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Chocolat Case

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Cooperating Individual questions and statements

In forming this conspiracy, the defendants and their conspirators did the following

* Participated in private meetings where it was agreed amongst Mars, Hershey and Nestle to either maintain increase or fix chocolate confectionery products in the US. * Announcing pricing and selling confectionary prices accordingly * Participated in private meetings to implement and monitor agreements that they reached.

The November 19, 2007 Information details several meetings and communications beginning at least as early as February 2004, including meetings at coffee shops, restaurants, conventions, and the offices of Nestlé, amongst Hershey, Mars, Nestlé, and the “Cooperating Party.” In the November 19, 2007 Information, the Competition Bureau set forth the following:

a. “Cooperating Individual 1” participated in a breakfast meeting with the President and CEO of Nestlé Canada Inc., Bob Leonidas, on February 23, 2004, at which time the parties discussed the topic of “trade spend” (the industry practice of providing discounts, rebates and allowances to customers, often linked to promotions). According to the Information, “Cooperating Individual 1 indicated that it was known in the industry that he disagreed with the industry’s prevailing approach to trade spend and that the Cooperating Party was going to reduce trade spend on chocolate. Cooperating Individual 1 indicated that he left the meeting with the impression that Leonidas ‘sees the world the way’ that he did. Cooperating Individual 1 also understood that he had an open line to call Leonidas if there were any issues in the market, including trade spend practices.”

b. An internal email exchange provided by the “Cooperating Party” with a starting date of June 1, 2005 relates to a discussion with their customer, Defendant ITWAL Limited, a distributor, concerning chocolate pricing. “Cooperating Individual 11 sent an email with the subject heading ‘Chocolate pricing’ to Cooperating Individual 12 and Cooperating Individual 13 stating: ‘At ITWAL I was informed by a reliable source that both Nestlé and Effem have been to customers hinting at 2005 price increases. No details or confirmation. I suggested that we would seriously consider appropriate actions once firm details known, and that I would be concerned about the other leading player not following which my contact said they would inquire about. This is similar to info we had picked up a couple of months ago. Martin I would send out a note to ADM’s to start digging.’”
c. “Cooperating Individual 1” met Leonidas of Nestlé at Manoir Richelieu during a Confectionary Manufacturers Association of Canada annual meeting held from June 2-5, 2005. According to the Information, “Cooperating Individual 1 stated that Leonidas said words to him to the effect of ‘I want you to hear it from the top – I take my pricing seriously’ or ‘We are going to take a price increase and I want you to hear it from the top.’ Leonidas handed Cooperating Individual 1 an envelope. Cooperating Individual 1 accepted the envelope without objection. Cooperating Individual 1 said ‘I may have said ‘we like to take pricing too, we take it seriously.’ I don’t think [Leonidas] took a negative impression. I just don’t know if he thought it was favorable.’ Cooperating Individual 1 agreed that Leonidas would have left the meeting with the idea that the Cooperating Party would follow a price increase led by Nestlé.”
d. “Cooperating Individual 1” advised the Bureau that the envelope contained information concerning Nestlé’s planned price increases for chocolate in 2005. He understood that there was a problem with him receiving this information, and advised the Bureau that “you shouldn’t talk about pricing. I didn’t want to be rude to [Leonidas] so I said OK, was neutral, but I didn’t want him to think, in any way, that I was coordinating with him.” Cooperating Individual 1 also stated that the letter was similar to another Nestlé price increase letter he had received.
e. An email exchange provided by the Cooperating Party dated July 6, 2005 indicates that by at least that date a letter containing confidential Nestlé price increase information was circulating around the Cooperating Party’s office. One of the emails observed that the letter was a draft, as it was dated July 15, 2005, was unsigned, and contained spelling mistakes. The information was that Nestlé was increasing the price of its confectionery portfolio by approximately 5 to 7%, effective October 31, 2005 for base confectionery and April 18, 2006 for seasonal confectionery. This pricing information was discussed among the Cooperating Party’s leadership team and prompted the Cooperating Party to consider and announce a price increase on chocolate. The Cooperating Party has also provided the Bureau with a copy of a letter located in its files that appears to be the July 15 letter.

