NESTLÉ PHILIPPINES, Inc. officials have been accused of fixing wholesale prices.

Nestlé officials accused of price fixing

by N.R. Melican

BusinessWorld Online, 31 October 2011

(Original article availble online here).

A CITY prosecutor’s office has found probable cause to charge Nestlé Philippines, Inc. officials with price fixing after distributors complained that the local arm of the food giant required their products to be sold for a dictated cost.

As such, the case has been filed at the Quezon City Regional Trial Court and raffled to Branch 97 at present.

In a resolution issued Aug. 15, 2011, Quezon City First Assistant City Prosecutor Meynardo M. Bautista Jr. ruled there was weight behind complaints against six officials -- former Nestlé Philippines chairman and chief executive officer (CEO) Doreswamy Nandkishore, incumbent chairman and CEO John Martin Miller, Sales Director Shahab Bachani, Chief Finance Officer Peter Noszek, and sales officials Jose Ceballos and Maria Elisa Lupena -- accused of imposing predatory prices for goods, a violation of Article 186 of the Revised Penal Code.

Nestlé Philippines could not be immediately reached for comment.

FDI Forefront II Trading Corp. and its parent firm Service Edge Distributors Inc. (SEDI) took issue with the price bulletins Nestlé Philippines issues to middlemen dictating the cost at which Nestlé products should be sold to retailers. Distributors are told to follow the selling prices in the bulletins or face termination of the distributorship agreement.

The two firms -- which were formerly assigned to distribute Nestlé products in northwest Quezon City, Caloocan, Malabon, Navotas and Valenzuela -- claim that the price bulletins do not take into account several factors: the cost of financing for the goods, municipal business taxes, cost of bad debts for bad or poorly paying retailers, cost of discounts given to retailers and cost of bad goods.

Nestlé Philippines terminated its distributorship agreement with FDI in late 2007 and that with SEDI in September 2011.

The respondents countered, however, that the two distributors’ claims are baseless, saying that price fixing only occurs when multiple firms agree to set prices to restrain trade.

The city prosecutor’s office decided, however, that the case was worth pursuing.

“The act of Nestlé in fixing the resale price maintenance for its products… is illegal, a per se violation of paragraph 1 of Artice 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 read.

“Even if the agreement of Nestlé and the complainants is to be analyzed under the rule of reason, the act is also unlawful because of its harmful anticompetitive effects against consumers and complainants, with no competitive economic benefits,” the resolution read further.

“[This is] harmful to the consumers because Nestlé 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 Nestlé,” it stated.

The Nestlé officials could be “criminally liable,” the resolution stated. -- N.R. Melican

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?"

PEOPLE V. NESTLE

"People v.Nestle"
by Horacio Paredes
Abante, 03 September 2011
(Original article available here)

"Tila nagbunga na rin ang pagsisikap ng dalawang kumpanyang Pinoy na mabigyan ng katarungan ang pagmamalabis at pang-aaping dinanas ng mga ito sa kamay ng isang dayuhang multi-national.

Lumabas na rin ang Resolusyon ng Office of the City Prosecutor ng Quezon City tungkol sa mga kasong isinampa ng Service Edge Distribution, Inc. (SEDI) at ng FDI Forefront II Trading Corporation (FDI 2) laban sa Nestle Philippines, Inc.(NPI).

Ang kaso ay tungkol sa predatory pricing na ipinatutupad ng Nestle kaugnay ng pagbebenta ng iba’t ibang produkto nito. Sa ilalim ng mga patakaran ng Nestle Philippines, ang mga distributor ng kumpanya ay hindi maaring magbenta ng mga produkto sa presyong labas sa idinidikta ng Nestle, kahit na ma­ging dahilan ito sa kanilang pagkalugi.

Ang mga nasakdal ay sina Nestle Chairman at CEO John Martin Miller, Chief Financial Officer Peter Noszek, Business Executive Manager Shahab Bacani, Regional Sales Manager Jose Ceballos, Area Sales Manager Elisa Lupena at dating Chairman at CEO Noreswamy Nandkishore.

Sinabi ni First Assistant City Prosecutor Meynardo M. Bautista Jr. na may sapat na ebidensya upang dalhin ang kaso sa hukuman.

