O really, O Canada?: A Trade War of Northern Aggression

The Canadian government today, Reuter reports, imposed criminal penalties on Nestle and Mars for colluding to fix the price of chocolate:

The three executives [one each from the candy companies, another from a wholesale distributor] face up to five years in prison if convicted, while the companies and the executives could each be fined up to $10 million.

The Competition Bureau has been probing the allegations of price fixing for five years in a scandal that has already resulted in a major class-action suit.

Both Mars and Nestle said they intend to “vigorously defend” themselves against the allegations.

Not every company targeted by the investigation is in so much trouble:

Canada’s Competition Bureau recommended lenient treatment for the Canadian arm of Hershey Co, which cooperated with the investigation. Hershey said it had reached a deal with the bureau, and would plead guilty to a single count of price fixing.

In its statement Hershey expressed regret for its actions and blamed workers who had already left the company.

“The current Hershey Canada senior management team as well as The Hershey Company and its management had no involvement in this conduct,” the statement said.

But I’m less interested in why Canada targeted Nestle and Mars over Hershey, than I am in its decision to target chocolatiers over other kinds of confection-makers. You may recall the breathless headlines back in August, when thieves made off with $18 million worth of maple syrup from Canada’s “global strategic maple syrup reserve.” If not, you probably remember when the Daily Show did a bit on it back in February.

The maple syrup reserve, explains the Atlantic, exists to manipulate supply and demand for the sticky sweet stuff in the global marketplace — in other words, it works hard to make sure you never have to resort to slathering your pancakes with “breakfast syrup”:

The reserve makes sure there’s always enough syrup for the market. [E]ach producer sells its harvest in bulk to the federation — a government-sanctioned cooperative — which turns around and deals it to bulk buyers. When production is high, the federation siphons a portion off to store in steel drums for future use.

How did this arrangement come about?

In the early aughts, the government began opening new forest areas to maple production. To keep the additional supply from cratering prices, Quebec’s federation introduced a quota system. Unfortunately, that limited reserves, which ran dry after three years of weak harvests. In 2008, supplies of syrup ran short and prices jumped from around $2.40 per pound to $4.00. It was a short-term windfall for producers that had the potential to do long-term damage as buyers were priced out of the market.

And so the government stepped in to help the industry… manipulate prices. In case you have any doubt whether this scheme constitutes a cartel, here’s what Simon Trépanier — acting general manager of the Federation of Quebec Maple Syrup Producers — told the New York Times back in December:

It’s like OPEC . . . We’re not producing all the maple syrup in the world. But by producing 70 to 78 percent, we have the ability to adjust the quantity that is in the marketplace.

Somehow, the “C” in OPEC doesn’t stand for cartel, but no matter. Here’s Wikipedia on the organization:

OPEC is the Organization of the Petroleum Exporting Countries. It is an oil cartel whose mission is to coordinate the policies of the oil-producing countries.

Which made me wonder how long til Canada sics the Mounties on whichever government officials cooked up this shady scheme — until I remembered that, sure, the fine could reach $10 million, but that’s in Canadian dollars. We talkin aboot practice. Carry on.

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4 thoughts on “O really, O Canada?: A Trade War of Northern Aggression”

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    Like

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