Friday, November 4, 2011

NESTLÉ PHILIPPINES, Inc. officials have been accused of fixing wholesale prices.

Nestlé officials accused of price fixing

by N.R. Melican
BusinessWorld Online, 31 October 2011
(Original article availble online here).

A CITY prosecutor’s office has found probable cause to charge Nestlé Philippines, Inc. officials with price fixing after distributors complained that the local arm of the food giant required their products to be sold for a dictated cost.

As such, the case has been filed at the Quezon City Regional Trial Court and raffled to Branch 97 at present.

In a resolution issued Aug. 15, 2011, Quezon City First Assistant City Prosecutor Meynardo M. Bautista Jr. ruled there was weight behind complaints against six officials -- former Nestlé Philippines chairman and chief executive officer (CEO) Doreswamy Nandkishore, incumbent chairman and CEO John Martin Miller, Sales Director Shahab Bachani, Chief Finance Officer Peter Noszek, and sales officials Jose Ceballos and Maria Elisa Lupena -- accused of imposing predatory prices for goods, a violation of Article 186 of the Revised Penal Code.

Nestlé Philippines could not be immediately reached for comment.

FDI Forefront II Trading Corp. and its parent firm Service Edge Distributors Inc. (SEDI) took issue with the price bulletins Nestlé Philippines issues to middlemen dictating the cost at which Nestlé products should be sold to retailers. Distributors are told to follow the selling prices in the bulletins or face termination of the distributorship agreement.

The two firms -- which were formerly assigned to distribute Nestlé products in northwest Quezon City, Caloocan, Malabon, Navotas and Valenzuela -- claim that the price bulletins do not take into account several factors: the cost of financing for the goods, municipal business taxes, cost of bad debts for bad or poorly paying retailers, cost of discounts given to retailers and cost of bad goods.

Nestlé Philippines terminated its distributorship agreement with FDI in late 2007 and that with SEDI in September 2011.

The respondents countered, however, that the two distributors’ claims are baseless, saying that price fixing only occurs when multiple firms agree to set prices to restrain trade.

The city prosecutor’s office decided, however, that the case was worth pursuing.

“The act of Nestlé in fixing the resale price maintenance for its products… is illegal, a per se violation of paragraph 1 of Artice 186, Revised Penal Code, which means that price fixing is automatically illegal and there will be no valid justification to legitimate price fixing agreement,” the resolution read.

“Even if the agreement of Nestlé and the complainants is to be analyzed under the rule of reason, the act is also unlawful because of its harmful anticompetitive effects against consumers and complainants, with no competitive economic benefits,” the resolution read further.

“[This is] harmful to the consumers because Nestlé exercised monopoly power of price fixing the resale of its goods which means that consumers cannot buy the product at a lower price than that fixed by Nestlé,” it stated.

The Nestlé officials could be “criminally liable,” the resolution stated. -- N.R. Melican