Ayon kay Bautista, may nagawang paglabag ang Nestle sa Article 186 ng Revised Penal Code na nagsisilbing batas ng Pilipinas hinggil sa isyu ng anti-trust practices. Ang nabanggit na artikulo ng Kodigo Penal ay nagtatakda ng sumusunod:

“Any person who shall enter into any contract or agreement or shall take part in any conspiracy or combination in the form of trust or otherwise, in restraint of trade or commerce to prevent by artificial means free competition in the market.”

Ang paglabag ay kaugnay sa mga ipinatutupad ng Nestle na mga limitasyon sa presyo ng mga produkto nito, sa mga gawaing pumipigil sa malayang kalakalan at nagbibigay-daan para mangi­babaw ang monopolyo, kasama na ang kapangyarihang magtakda ng mga presyo at pigilan o harangan ang mga karibal sa negosyo sa isang partikular na lugar.

Lumabas sa imbestigasyon na may kasunduan ang Nestle at ang dalawang distributors kung saan itinakda ng NPI ang mga presyo na dapat sundin ng mga distributors. Inobliga ng NPI ang SEDI at FDI 2 na ibenta lamang ang mga produkto nito sa itinakdang mga presyo, kasabay ng bantang pawawalang-saysay ang distributorship agreement kapag ‘di sila sumunod.

Sinabi ni Bautista na ang ginawang ito ng NPI ay ilegal at isang paglabag sa Paragraph 1 ng Article 186 ng Revised Penal Code. Aniya, ilegal din ang nangyaring price fixing at walang sapat na katwiran upang maging lehitimo ang pagtatakda ng mga presyong nabanggit.

Ang kasunduan sa pagitan ng dalawang panig, ani Bautista, ay labag sa interes hindi lamang ng dalawang distributors kundi pati na ng mga consumers o mamimili. Wala rin aniyang benepisyong ekonomiko na matatamo rito.

Ayon kay Bautista, ang mga isinakdal, na mga responsableng opisyal ng Nestle Philippines, ay hayagang isinagawa ang krimen, o pinayagang mangyari ito, o nabigong pigilan ang nasabing krimen, kaya mayroon silang pananagutan dito.

Inirekomenda ni Bautista na ipaghaharap ng sakdal sa korte ang mga nabanggit na opisyal ng NPI bunsod ng reklamong ini­hain ng FDI Forefront II Trading Corporation. Ang rekomendasyong ito ay inaprubahan at sinang-ayunan ni City Prosecutor Donald T. Lee.

Matinding dagok sa Nestle Philippines ang naging pasiya ng Quezon City Prosecutor’s Office. Panay pa naman ang papogi ng Nestle sa telebisyon at sa mga pahayagan kaugnay ng katatapos pa lamang na selebrasyon ukol sa nakaraang 100th Anniversary nito sa Pilipinas. Parang binagyo ang parada ng Nestle.

Sa kabilang dako, pinawalang-saysay naman ang sakdal ng Service Edge Distributors, Inc. sa dahilang ang negosyo ng Service Edge ay sumasaklaw lamang sa Caloocan, Malabon, Navotas at Valenzuela na pawang nasa labas ng Quezon City. Kaya walang hurisdiksyon ang Quezon City Prosecutors Office sa kaso.

Gayun pa man, napag-alaman na puwede pa ring magsampa ng demanda ang Service Edge sa piskalya ng alin sa mga lugar na sumasaklaw ng operasyon nito. Hindi pa ligtas ang mga nasabing opisyal ng Nestle sa demanda ng Service Edge kapag ito ay iharap ng distributor sa tamang korte.

* * *"

Nestle to stand trial in Quezon City for anti-competitive acts

In light of all the debates and discussions on anti-trust practices revolving around the PLDT-Smart-Sun deal, another giant multinational, Nestle Philippines, Inc. (NPI) is actually going to be held for trial for criminal violation of anti-competition provisions.

On 15 August 2011, the Office of the City Prosecutor of Quezon City issued a resolution finding that there is sufficient evidence to hold NPI for trial for violation of Article 186 of the Revised Penal Code, which 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. 

High-ranking officers of NPI, namely Doreswamy Nandkishore (former CEO), John Martin Miller (current CEO), Shahab Bachani and Peter Noszek were impleaded for conspiring to commit anti-competitive acts.   The resolution found that NPI’s practice of resale price maintenance constituted price-fixing which results in exclusion of competition in a particular market. 