f. Cooperating Individual 2 stated that Cooperating Individual 1 called her on July 6, 2005 from Europe and instructed her to go to the Nestlé [Canada Inc.] offices to pick up something from Leonidas. Cooperating Individual 2 got Leonidas’ phone number from Cooperating Individual 1’s contacts and called Leonidas to arrange a time. Cooperating Individual 2 went to the Nestlé [Canada Inc.] offices with a colleague and was met by Leonidas downstairs. He said something to the effect that it was better not to be seen in his office and handed Cooperating Individual 2 an envelope. Cooperating Individual 2 subsequently opened the envelope and it contained information about a planned price increase by Nestlé [Canada Inc.] Counsel for the Cooperating Party provided the Bureau with a copy of the document that Cooperating Individual 2 had retrieved from the files and Cooperating Individual 2 believes it is the document that was contained in the envelope from Leonidas. The document is an unsigned letter on Nestlé letterhead announcing a chocolate price increase to the trade and was forward dated July 19, 2005. The July 19 letter is substantively the same as the July 15 letter, except that spelling mistakes had been corrected and the percentage price increase had been increased to “5 to 8%.”
g. Cooperating Individual 2 said that when she returned to the office on July 6, 2005, she called Cooperating Individual 1 in Europe, as he had requested, and left a voice-mail reading the contents of the letter. Cooperating Individual 2 also states that she sent an email message to Cooperating Individual 1 informing him that she had left him a voice-mail regarding the Nestlé letter. The Cooperating Party has provided the Bureau with a copy of an email from Cooperating Individual 2 to Cooperating Individual 1 dated July 6, 2005 that states “Sent voice-mail re Nestlé letter.”
h. Regarding the email from Cooperating Individual 2 dated July 6, 2007, Cooperating Party 1 explained that earlier that day he had received a confirmation on voice-mail that Nestlé [Canada Inc.] was going to have a price increase. Cooperating Individual 1 thinks he sent a voice-mail or email message to Cooperating Individual 2 and asked her to forward the message by voice-mail to others in the Cooperating Party along the lines of “If Nestlé is going to take a price increase then we will too.”
i. Counsel for the Cooperating Party provided the Bureau with a price increase letter from the Cooperating Party dated July 29, 2005. The Cooperating Party announced a price increase on average of 5.2% on its chocolate portfolio, effective October 31, 2005. The price increase for the Cooperating Party was such as to align its prices on a number of common formats with those of Nestlé [Canada Inc.].
j. Counsel for the Cooperating Party provided the Bureau with a Hershey [Canada Inc.] price increase letter dated August 23, 2005 that was located in the files of Cooperating Party. Hershey [Canada Inc.] announced a price increase of an unknown percentage on most chocolate and candy products effective October 31, 2005.
k. Counsel for the Cooperating Party provided the Bureau with a Mars [Canada Inc.] price increase letter dated September 6, 2005. Mars [Canada Inc.] announced a price increase on average of 6% on select items in its confectionery portfolio, effective November 7, 2005.
l. Counsel for the Cooperating Party stated that Cooperating Individual 3 was contacted by Nestlé [Canada Inc.] employee Lynn Hashinsky in late fall 2005 regarding pricing at a key account. Cooperating Individual 3 reported this to the Cooperating Party’s in-house counsel who in turn informed Cooperating Individual 1 of the incident.
m. Counsel for the Cooperating Party provided the Bureau with a copy of an email exchange between Leonidas and Cooperating Individual 1 beginning on January 18, 2006. Cooperating Individual 1 congratulated Leonidas on his promotion to President and CEO of Nestlé [Canada Inc.] Leonidas responded on January 19, 2006: “Thanks [first name of Cooperating Individual 1], still want to see you Feb 7th 8 am to TALK.”
n. Counsel for the Cooperating Party provided the Bureau with a copy of an entry from Cooperating Individual 1’s calendar dated February 15, 2006 showing a meeting scheduled for 7:30 am with Leonidas at a Second Cup coffee shop. Cooperating Individual 1 met Leonidas in February 2006 at a Second Cup coffee shop in Toronto. During this meeting they discussed the price of seasonal chocolate. Leonidas said he wanted Cooperating Individual 1 to take a price increase. Cooperating Individual 1 states that he refused to commit to taking a price increase. On October 30, 2006, the Cooperating Party announced a price increase on seasonal chocolate to take effect February 5, 2007 – 5% for Halloween products and 4% for Easter products.
o. Cooperating Individual 1 received a phone call from the new President of Nestlé Confectionery, Sandra Martinez de Arevalo, in mid 2007. Martinez wanted to meet and talk. Cooperating Individual 1 and Martinez met for lunch at Auberge du Pommier on July 4, 2007 in Toronto. The discussion covered a number of issues, both personal and professional. Martinez suggested that the Cooperating Party lead a price increase in 2007, as Nestlé wanted to take a price increase in the third quarter. Cooperating Individual 1 replied that he was not prepared to take a price increase in 2007, but indicated that the Cooperating Party might take one in 2008. Cooperating Individual 1 said he would follow on chocolate but not lead. Martinez said she would call him back in two weeks. Cooperating Individual 1 said that he was of the view that the discussion did not matter because he was leaving the Cooperating Party; he could lead her down the garden path because he would not be making the decisions. Martinez could “say whatever she wants and hear whatever she wants” because Cooperating Individual 1 would not be making pricing decisions. Cooperating Individual 1 also states that Martinez would have understood that “they were on the same page.” Counsel for the Cooperating Party provided the Bureau with a copy of the receipt and expense report for the lunch on July 4, 2007.

