Thursday, March 24, 2011

Manila Standard responds to Nestle allegations

"That party line on impeachment" by Emil Jurado
Published on 23 March 2011, Manila Standard Today, TO THE POINT (original article may be viewed online here).
*In reaction to Nestle's response here.

"Allow me to congratulate Nestle for its 100th year in operation in the Philippines. According to its CEO John Miller, “one hundred years of service to the Filipino consumer is a great source of pride within Nestle Philippines,” and that the company’s centennial “signifies its continuing commitment to the country.”

Well said, Mr. Miller. Unfortunately, there are many Filipinos—ironically, your very own distributors—who assert that your presence here in the Philipines has been anything but a service. These entrepreneurs initially held on to the promise of your company’s international reputation, only to find out latter on that Nestlé operates quite differently here in the country.

I summarize many of the woes experienced by Nestle distributors in my column last March 11. Edith de Leon, head of Nestlé’s corporate affairs office, wrote the Manila Standard Today an official response “categorically rejecting the assertions” mentioned in my column.

I read the points cited by Ms. De Leon very carefully, hoping that Nestlé could provide some clarity on the issue. More importantly, I wanted to hear what they had to say about the company’s being constantly regarded as the poster boy of corporate bullying in the Philippines. However, she must have had too much Nestlé coffee as her reply was filled with generic motherhood statements, as well as some “facts” which left me scratching my head. Santa Banana, is this what we can expect from Nestlé in the next 100 years?

* * *

Let’s rewind a bit and analyze Nestle’s rejoinder to my column. First, Nestlé implies (quite creatively) that the cases filed against it by Service Edge Distribution Inc. (SEDI and Forefront II Trading Inc.) were dismissed by the Department of Trade and Industry for “lack of merit.”

The fact is, the Order dated Jan. 5, 2011 clearly stated that the dismissal was due to “lack of jurisdiction.” I also understand that not a single case filed by SED1 and FD2 against Nestle has been dismissed.

Perhaps, it is the same tactics that have gotten several perjury cases filed in Quezon City and Makati courts. These cases were filed against top Nestlé executives that include, aside from Mr. Miller, Shahab Bachan and Doreswanby Nandkishore. My gulay, is the Nestlé head office in Switzerland aware of what’s happening here?

Second, to dismiss the complaints filed by these distributors as “unfounded” is to have a rather short memory. It was only five years ago that the Supreme Court itself (Nestle Philippines Inc. vs. FY Sons Inc. May 5, 2006 G.R. No. 150780) ruled that FY Sons (yet another distributor) was “lured to invest huge sums of money, time and efforts” by Nestlé only to have the latter “breach the distributorship agreement by committing various acts of bad faith such as, but not limited to, failing to provide promotional support, and concocting falsified charges to cause the termination of the distributorship agreement without just cause.”

If this sounds painfully familiar, it’s because Nestlé distributors are still singing the exact tune now. Fact two.

Third, Nestlé claims that it cannot possibly be accused of predatory pricing simply because its goods are not the cheapest in the market. Likewise, there is this assurance that its pricing policy are “compliant with the laws as well as recognized standards of trade practice in the country.”

* * *

At last, Nestlé and I agree on something: its goods are certainly not cheapest in the market. But if a company imposes vertical price restraint agreements with its distributors, isn’t that predatory pricing as well? My friends, who are experts in marketing, point out that this practice of setting a minimum price by which its distributors are required to sell Nestle products does not take into consideration the operational costs which are shouldered by the Filipino SMEs. Turning out a profit then becomes an immense struggle, considering capital outlay and lack of marketing and promotional support from the multinational.

Furthermore, how can Nestlé possibly be “complying with the country’s laws and standards” when there is no standard on vertical price agreements to begin with? To date, Philippine courts have no actual guidelines for determining whether or not predatory pricing has occurred or whether a vertical price agreement is restrictive of trade and monopolizes competition. Fact three.

Finally, the company assures the public that its activities are conducted “in compliance with Nestlé Corporate Business principals adhering to fairness, transparency and compliance to laws and regulations.” Perhaps as far as Nestlé Philippines is concerned, yes. But, considering its main headquarters is in Switzerland, a vertical price restraint is patently against the standards of the Swiss Competition Council.

Santa Banana, this appears to be a case of the hand doing something that the head is not aware of!"

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