Since current anti-trust bills are still pending in Senate, the OCP made reference to the US Sherman Act which considers resale price maintenance as illegal per se.   According to the resolution, the vertical agreement existing between NPI and its distributors, FDI Forefront II Trading Corporation and Service Edge Distributors, Inc., was anti-competitive since Nestle fixed the resale price of its products, while its distributors were obligated to sell Nestle products only at the price fixed by NPI.   Apparently, failure by the distributors to sell the products at the prices fixed by NPI would result in the unilateral termination of their distributorship agreement by NPI.   The price fixing was found to be harmful to consumers because it meant that consumers cannot buy the product at a lower price than that fixed by NPI.

This practice of price-fixing by NPI was deemed as a violation of Paragraph 1 of Article 186 of the Revised Penal Code.   Nandkishore, Miller, Bachani and Noszek were found to have knowingly committed the crime or to have permitted or failed to prevent the commission of the crime.   The NPI officers will stand trial before a Regional Trial Court of Quezon City.

Nestle CEO visits Philippines

Nestlé CEO’s Philippine visit may help resolve distributor woes

Published 18 June 2011 in Metrofile, The Daily Tribune

(Original article available online here)

"The visit to the Philippines of Nestlé global CEO Paul Bulcke could help resolve the controversy concerning the alleged anti-trust practices being committed by Nestle Philippines Inc. (NPI) against its local Filipino distributors. Bulcke is arriving in Manila today, June 16, to take part in NPI’s ongoing centennial celebration which is being observed, with the theme “Kasambuhay, Habambuhay (Companion in Life, for Life)”. NPI’s Filipino distributors are hoping that Bulcke’s Manila sojourn could provide the spark for the resolution of the continuing disputes between the two sides that have led to the filing of charges in court against the Swiss-based multinational. 

Bulcke, a Belgian businessman appointed global CEO in 2007, has described Nestlé under his tenure as ‘une force tranquille’ which translates to “calm strength.” In this regard, anti-trust lobbyist and lawyer Lorna Kapunan expressed hopes that this tranquility covers not only the running of the head office in Switzerland, but its operations in the Philippines as well. Kapunan is the legal counsel of two of the local distributors that have filed complaints against NPI in the local courts and in the Department of Trade and Industry.

“Seeing as how disorganized NPI has responded to the cases we have filed against them, one can only hope that Bulcke’s presence will not only resolve the concerns raised by my clients, but will also realign the company to the head office’s standards on fair trade and competition,” Kapunan said. “After all, being the top executive of Nestlé, Mr. Bulcke should know their Code of Business Conduct by heart. Specifically, he should examine whether the Nestlé Philippines complies with Section 7 of this Code, which clearly states that commercial policy and prices will be set independently and will never be agreed, formally or informally, with competitors or other non-related parties, whether directly or indirectly.” 

On the other hand, NPI Chairman and CEO John Miller stated that the company’s ongoing celebrations are meant to affirm the Filipino’s love for family, in that “Nestlé products have become very much a part of the Filipino families’ way of life.” NPI ranks among the top 3 subsidiaries in the region comprising of Asia, Oceania, and Africa, and is ranked number one among the Asean countries. "

BusinessWorld: Atty. Lorna Kapunan on Anti-Trust

"Anti-trust protection for SMEs" (1st of 2 parts)
by Atty. Lorna Patajo-Kapunan
Published in BusinessWorld Online Edition on 24 May 2011
(Original article available here).

"Part I

The recent PLDT-Smart buy-out of Sun Cellular emphasized once again the need for a more comprehensive anti-trust law in the country. Public awareness of the lack of a determinative anti-trust policy has heightened. While the National Telecommunications Commission (NTC) has been tasked with investigating any anti-trust policies in the Sun Cellular sale, there continues to be much criticism for the lack of an anti-trust law with "teeth."

And while the NTC may be called forth to investigate possible anti-trust violations in the telecommunications sector, the question remains as to who will "police" similar violations in other industries, such as consumer goods, manufacturing, food, retail, and distribution.

