German cartel office raids chocolate makers

Chocolate is tempting stuff, but profit can be even more so. That at least is the suspicion swirling around some of the world's leading candy makers.

The Federal Cartel Office in Germany, the country's antitrust watchdog, raided offices of several confectionery giants, including Nestlé, Kraft and Mars, last Thursday. Authorities suspect that the companies may have colluded to raise the prices of their products.

Authorities also seized documents at the headquarters of a local favorite, Ritter Sport, whose perfectly square chocolate bars are ubiquitous in Germany and gaining ground in the United States.

"They seem to think we have improperly exchanged information," said Petra Fix, a spokeswoman for Ritter Sport, which is based in the southern German town of Waldenbuch, outside Stuttgart.

Nestlé, which is based in Switzerland and is the towering giant of the field, also had a visit from antitrust agents at its Frankfurt offices. "We cooperated with the authorities," a spokesman, Robin Tickle, said.
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Chocolate makers have put the onus for rising prices, which have doubled for some products, on the cost of raw materials. Commodity prices have risen sharply over the past year amid strong demand from big emerging economies like China and India. Costlier raw materials would typically force companies to pass costs on to consumers, but manufacturers always run the risk of being undercut if they move to do so ahead of the competition.

"The sector is quite consolidated, and the price rises were quite pronounced," said Marco Gulpers, an analyst at ING Wholesale Banking, Bloomberg News reported. "There are a lot of reasons why these companies need to raise prices to protect their margins."

European Union competition authorities were not involved in the action last week, according to a spokesman, Jonathan Todd. He suggested the move is a German effort, at least for the time being.

Canadian and U.S. antitrust regulators began their own investigation of some of the same manufacturers last year.

To the American eye, the timing of the German move has delicious irony about it, coming only a week before Valentine's Day, the traditional time for chocolaty gifts between lovers. Alas, such a sales boom remains a figment of sweet imagination for chocolate sellers in Germany.

Fix, the spokeswoman for Ritter Sport, said she spent enough time in the United States to appreciate how much chocolate companies benefit from Valentine's Day. But the holiday has not really caught on, at least among older Germans.

"It's picking up, but it started much later in Germany," Pix said. "It is a little more important among the young."