Mayer Brown serves as co-counsel in important victory for Nestlé USA
27 February 2014
Mayer Brown served as co-counsel in an important victory for Nestlé USA when Chief Judge Christopher Conner of the US District Court for the Middle District of Pennsylvania granted its motions for summary judgment in In re Chocolate Confectionary Antitrust Litigation. This case is one of the largest multi-district antitrust litigation matters currently pending, and presented significant legal issues for summary judgment, including the inferences to be drawn based upon purely non-US conduct. Cadwalader LLP served as co-counsel.
The Court’s ruling is the culmination of more than six years of litigation that began in December 2007, when the first of over 90 federal lawsuits were filed alleging a conspiracy between Nestlé USA, Mars, Hershey and Cadbury to fix the price of chocolate candy products sold in the United States between 2002 and 2007. These complaints were brought on behalf of direct and indirect putative class plaintiffs and large individual corporate plaintiffs such as Safeway and CVS.
After considering the voluminous record, Chief Judge Conner concluded that there was no evidence that Nestlé USA engaged in any anti-competitive conduct. As the Court noted, “[d]espite diligent efforts on the part of plaintiffs’ counsel and nearly unfettered access to defendants’ records, plaintiffs are before the court with nothing more than speculation as to the who, what, when, where, and how of the communications that allegedly facilitated the parallel list price increases” between 2002 and 2007. Instead, the Court concluded that the US chocolate manufacturers’ actions reflected lawful “unilateral pricing decision and divergent strategies.”
The Court observed several rational business justifications for defendants’ price increases during the time period. It observed that “the average cost of cocoa increased by 53 percent” during the alleged conspiracy. At the same time, the costs for labor, health insurance, energy, and packaging were all increasing.
Notably, the Court found that “with respect to Nestlé, the evidence is even more favorable” because the “uncontroverted evidence demonstrates that Nestlé was constrained by virtue of its market position: although it desired to increase product prices to meet rising costs of production, it also deemed such a move to be strategically unsound given its small market share.”
The Court also rejected plaintiffs’ theory that the alleged domestic conspiracy was somehow “actuated” by a “partially proven” conspiracy in Canada. The Court said that “during the course of this litigation, plaintiffs’ cross border theory has evolved almost beyond recognition” and that “the record is devoid of evidence tending to establish any tie between the alleged Canadian conspiracy and the lock-step price increases in the U.S.” Ultimately, the Court concluded that “the record . . . is devoid of evidence—direct or circumstantial, individually or in toto” to support plaintiffs’ price-fixing claims.
This victory is only the latest achieved by Mayer Brown litigators in this long-standing litigation. Nestlé S.A. and Nestlé Canada were initially also named as defendants, but were dismissed from the litigation for lack of personal jurisdiction. In May 2013, the court granted Nestlé USA’s Daubert motion, holding that an expert’s computation of damages allegedly attributable to Nestlé USA was “unreliable.”
The Mayer Brown Litigation & Dispute Resolution team included partners Carmine Zarlenga and Adam Hudes and associate Stephen Medlock (all Washington DC).