Ethics & Competition: Chocolate Price Fixing in Canada

This simply couldn't be worse news for two multinational giants in the global chocolate product market. Authorities in Canada have charged the food giants Nestle and Mars, together with a network of independent wholesale distributors, in an alleged conspiracy to fix prices of chocolates. Hershey is also involved - but they appear to have confessed to the illegal price-fixing activities and will be hoping for relatively lenient treatment in return for cooperating with the Canadian authorities.Price-fixing is illegal - plain and simple. But it's also unethical. To be caught out price-fixing is to be caught acting against the interests of consumers. Not a good place to be if you are a global brand that values its reputation.Nestle and Mars have both denied the alleged behaviour and have vowed to fight the legal action:Nestlé said in a statement:“Nestlé Canada will vigorously defend these charges. At Nestlé Canada, we pride ourselves on operating with the highest ethical business standards.” Mars issued a similar promise to fight the allegations.Time will tell whether price fixing has actually taken place.But what is price-fixing?

Price fixing is an agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or to control the market so that the price is maintained at a given level by controlling supply and demand.

Price fixing requires a conspiracy between some sellers or buyers - each of whom is likely to be able to exert some significance over supply and/or demand through their market share. Price fixing is commonly associated with industries which have a competitive structure that can be described as an oligopoly.