The current business climate in the Philippines highlights the need not only for a comprehensive anti-trust policy but a regulatory body with teeth. Apart from NTC, there is the Department of Trade and Industry (DTI) tasked by law to implement and monitor compliance with trade and industry laws. But then, when an issue like predatory pricing or vertical price restraint comes up, DTI itself claims it has no jurisdiction. There is thus much confusion as to which and what agency has the expertise to regulate trade and industry laws. Who monitors and who metes out the punishment? Are the penalties even sufficient to prevent anti-trust violations in the Philippines?

Admittedly, "anti-trust" remains a somewhat vague concept in our country, especially to the general public. Lawyers and businessmen may understand the general idea, but would themselves be hard-pressed to define, much less abide with, perimeters surrounding anti-trust violations, precisely because of a lack of a comprehensive anti-trust law that provides such guidelines. What it all boils down to is the prevention of monopoly and the promotion of free competition. Why is this important to the common tao? The answer is because, when there are no clear-cut rules and regulations, foreign companies, multinationals, and large local companies, will continue doing anti-trust practices which ultimately affect not only the consumer but the Filipino worker, employee, and entrepreneur. And they will continue to do such prohibited acts precisely because they can get away with it here in our country.

While there are existing provisions on anti-trust in Philippine law, these provisions are scattered across different codes and republic acts. There are no implementing rules and regulations. The various and existing anti-trust provisions do not provide clear-cut guidelines, elements/requisites, and quantum of evidence required to determine whether an act constitutes unfair competition, monopolistic behavior, or restraint of trade. The penalties meted out alone by certain provisions are dismally insufficient as preventive measures.

These are the issues that the Philippine Senate hopes to address in various proposed anti-trust bills. During the Senate "Understanding Anti-Trust" public forums held last February 2011, facilitated by Senators Manny Villar, Juan Ponce Enrile, and Sergio R. Osmeña III, the following proposed anti-trust bills were presented to the public and extensively discussed: Senate Bill No. 1, authored by Senatore Juan Ponce Enrile; Senate Bill No. 125, authored by Senator Sergio R. Osmeña III, Senate Bill No. 175, authored by Senator Antonio F. Trillanes IV, and Senate Bill No. 1838, authored by Senator Miriam Defensor Santiago. While the Senate can be lauded for recognizing the need to strengthen our anti-trust laws, with the intention of providing greater protection to the consumers, Filipino small-to-medium enterprises (SMEs), and middlemen, these proposed bills have yet to be approved.

The absence of rules and regulations implementing anti-trust laws also translates to less anti-trust cases filed in and ruled on by the Philippine courts. In fact, in the Senate’s "Understanding Anti-Trust" Forum, it was reported that right now there is only just ONE anti-trust case filed before the Department of Justice. In the same Senate public forums, Senator Manny Villar called for the need for greater protection for the middlemen -- the Filipino SMES who provide retail, distribution, and other BPO services to multinationals and other foreign companies. There is an urgent need to provide for a level playing field and for penalties that will actually deter corporations from committing anti-trust and other prohibited acts.

(To be continued)"

Following Nandu's promotion: Nestle Philippines' troubles continue

"It's all about population control"
By Emil Jurado, TO THE POINT, Manila Standard Today, 19 May 2011
(Original article available online here)

"I recently came across published reports about a product recall being done by Nestle Philippines Inc.

I know that Nestle has recalled many of its products for various reasons—the most noteworthy being 100g glass jars of Nescafe. In this case of contaminated coffee, people were instructed to keep the lids as proof of purchase for a refund, but to “dispose of contents immediately and not to bring the coffee back to the stores where they were bought.”

A variant of Lean Cuisine frozen dinners were recalled as well when consumers reported finding pieces of hard plastic in their food.

Locally, the most recently was the recall of Maggi beef and chicken noodles after traces of salmonella were found in two batches of the beef variant.

Having to take these items off the shelves is just one of the many problems besetting NPI. I believe that the string of cases against the company regarding its dealings with its local partners is, or should be, a major concern. My gulay, it seems that the multinational has made it a habit to squeeze distributors to the point that doing business is no longer profitable. Then, when cases are filed against the company on that very same issue, it tries to squeeze itself out of legal proceedings.

***

I have written at length about a Filipino company that distributes Nestle products and has been on the receiving end of the multinational’s bullying tactics. Nestle created price caps for its goods and simultaneously shortened the time of payment collection for distributed products. The local company took issue with that and filed formal complaints with the Trade and Industry Department as well as with the Regional Trial Court. This has caught the attention of some lawmakers, who are now working on strengthening anti-trust measures.

