NESTLE PHILIPPINES: SHAME ON YOU! - Repost from Ducky Paredes, Malaya, January 14 2009

A Battle of Dragons

“’Apparent Authority’ is a term used in the law of agency to describe a situation in which a principal leads a third party to believe that an agent has authority to bind the principal, even where the agent lacks the actual authority to do so.”

by Ducky Paredes

In the Chinese calendar, 2010 is the year of the metal tiger, when we should focus on certain character traits that will ensure prosperity and success for the whole year round. The qualities associated with the metal tiger are persistence, strength, and determination.

These are what friends who have gotten a raw deal at the hands of a contentious multinational need to eventually get their due.

You all know this company by now — it manufactures and markets a wide range of mass consumer products and, I’ve written about these problems several times.

Apparently, finally, after years of enduring abuse at the hands of this multinational, a number of its Central Luzon distributors have organized themselves and are now poised to fight back. Perhaps the year of the metal tiger has finally inspired them to stand up against a supposed corporate bully — a “Crouching Tiger”, ready to pounce on its tormentor and defend itself.

Based on reports, the last straw for these outraged – and mostly debt-ridden – distributors came when an internal scandal broke out that caused them to lose tens of millions of pesos individually. Unfortunately, after repeated attempts to air their grievances to the multinational, the response they got has allegedly been the formal equivalent of a shrug and an eye-roll.

Their troubles s began when the multinational’s Regional Sales Manager (RSM) for Central Luzon instructed her distributors to give an unheard-of discount (purportedly 10% to 12%) to one particular company. Since distributors are only allotted a 4% discount, some questioned how they could possibly still stay in business, losing 6% to 8% at each transaction. (A funny supposedly Chinese quote is: “Hindi bale malugi sa bawat benta basta kita sa lahat.”)

The answer to their conundrum came when Ms. RSM allegedly wrote them letters – using the multinational’s official letterhead, no less – promising that the multinational would definitely reimburse the difference. Given this directive and the document to back it up, the Central Luzon distributors had to comply.

The extremely fortunate recipient of these massive discounts was now in a position where it can undersell all other distributors, which it did, except those in Central Luzon, from where its cheap goods were coming. This privileged company apparently did just that, targeting Metro Manila wholesalers. Eventually, the multinational’s Metro Manila distributors began crying foul, wondering how a distributor from another area could possibly be selling the goods at such low prices. When they asked company officials to explain this puzzle, the multinational’s clarification supposedly went something like this: “I don’t know how that company does it, all I know is that they are able to do it. If your sales are suffering because you can’t find a way to match their price, then that’s your problem, not ours”.

Because of this, and faced with an illogical situation, a number of Metro Manila distributors had to absorb their losses; the smarter ones stopped dealing with this multinational

Meanwhile, over at Central Luzon, things began heating up when not a single distributor received the promised reimbursements from the mother company. This reached a bitter climax when the checks issued by the discount-privileged customer even started to bounce. Lo and behold – upon further investigation, it was discovered that the person running the company was the husband of Ms. RSM! Can you say “conflict of interest”?

Adding insult to injury (or lawsuit to malice) was the fact the checks that bounced were under the bank account of Ms. RSM herself.

At present, Ms. RSM is nowhere to be found, and is presumably in hiding with her husband. In their wake, they left behind total losses (from both Central Luzon and Metro Manila distributors) reportedly amounting to approximately P1 billion. More tangibly, hundreds of jobs and financial futures were ruined because of this purported scam.

The multinational – let’s call this the “hidden dragon” because of the way it presents itself as a family-oriented, wholesome company while, in reality, practically a criminal enterprise – seems to have washed its hands of the situation. Perhaps what they don’t realize is that under the legal principle of “Apparent Authority”, this multi may be in a real bind.

“Apparent Authority” is a term used in the law of agency to describe a situation in which a principal leads a third party to believe that an agent has authority to bind the principal, even where the agent lacks the actual authority to do so. In such circumstances, the law holds the principal liable for the acts of the agent, out of fairness to the third party.

Considering that the multinational had every chance (and the obligation to do so, since the RSM was apparently up to no good and it was the multinational’s duty to stop her) to correct the anomaly during its early stages (but instead chose to pursue their sales targets), this “hidden dragon” may soon be forced out of its cave and tamed in a court of law.

Hopefully.