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From Antitrust Law Daily, September 15, 2015

Sweet victory for chocolate makers in price fixing class action

By Jeffrey May, J.D.

Grocery store chains, retailers, and other companies that purchased chocolate directly from manufacturers failed to show that the chocolate makers conspired to fix prices in the United States between 2002 and 2007, the U.S. Court of Appeals in Philadelphia has ruled. Evidence of parallel price increases and a conspiracy in the Canadian market was ambiguous and did not support an inference of a U.S. conspiracy. Although the appellate court's analysis did not “exactly mirror” the district court's, summary judgment in favor of the defending chocolate makers in the class action dispute was upheld (In re Chocolate Confectionary Antitrust Litigation, September 15, 2015, Fisher, D.).

In order to avoid summary judgment on a Sherman Act, Section 1 claim, a plaintiff had to offer evidence that tended to exclude the possibility of independent action, the court explained. While the plaintiffs built their case on a “logical enough foundation” of three parallel price increases over a five-year period, “ambiguous evidence alone cannot raise a reasonable inference of a conspiracy sufficient to survive summary judgment,” according to the court. Ultimately, the appellate court found the plaintiffs' evidence “relatively weak.”

Parallel pricing, plus factors. The plaintiffs presented evidence of parallel pricing; however, the necessary “plus factors” that enhance the plausibility of a conspiracy were not shown to defeat summary judgment, the court ruled. The manufacturers had a motive to fix prices, but evidence of motive without more did not create a reasonable inference of concerted action.

The parties vigorously disputed a second plus factor: whether the manufacturers acted against their self-interest by raising prices. While evidence showed that the U.S. chocolate market might not have been acting consistently with a competitive market, evidence of price increases disconnected from changes in costs or demand did not answer the question of whether the price increases were the result of lawful, rational interdependence or of an unlawful price fixing conspiracy. The plaintiffs’ evidence did not go beyond interdependence and therefore did not create an inference of a conspiracy, the court ruled.

The most important plus factor in the case was the existence of traditional conspiracy evidence, including the evidence of the Canadian conspiracy, according to the court. Following the guidance of Antitrust Law: An Analysis of Antitrust Principles and Their Application by Phillip Areeda and Herb Hovenkamp and the Second and Eleventh Circuits, the appellate court took the position that a foreign conspiracy “generally does not tend to prove a domestic conspiracy, especially when the conduct observed domestically is just as consistent with lawful interdependence as with an antitrust conspiracy.”

The plaintiffs in this case did not adequately link the Canadian conspiracy to the purported U.S. conspiracy to justify an inference of conspiracy in the United States. The court pointed out, among other things, that the alleged conspiracies involved different players and a comparison of the two alleged conspiracies showed “gaping holes” in the plaintiffs’ case.

To support an inference of conspiracy, the plaintiffs also identified evidence of exchanges of information by the manufactures before public price announcements, opportunities to conspire, shifts in pricing behavior, and purported pretextual explanations for price increases. Even when combined with the “disconnected” Canadian conspiracy, “all of this evidence is as consistent with interdependence as with a conspiracy, and as such, it does not tend to exclude the possibility that the Chocolate Manufacturers acted lawfully,” the court decided.

These are Case Nos. 14-2790 through 14-2795.

Attorneys: Steve D. Shadowen (Hilliard & Shadowen) for The Kroger Co., Safeway, Inc., Walgreen Co., Hy-Vee, Inc., Albertsons LLC, The Great Atlantic and Pacific Tea Company, Inc., and HEB Grocery Company L.P. Bernard D. Marcus (Marcus & Shapira) and Joseph T. Lukens (Faruqi & Faruqi) for Giant Eagle, Inc. Daniel H. Gold (Haynes & Boone) for United Supermarkets, LLC. Richard L. Coffman (The Coffman Law Firm), Joseph M. Vanek (Vanek Vickers & Masini ), Steve D. Shadowen (Hilliard & Shadowen) for Meijer, Inc., Meijer Distribution, Inc., Publix Super Markets, Inc., Super Valu Inc., and Affiliated Foods, Inc. H. Laddie Montague, Jr. (Berger & Montague) and Roberta D. Liebenberg (Fine Kaplan & Black) for Card & Party Mart II Ltd., Jones Wholesale Grocery, Inc., PITCO Foods, and The Lorain Novelty Co., Inc. Eric L. Bloom (Hangley Aronchick Segal Pudlin & Schiller) for CVS Pharmacy, Longs Drug Stores California, Inc., Rite Aid Corp., and the Golub Corp. William F. Cavanaugh, Jr. (Patterson, Belknap, Webb & Tyler) for Hersey Co. and Hersey Canada Inc. David Marx (McDermott Will & Emery) for Mars Inc. and Mars Snackfood United States LLC. Peter E. Moll (Cadwalader Wickersham & Taft ) and Adam L. Hudes (Mayer Brown) for Nestle USA Inc.

Companies: The Kroger Co.; Safeway, Inc.; Walgreen Co.; Hy-Vee, Inc.; Albertsons LLC; The Great Atlantic and Pacific Tea Company, Inc.; HEB Grocery Company L.P.; Giant Eagle, Inc.; United Supermarkets, LLC; Meijer, Inc.; Meijer Distribution, Inc.; Publix Super Markets, Inc.; Super Valu Inc.; Affiliated Foods, Inc.; Card & Party Mart II Ltd.; Jones Wholesale Grocery, Inc.; PITCO Foods; The Lorain Novelty Co., Inc.; CVS Pharmacy; Longs Drug Stores California, Inc.; Rite Aid Corp.; Golub Corp.; Hersey Co.; Hersey Canada Inc.; Mars Inc.; Mars Snackfood United States LLC; Nestle USA Inc.

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