In the meantime, Nestle seems to be taking matters in stride as it even failed to give a rejoinder to the Filipino distributor’s claims within 15 days as it was ordered by the court. Santa Banana, is this company that confident about its position, or connections, that it can afford to be complacent?

All these developments come on the heels of news that Nandu Nandkishore is to be promoted Executive Vice President for Asia, Oceania, Africa and the Middle East. Nandkishore was CEO of NPI, who was promptly shipped to the mother company to assume another position when the cases were filed by the Filipino distributor. With his new designation, I presume he is ready to finally face the music."

Nandu vs. Cory

"Nandu Nandkishore: The Nestle Executive Who Disrespected Cory Aquino!"

by The EQualizer Post, 15 April 2011
Full and original article appears here.


Image from The EQualizer Post

Frits van Dijk, head of Nestle’s business in Asia, Oceania, Africa and the Middle East, will retire in September. Nandu Nandkishore, who became head of Nestle’s nutrition unit last year, will replace him.

We do not believe that it is morally acceptable for Nestle to promote senior executives even if they cheat during their overseas assignments, deceive and cover-up serious misdeeds, treating shareholders and the public as gullible fools.
Are cherished Nestle values not important anymore? Are controversial executives just "kicked upstairs" in Nestle? If so, this would be a great insult to all the honest and competent executives in Nestle worldwide!

Some companies are not content with just being monopolies.

They have to be bullies and hypocrites.

Take the case of a multinational that espouses “trust, integrity and honesty.”

Alas, their behavior is the exact opposite.

A curious case involves one distributor who discovered a sexual affair between their top officer and the sales manager in charge of their account.

Instead of addressing the blatant conflict of interest, guess what the multinational did when this was brought to the officers’ attention?

They illegally terminated the distributor’s contract, and threatened him so he would remain silent.

It’s enough to make you spit in your coffee and throw it at their faces. Ramon Tulfo (Philippine Daily Inquirer)

My friends at the Philippine branch of a multinational coffee-dairy maker must fix the stink about their sales manager and a distributor. The story is going around town. The food giant’s female sales boss not only is having an affair with their distributor’s married general manager, but also has caused the latter to abscond with company funds. The distributor’s owners are scandalized that the multinational has chosen to treat the affair as one of consenting adults, instead of a conflict of interest. That’s bad, since the multinational’s vaunted primary corporate policies are honesty, integrity and fairness. Jarius Bondoc (Philippine Star)

Several months ago, I wrote about this food multinational corporation that was bullying one of its Filipino distributors. Considered the world’s largest food and drink company, this multinational had terminated its contract with a distributor and had threatened to do the same with another distributor. The reason stated was conflict of interest.
The alleged conflict of interest was based on Distributor 1’s shareholders’ discovery that one of its executives, a married man, was having an affair with a sales executive of the multinational. The relationship led to double the amount of discounts on the multinational’s goods given to retailers (such as groceries) by the executive. This led to brisk sales, but at a loss to the distributor.

The multinational made money all right because it sold its brands, and their executive got recognition and financial incentives because of her performance. However, all these were at the distributor’s expense. Even more disturbing, an independent audit showed that there were “phantom deliveries” of products to the distributor, non-existent goods, but still paid for because of the connivance between the parties to the illicit affair.
* * *
When the distributor brought up the illicit relationship to the multinational executive’s superiors, they shrugged it off as an affair between two consenting adults. This was despite the company’s Corporate Code of Ethics that enjoins its management and employees to “avoid even the appearance of impropriety in its business relationships on behalf of the company.” In the code, there is also a provison that says “sanctions will be applied in the event of misconduct or abuse of established corporate standards.”

