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The United States, Canada and Germany investigate candymakers.
Published Feb. 14, 2008

If you feel your Valentine's Day chocolates are not such a sweet deal this year, you're not alone. Regulators are investigating price fixing among candymakers in at least three different countries.

In the past week, the German Federal Cartel Office raided the offices of seven of leading chocolate companies, including Mars Inc., Kraft Foods Inc. and Nestle S.A., searching for documents. Three months ago, Canada's Competition Bureau searched the offices of several companies, many of the same ones as in Germany.

The Canadian investigation sparked American lawsuits accusing the world's biggest chocolate companies of violating antitrust laws. At least 46 suits have been filed in eight states on behalf of more than 50 consumers and companies.

The U.S. Department of Justice declined to confirm it is investigating, yet several companies confirmed receiving inquiries.

The retailers and consumers who filed suit allege the companies needed to fix prices because while the costs for raw materials such as milk and cacao have increased, sales of chocolate in the United States have remained relatively flat in recent years.

Chocolate manufacturer sales grew by 2.9 percent in 2007 to $16.3-billion, according to the National Confectioners Association.

The cases detail how informants kept letters for years, showing that Canadian executives exchanged confidential pricing information dating to 2002 through e-mail, phone and meetings.

Marilyne Nahum, a spokeswoman for the Competition Bureau, declined to discuss the details of the ongoing investigation and said no charges have been filed.

The companies could face criminal conspiracy charges, which carry penalties of up to $10-million Canadian dollars (more than $10-million in U.S. currency) and five years in prison.

According to affidavits submitted in an Ontario court to obtain search warrants, top executives at Hershey Co., Mars and Nestle met secretly in coffee shops, restaurants and conventions to set prices. The volume of commerce involved is potentially in the billions of dollars per year.

The German cartel office has said it suspected the companies conspired with one another to raise their prices even higher than the increase in the price of raw materials, such as cocoa and nuts, would have demanded. If the office finds evidence of collaboration, the companies face possible fines of up to 10 percent of their annual income.