Manila Standard response to Nestle Philippines' statement

From "To The Point" column by Emil Jurado, MANILA STANDARD TODAY, 12 April 2011
(Full column available online here)

"***

Last month, I had a nice “exchange” with Ms. Edith de Leon, head of corporate affairs of Nestle Philippines Inc. over a column I wrote about predatory pricing charges leveled against the food and beverage giant. I mentioned some of the reasons why Nestle is now regarded as the poster boy of corporate bullying in the Philippines. Ms. De Leon reacted by writing an official letter to this paper denying everything.

Without going through the exact nuances of the issue again (I wrote a detailed rejoinder to her reply in my column last March 23) I have to say that the way Nestle has replied to the issue of predatory pricing, clearly a violation of the law, has left me somewhat bewildered.

For the sake of brevity and uniformity, Nestle’s letter to the Manila Standard Today was practically the same one it sent to other newspapers that wrote about the pending cases. That’s perfectly understandable until you consider that the company’s official reply was wrought with inaccuracies and misleading statements. I tackled these one by one in my March 23 column, and Nestle has been silent since.

Silent, that is, until a reliable source called me about the articles I had written. Obviously, he spoke on the condition of anonymity, and emphasized that no one from Nestle (apart from Ms. De Leon) was authorized to comment on the issue.

What he told me, however, made my senior citizen skin crawl. My gulay, talk about a snake pit of corporate intrigue and conspiracy allegedly happening at Nestle!

***

It seems that NPI is fully aware that it is standing on weak ground on the pricing and ethics controversies filed against it. This is compounded by the fact that several of its bankrupt distributors have gone to the Department of Trade and Industry to file their complaints. Moreover, a number of the company’s top executives – John Miller, Shahab Bachani and D. Nandkishore - are facing perjury charges in both Quezon City and Makati courts.

Nestle has reportedly realized that the facts are simply too glaring to be argued away or reasonably disputed. In other words, the company has dug itself a hole that it can’t seem to climb out of. There’s also jurisprudence working against Nestle since the Supreme Court ruled against the company five years ago (Nestle Philippines Inc. vs. FY Sons Inc., G. R. No. 150780), for exactly the same things it is now being accused of.

The problem lies in the company’s annual stockholders meeting this coming April 14. If someone should bring up the situation in the Philippines, how would that be addressed? And here’s the jaw-dropping fact: Nandkishore—the very same person facing perjury charges in local courts—now sits on Nestle’s Executive Board occupying a very sensitive position as head of Nutrition.

Allegedly, Nestle’s solution is not to find a way out of the mess. What it is doing now is finding a best possible scapegoat, and Nandkishore has purportedly been singled out. Santa Banana, it seems that his own company is about to throw poor Nandu under the bus!

My source claims that Nandkishore fits the bill perfectly, since the monumental chaos in the Philippines happened under his watch (he used to be the CEO of NPI until he got promoted). Moreover, there are many executives who supposedly questioned his being named to such a senior post within the Executive Committee. Surely, Nandu’s fall from grace only means good things for their job prospects.

Watch your back, Nandu, or you may find yourself crying over spilled milk."

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!"

Oh what a tangled web you weave

Nestle claims dismissal on the merit and rejects predatory pricing. Similar articles were sent by Nestle to Business Mirror and Manila Standard (see below). Responses by Manila Standard here.

To the point: predatory pricing

Appeared in "To The Point" column, Manila Standard Today, by Emil Jurado, on 11 March 2011

"There’s this case filed recently by two Filipino-owned companies against a giant multinational company whose products the local firms distribute. The case bears watching. Service Edge Distribution Inc. and FDI Forefront II Trading Corp. sued Nestle for predatory pricing and perjury.

Predatory pricing is selling one’s products at very low prices to put competitors out of business or discourage them from entering the market. In this case, Nestle allegedly forced SEDI and FDI II to sell products at controlled prices, way below the actual cost of distributing the product, with threat of termination of contract if they failed to do so.

Santa Banana, it’s bad enough to take a low blow against competition. To do something like this to one’s own distributors is one for the books!

The case of perjury involves four top executives of the multinational company who allegedly presented false testimonies as evidence in their counter-affidavits to the complaints filed against them.

Cases such as these that involve not-so-aboveboard practices of some multinational companies doing business in the Philippines give urgency to the passage of an anti-trust law that will protect small and medium enterprises that are owned and managed by Filipinos.

In the Senate, pending are Bill 123 by Senator Serge Osmeña, Bill 1838 by Senator Miriam Defensor Santiago and Resolution 123 by Senator Manny Villar. These call for an inquiry into cartels and monopolies. There is another measure by Senate President Juan Ponce Enrile that prohibits price-fixing and price discrimination.

Representing the private sector in the Senate inquiry is lawyer Lorna Patajo Kapunan, who has brought public attention to the way some multinationals, for the longest time, have taken advantage of the absence of an implementing law that will stop their underhanded practices."

Also available online here.