Well, sanctions were applied all right, but to the wrong party—my gulay, to the distributor!
Eventually, the multinational had a dialog with the distributor to settle their differences. Nothing came out of it.
As it turned out, this was not an isolated case. Another sales employee of the multinational coerced five Filipino distributors of the company in Central Luzon to pass on goods to Metro Manila wholesalers at 8 to 10 percent discount.
Manila distributors like Distributor 2 could not compete with such low prices, but because the multinational forced it to “hit targets at all costs,” it had no choice. In the process, it lost money.
* * *
My gulay, the distributors later found out that the customer offering preferential discounts was the executive’s husband. They discovered this when the checks they were given by the customer bounced. Upon investigation, the checks were traced to the executive’s account. And the distributors were not the only ones left holding the bag. Just when the couple’s scam was discovered, the executive’s husband got cash advances from the Metro Manila wholesalers for goods they never got. One of them even lost P22 million.
When the distributor approached the multinational for redress, the company did not accept any responsibility and instead offered to help only as far as paying for the distributors’ legal expense to sue. However, independent lawyers say the executive, by her verbal or written orders, some in documents with the multinational’s letterhead, bound the company to take responsibility by virtue of the doctrine of “apparent authority.”

What do you do with a bully who runs roughshod over its distributors? You take him to court!
Emil Jurado (Manila Standard)"

Philippines Graphic responds to Nestle

"Nestle response has no legal basis - NPI distributors"

by Joel Pablo Salud

Published in Business Mirror and Philippines Graphic on 21 April 2011

(Original article available online here)

"Nestlé Philippines, Inc.’s (NPI’s) response to accusations of predatory pricing appears to be based on unfounded generalizations than what is actually founded on law.

Atty. Lorna Kapunan, counsel for Nestlé’s distributors, said what Nestlé has is a “vertical price agreement,” which is a competition restriction between firms that governs products made by NPI. This agreement “is still considered predatory pricing.”

Nestlé’s distributors have accused the biggest food conglomerate of predatory pricing, and ending distributorship agreements without so much as fundamental basis based on Philippine laws.

“The practice of vertical restraints are closely monitored by international courts, with many of the agreements being ruled as unlawful per se. NPI currently engages in the practice of setting a minimum price by which its Filipino distributors are required to sell their products. This does not take into consideration the operational costs shouldered by Filipino Small and Medium Enterprises to distribute the products. Decent profit margins are therefore very difficult to attain, considering capital outlay and the lack of marketing and promotional support from NPI.”

Counsel added that non-compliance with the low prices results in NPI threatening to end the distributorship agreement. Thus, small- and medium-scale entrepreneurs (SMEs) like FDI2 find themselves scrambling to reach break-even status by trying to honor the terms of agreement.

Nestlé Philippines’ head of Corporate Affairs Edith de Leon acknowledged in the reply that Nestlé products are not the cheapest in the market and that competition among lower-priced products remains intense. De Leon’s statement allegedly avoids the issue of vertical price agreements with its Filipino partners.

De Leon also stated that Nestlé complies with the country’s laws and standard trade practices, a statement Atty. Kapunan quickly puts in context. Kapunan stressed that NPI knows there are no standards on vertical price agreements in the Philippines.

The Senate is now in the thick of addressing this matter and other issues regarding antitrust through the promulgation of various bills in the Upper House.

According to Atty. Kapunan, by Swiss standards, NPI’s distributorship model is patently illegal. The standards laid down by the Swiss Competition Council in Switzerland would make NPI’s existing distributorship agreement here restrictive of trade, thus subject to penalties.

Similarly, she mentioned, that the case mentioned by de Leon filed with the Department of Trade and Industry (DTI) was dismissed, not for lack of merit as she previously stated, but for lack of jurisdiction on the part of the DTI.

“While FDI2 has filed a motion for reconsideration of DTI’s decision, the case itself is public domain and anyone may see that DTI did not even delve into the merits of the case. To date, no case against NPI, with the exception of the one filed by FDI2 in DTI, has been dismissed,” Kapunan explained.

Moreover, accusations made against Nestlé by its distributors may not be quite as unfounded as the company would have the public believe.

In the case of “Nestlé Philippines, Inc. vs. FY Sons, Inc.” (05 May 2006, G.R. No. 150780), the Supreme Court ruled that FY Sons, also a Nestlé distributor, was lured to invest huge sums of money, time and effort in order “to abide by such distributorship agreement, and to develop market areas for [Nestlé’s] products.

Thereafter, Nestlé breached 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.”

These incidents are not new, Kapunan explained, as NPI executives John Miller, Shahab Bachani and Doreswamy Nandkishore have been charged with “perjury for issuing conflicting statements in their affidavits with respect to the policies of Nestlé in agreements with their distributors and other Filipino partner firms.”

