Court Certifies Chocolate Antitrust Class Action

A federal judge has certified a class action alleging that The Hershey Company, Mars Inc., and Nestlé U.S. A., Inc. fixed chocolate prices and inflated the prices of chocolate candy starting in 2002.

The class action is being brought on behalf of 2,900 wholesalers, grocery stores, and other businesses that directly purchase chocolate from the three companies.  The alleged price-fixing conspiracy has resulted in 91 legal actions across multiple districts, consolidated for pretrial purposes as In re Chocolate Confectionary Antitrust Litigation.

According to the plaintiffs, after a decade of stability the chocolatiers made a series of price raises between 2002 and 2007.  Although the defendants claim the price increases were due to rising production costs, the plaintiffs allege that the chocolate companies had advance knowledge of each other’s price changes and had numerous opportunities to meet and agree to the price increases.

In holding that the class of direct purchasers alleged by the plaintiffs should be certified, Judge Christopher C. Conner of the U.S. District Court for the Middle District of Pennsylvania treated the testimony of the plaintiffs’ experts as crucial to the plaintiffs’ burden to prove the Federal Rule of Civil Procedure 23 requirements for class certification.  The court also found that the plaintiffs’ experts’ testimony was required to, and did, meet the Daubert standards of admissibility at the class certification stage.

According to one of the plaintiffs’ experts, the chocolate confectionary industry is more susceptible than other markets to anticompetitive manipulation due to various factors, including:  the relative inelasticity of the demand for chocolate products; high barriers to market entry and the defendants’ market power; the reasonably interchangeable nature of the products; and “the myriad of opportunities for executive discourse in formal settings.”  The court held that these opinions were sufficiently supported by record evidence.

Before granting certification, the court expressed concern whether a class action would be able to adequately address the antitrust injury each individual plaintiff experienced given that each direct purchaser paid varying prices for the chocolates.  Judge Connor concluded that common proof of antitrust injury was possible because the plaintiffs’ expert in econometrics accounted for the effects of other explanatory variables on price, including production costs, and because his analysis showed “that Direct Purchasers paid nearly identical prices – within a range of one-and-one-half cent – for each unit of a particular chocolate confectionary product.”