NESTLE PHILIPPINES: MONSTER MNC

"MONSTER MNC IS 100"
by Ducky Paredes
MALAYA, Business Insight, 05 September 2011
(Original article available here)

"PEOPLE and multinational corporations both have birthdays but with a big difference. Humans tend to become kinder as they approach the end of their time on earth; multinationals get to be more powerful and, as their reach expands, more dominant, exploitative and even criminally abusive. Not all, of course; as with humans, there are good and bad multinationals.

One multinational celebrated its hundredth year recently by bullying and throwing its weight around to the detriment, not just of its competitors, but also even of its own business partners.

At last, the multinational is getting its comeuppance. For starters, the force of the law, imperfect as it is in this country, seems to be working against the multinational. A judge is looking them over and entertaining complaints filed by Pinoys who were abused by the MNC and forced into a state of near-bankruptcy.

There is even more trouble due the MNC in the form of bills pending in the Senate and the House of Representatives intended to improve current laws against monopolistic behavior, predatory pricing and restraint of trade, sponsored by Senate President Juan Ponce Enrile, Senator Sergio Osmeña and Representative Rufus Rodriguez. .

The giant multinational, which is Nestle Philippines, Inc. (NPI), just turned 100 recently. Nestle, as with most other MNCs, celebrated its longevity by launching corporate social responsibility (CSR) projects backed up by lavish advertisements in print, radio, television and cinema showing how the multinational has been a good corporate citizen. In the case of Nestle in the Philippines, one wonders whether this the true picture of the company.

NPI’s festivities were somewhat rained on when the Office of the City Prosecutor of Quezon City issued a resolution on August 15 finding sufficient evidence to hold NPI for trial for violation of Article 186 of the Revised Penal Code.

This article penalizes any person "who shall enter into any contract or agreement or shall take part in any conspiracy or combination in the form of a trust or otherwise, which results in restraint of trade or commerce and prevents, by artificial means, free competition in the market."

The resolution found merit in the complaint filed by Nestle distributors FDI Forefront II Trading Corporation and Service Edge Distributors, Inc. that their agreements with Nestle were anti-competitive since they were obligated to sell Nestle products at the price fixed by NPI, regardless of the fact that the set price provided too thin a margin for the distributors to make a profit. Failure by the distributors to sell under these terms would result in the unilateral termination of their agreement with NPI. Their complaint pointed to a situation when NPI forced them to sell to a set of customers at a loss because of the fixed price set by NPI.

According to the QC Prosecutor’s resolution, "the act of Nestle in fixing the resale price maintenance for its products, imposing it on complainant is illegal, a per se violation of paragraph 1 of Article 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 further stated that an analysis of the agreement shows that the act is also unlawful "because of its harmful anti-competitive effects against consumers and complainants, with no competitive economic benefits. Harmful to the consumers because Nestle 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 Nestle."

High ranking NPI executives, former Chief Executive Officer Doreswamy Nandkishore, current CEO John Martin Miller, Shahab Bahcani and Peter Noszek were impleaded for conspiring to commit anti-competitive acts as they were found to have knowingly committed the crime or to have permitted or failed to prevent the commission of the crime, and will stand trial before a Regional Trial Court of Quezon City.

The resolution is a welcome development, not only to the complainants, but to those who support the passage of an Anti-Trust Law, coming as it does on the heels of President Noynoy Aquino’s signing of Executive Order No. 45 giving full jurisdiction to the Department of Justice over matters related to competition and fair trade practices.

Lawyer Lorna P. Kapunan recalled the president’s assurance that the matter of monopolies and corporate bullying tactics was one of the first issues that he would look into. "His signing that E.O. shows that he is taking active steps to back up his promise," Kapunan said.

Nestle insiders say that the top honchos in the company’s main office in Switzerland are closely monitoring the woes that the local hundred-year-old outfit is experiencing. The rift between NPI and its distributors was reportedly on the agenda when the mother company’s chief executive Paul Burke and executive vice president Frits Van Dijk came all the way from Switzerland to meet with NPI officials (and also incidentally, to participate in the company’s centennial celebration).

Will the mother company in Switzerland do anything to convert the image of the centenarian company into a more grandfatherly one in its dealings with its business partners or will Nestle continue to exhibit the worst traits of a MNC monster?"

Milk Code in the Philippines: Quo Vadis, Nestle?

When an entity publicly espouses certain universal values, it is reasonable to expect that the entity -no matter what kind of situation it is in - will abide by its own espoused values. However, if you look at the way Nestle is handling itself in the Philippines, especially in its hypocritical and bullying treatment of its third party "partners," it is fairly obvious that its values - Honesty, Integrity and Fairness - are just mere lip service. (Please look at the historical posts to see for yourself how this is so.)

If it is unique, "one-of" case then one can reasonably conclude that it a mere aberration; and therefore, the reputation of Nestle, most especially in the Philippines, should remain intact and fairly unblemished. On the other hand, if it is proven that such behavior is habitual, then it reflects badly on how twisted the leadership behind the organization is. As much as we try not to think of it negatively, it is with extreme sadness to conclude that Nestle falls into the category of the latter.

Apart from its trade bullying and its blatant disregard for its former workers, Nestle, by its own words, is extremely guilty and hypocritical in its stand on the international milk code. Consider their own words when you make your judgement on how seriously fucked up this company is:

Philippine Daily Inquirer, 11/21/2006:

Nestlé position

In a statement, Nestlé

Philippines Inc. said it was supporting the proposal to prohibit the use of identical or

similar brand names both for infant formulas and for other milk products not covered by the Milk Code.

“The proposal will strengthen the effective and transparent

enforcement of the ban on the advertising of infant milk,” Nestlé said yesterday in a statement.

The company said it was also supporting an advertising ban on breast milk

substitutes for infants aged up to 12 months. In contrast, the IRR regulates the

advertising of milk formula for children aged up to 24 months, which is consistent with the World

Health Assembly resolutions and the Infant and Young Child Feeding Convention to which the

Philippines is a signatory.

The International Baby Food Action Network (IBFAN) in Europe, representing 58 groups

in 35 countries across the continent, endorsed the petition supporting the Philippine government’s policy on infant formula.

From England, a certain Jennifer wrote: “The health of

children of the Philippines is of far greater importance than the accumulation of profits by baby milk companies.

“It is shameful that com

panies and individuals should undermine the health of babies purely to make money.”

Please click HERE for the full article.

In their own website for baby milk,

however, here is Nestle's global statement:

However, it appears that most of the allegations about Nestlé

are practices that are entirely in keeping with the International Code, as originally drafted and as implemented by

each government in question. It is important to note in this context that the Code was passed as a recommendation to

governments to implement according to their own legislative and regulatory frameworks.

Nestlé voluntarily and unilaterally applies the Code in its entirety in all developing countries (over 150 nations).

Please click HERE for the full article.

WOW! If this isn't hypocrisy at its best, then what is? It is clearly no wonder why the other issues are

present and there to stay. There is no value (pun intended!) to the word, written or otherwise, in the Nestle world.

The good news is that FRR believes that people, even bullies,

can change for the better. You can be un-fucked up if you put the will behind it.

Nestle, quo vadis?