote. “However, according to defendants, MRW’s motion to quash a subpoena previously filed in this litigation belies that argument, as MRW stated that their customers are ‘mostly convenience stores.’ More detailed transaction information will allow defendants to evaluate what effect, if any, this incongruity had on Dr. Owen’s analysis.”
     The original four defendants controlled more than 80 percent of the $16 billion U.S. chocolate market in 2006, and half of the world market, according to a 2007 class action filed in Newark.
     Hershey’s controlled 45 percent of the U.S. chocolate market in 2006, Mars 27 percent, Nestle 9 percent, and Cadbury about 4 percent, that action continued.
     Mars controlled 15 percent of the world market, Nestle 13 percent, and Hershey’s and Cadbury 8 percent each, according to that complaint. The chocolatiers then employed more than 400,000 people.

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