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In a lawsuit filed in U.S. District Court, Pittsburgh-based Giant Eagle is alleging that the world's largest chocolate companies have been in cahoots to raise prices and stifle competition.
In the lawsuit filed against The Hershey Co. of Hershey; Mars Inc. of McLean, Va.; Nestle, S.A. of Switzerland; Cadbury Schweppes plc of London and its subsidiaries, Giant Eagle claims it was overcharged for $200 million worth of chocolate products between 2002 and 2007.
The regional chain - the Pittsburgh market leader which estimated its annual sales at $7 billion - said it bought roughly $189 million worth of chocolate candy products -- candy bars, seasonal novelty chocolate and boxed chocolate -- between 2002 and 2007 from Hershey, Mars, and Nestle -- three companies that are said to control 80 percent of the U.S. market and generate $15.6 billion in retail sales, according to the lawsuit.
Giant Eagle wants the court to award it three times the amount of damages it allegedly suffered because of the conspiracy, plus interest at the highest rate on those damages.
The lawsuit filed by Giant Eagle - which owns 158 stores and 65 franchises in Western Pennsylvania, Ohio, West Virginia and Maryland -- is at least the fourth filed in the United States since last year that alleges a chocolate conspiracy, according to press reports.
With control of the chocolate market concentrated in the hands of so few companies, and the technical difficulties of entering the market and merchandising new products, "The chocolate candy product market was ripe for collusion," Giant Eagle's suit claimed.
Further, the grocery chain contended the three suppliers increased average prices 16 percent from December 2004 to March 2005, even though there was no evidence of increases in raw material prices.
A report on Saturday, March 29 in the Pittsburgh Post-Gazette said a week earlier, CVS Pharmacy Inc. and Rite Aid Corp. filed a similar lawsuit in eastern Pennsylvania. Another lawsuit filed in that same court was filed by Walgreen Co., The Kroger Co. and Safeway Inc.
In a regulatory filing in February, Hershey noted that it was party to almost 50 civil antitrust suits in the United States and three in Canada, the Pittsburgh Post-Gazette reported.
Hershey and Nestle raised their candy prices by an average of 11.7 percent this year, said Giant Eagle, whose lawsuit also cites a 2007 investigation by the Canadian Competition Bureau claiming that Nestle, Hershey and Mars conspired to fix prices in Canada over the past several years.