p. Cooperating Individual 5 received a call from Nestlé [Canada Inc.] employee Steve Morris on July 5, 2007. Morris told Cooperating Individual 5 that Nestlé [Canada Inc] was thinking about taking a price increase in early March 2008. Cooperating Individual 5 said that the Cooperating Party was thinking of taking a price increase too. They also discussed that if Nestlé [Canada Inc.] and the Cooperating Party took a price increase, Mars would probably follow too. Cooperating Individual 5 provided this information to his supervisor, Cooperating Individual 6, Cooperating Individual 7 and Cooperating Individual 8. Cooperating Individual 8 informed in-house counsel of the Cooperating Party, who in turn informed Cooperating Individual 1.
q. Martinez left a voice mail for Cooperating Individual 1 on August 30, 2007, stating that she wanted to say goodbye before he left the Cooperating Party and requested a meeting with him the week of September 11 to 14. Cooperating Individual 1 believes that Martinez wanted to meet to follow up on the pricing discussions that took place on July 4, 2007. This meeting never occurred due to scheduling issues. Counsel for the Cooperating Party provided the Bureau with a transcribed copy of the voice-mail that was sent by Martinez to Cooperating Individual 1 on August 30, 2007.
r. Counsel for the Cooperating Party informed Andrew Burke that on September 19, 2007, both Cooperating Individual 1 and Leonidas were in Vancouver attending an event hosted by Overwaitea, a mutual customer. Cooperating Individual 1 said that during this event, Leonidas encouraged Cooperating Individual 1 to attend an upcoming meeting of the FCPC [Food & Consumer Products of Canada]. Leonidas said that it was “public news” that Nestlé [Canada Inc.] was taking a price increase in February 2008 of 4-6% on everything and that they had told their customers. Cooperating Individual 1 did not reply and Leonidas said to him words to the effect of “You don’t need to say anything.” Leonidas also encouraged Cooperating Individual 1 to contact Martinez.

s. In emails dated November 7, 2005, February 27, 2006 and February 6, 2007, Cooperating Individual 4 refers to discussions with Martin Lebel, an employee of Effem (now Mars Canada Inc.). In the November 7, 2005 email, Cooperating Individual 4 referred to a discussion with Lebel related to Mars [Canada Inc.]’s “dead net cost” on chocolate singles and trade spend issues. In the February 27, 2006 email, Cooperating Individual 4 referred to a discussion with Lebel about the level of margins on certain chocolate products. In the February 6, 2007 email, Cooperating Individual 4 referred to a discussion with Lebel indicating that Cooperating Individual 4 obtained information from Effem and Hershey [Canada Inc.] about presentations made to one of their common customers.
t. Counsel for the Cooperating Party provided the Bureau with a copy of an email sent on January 3, 2007 by Bert Alfonso, now Senior Vice President and Chief Financial Officer of The Hershey Company in the USA, to both Lent and Cooperating Individual 1. The email included the following statement: “As we discussed, Hershey has recently appointed Eric Lent as VP/GM for the Canada business. In keeping with the good advice from ‘The Godfather,’ keep close to your competition, I am including contact info below in an effort to introduce you both. All kidding aside, I know Eric is looking forward to meeting you.” Subsequent email communications between Lent and Cooperating Individual 1 on January 3, 2007 set up a phone call between the two for 3:30 on January 4, 2007.
u. Counsel for the Cooperating Party provided the Bureau with a copy of an email sent on March 15, 2007 by Lent to Cooperating Individual 1 with the subject heading “Interesting times” and the text, “I’m back in town the week after next. Let’s get together!”
v. Cooperating Individual 9 first met Lent at a dinner hosted by the FCPC trade association at Niagara-on-the-Lake on September 27, 2007. As he was getting ready to sit down at a dinner table, Cooperating Individual 9 was approached by Lent. Lent said words to the following effect to Cooperating Individual 9: “Hey [Cooperating Individual 9], welcome back to Canada. Congratulations on your new job. Hey, by the way, Nestlé is taking a price increase.” Lent continued with either “So we should take advantage” or “we should increase our prices too.” Cooperating Individual 9 replied either ”We should not be having this conversation” or “I am not comfortable having this conversation.” Lent continued: “Don’t worry we can talk about it. Bob and I talk all the time [Lent pointed to an individual that Cooperating Individual 9 later identified as Bob Leonidas, President of Nestlé [Canada Inc.]. It’s public knowledge that Nestlé [Canada Inc.] is taking its prices up.” Cooperating Individual 9 contacted a member of the Cooperating Party’s in-house counsel after the dinner and left a message detailing the conversation.

w. Cooperating Individual 9 received a message from Lent on October 17, 2007 requesting a meeting. That same day, Cooperating Individual 9 sent an email reply to his assistant, and also the assistant general counsel for the Cooperating Party, adding the comment “our friend at Hershey [Canada Inc.] seems to need a reminder re: Competition Act.” On October 19, 2007, counsel for the Cooperating Party brought this issue to the Bureau’s attention in light of its obligations under the Immunity Program

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