Saturday, February 23, 2008

Chocolate firms raided, accused of price fixing.

If you feel your Valentine's Day chocolates are not such a sweet deal this year, you're not alone. Regulators are investigating alleged price fixing among candy makers in at least (2) different countries. In the last week, the German Federal Cartel Office raided the offices of seven of the leading chocolate companies including Mars Inc., Kraft Foods Inc. and Nestle searching for documents. Three months ago, Canada's Competition Bureau searched (raided) the offices of several companies, many of the same ones as in Germany. The Canadian investigation sparked several American lawsuits accusing the world's biggest chocolate companies of violating antitrust laws. The U.S. Department of Justice declined to confirm it is investigating, yet several companies confirmed receiving inquiries. By Janet Frankston Lorin, Associated Press.

Can you believe this? It all started in Canada when a Ontario court granted search warrants based on the evidence that there are reasonable grounds to believe that a number of suppliers in the chocolate industry have engaged in price fixing. Then Germany raids seven companies searching for documents looking for criminal acts. These are not people who sell drugs but chocolate. German officials said the companies raided this week had agreed, among themselves, at the beginning of the year to raise prices. This is not price fixing food that we need to live but chocolate which we can do without. It's a pleasure of life to enjoy.

But there is price fixing going on in the chocolate industry. First the union workers negotiate a contract that sets out the terms, fixed price, and conditions of employment. Second the government set a fixed price on licenses', permits and taxes. Third, the power companies price fix the cost of electricity. And last, the shippers have a fixed price to ship the chocolate.

Why are the Canadian and German governments doing this? The same reason that there are now several American lawsuits, for the money. The companies in Canada could face up to $10 million in Canadian dollars, seven companies could be $70 million dollars. In Germany the companies face possible fines of up to 10 percent of their annual income, which could be close to a billion dollars. Even if they have done nothing wrong, it costs these companies thousands of dollars to defend themselves and could last 5 to 10 years. This is the reason most companies settle out of court and the consumer ends up paying the bill in higher insurance prices and employee lay offs.

This is one of the main reasons companies are pulling their factories out of these countries and setting up shop in Mexico, China and India. This is also the same reason companies are not building new factories in these countries. South America, where the cocoa bean is harvested, would be more than happy for those companies to move there. I don't think they will try to take their money with fines. I think these countries should look into the gum industry. It seems like all the packs of gum are the same price.

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