Cases against Nestlé are now pending in the courts of Quezon City and Makati City. G"

People's Journal responds to Nestle

"Black coffee, anyone?"
by Willie S. Baun, PEOPLE'S JOURNAL, Streetlights, 14 April 2011
(Article hit the stands on 14 April 2011; original article available online here)

"PEOPLE who have been keeping their ears to the ground at the premises of Nestle Phils., Inc. in Rockwell, Makati are likely to hear rumblings in today’s meeting of the giant multinational food and beverage company’s stockholders not only here but all the way in a town by Lake Geneva in Switzerland.

What’s brewing, to shift to a familiar metaphor, is primarily the issue of predatory pricing filed against NPI by two of its long-time distributors, Service Edge and FDI Forefront.

Since the issue broke out in the open months ago, NPI sources said, there has been a flurry of communications from top honchos of the Swiss firm’s headquarters to its execs here. They are reportedly not pleased with how the issue has been handled by NPI and its legal teams.

Charges filed against NPI with state regulatory agencies cite the company for allegedly compelling its distributors to lower their prices – regardless of their operating costs, interest charges, and taxes. Consequently, some of them lost heavily and have had to lay off personnel. One of them has gone bankrupt.

Affected distributors have also filed criminal complaints of perjury at the Quezon City and Makati City courts against top NPI executives, two of whom have managed to sneak out of the country, thanks to the short arm of our law and justice system.

Is it true that one of the fugitive execs is now a member of the Nestle executive board in Switzerland while the other has been given a plum assignment in the United States? If so, nothing pays like predatory pricing does, indeed.

So, it may well be the creamer, as it were, of choice for the Nestle brew involved in yet another case. Tycoon Henry Sy’s Banco de Oro has likewise sued NPI for allegedly false and deceptive testimony.

Streetlights came out with this earlier, to which a rejoinder was supposed to be forthcoming two weeks ago. It did finally last Monday (PJ Editorial, April 11) but only to “celebrate” the NPI’s fealty to corporate social responsibility across 100 years, all of a century, of business in the country.

PJ sportingly joined NPI, and so does Streetlights to wit:

“But possibly its more significant exercise in this regard (CSR) is its commitment to work with the Department of Agriculture, the Land Bank of the Philippines and Banco de Oro, to infuse more pep in the country’s coffee industry.

“This supposed to pour some P3 billion into the venture, a major portion of which will reportedly be used to provide loans to coffee farmers in the country.

“For this, we say, ‘Cheers’. Let’s drink to that, and not with any alcoholic concoction, but with Nescafe, perhaps?” Heck, you can make that “with Nescafe, for sure,” and I wouldn’t mind because it’s been a fact of this old fogey’s life thrice a day for more than the years he can instantly remember.

In the meantime, it comes as no surprise to learn that this matter of multinational company brushes versus fair trade rules has not escaped the attention of the Senate. Yeah, that of the Senate President – Manong Johnny – who, since 2008 has been pushing for Anti-Trust legislation precisely to preempt foreign firms’ bullying of their local partners.

Black coffee time to sober up, Jose, and so is it for anyone who mistakenly believes corporate hooligans can only be from Nestle."

Pagbabalatkayo ng Nestle

"Pagbabalatkayo ng Nestle"
by Horacio Paredes, ABANTE, 14 April 2011
(Original article available online here)

"Kumpirmado umanong dalawang mataas na opisyal ng dambuhalang Swiss multinational company, Nestle Philippines Inc. (NPI), ang palihim na pumuslit palabas ng bansa matapos silang sampahan ng mga kasong kriminal ng dalawang Pinoy distributor.

Ang bigating duo ay sina dating NPI chairman at CEO Doreswamy Nandkishore at ex-Chief Finance Officer Peter Nozcek. Sa puntong ito, malinaw na naisahan tayo ng mga Swiso. Hindi kaya dapat panagutin din ang mga NPI officials na nagsabwatan upang makaeskapo ang dalawa?

Umano, si Nandkishore ay hinila pabalik sa Nestle, Switzerland samantalang si Nozcek ay nire-assign sa Amerika. Kasama sila sa mga criminal case na inihain laban sa higanteng food and beverage company na kailan lamang ay nagdiwang ng kanilang 100th year sa ating bansa. Sa mga press release, ipinagmamalaki ng kumpanya ang pagiging bahagi ng tahanang Pilipino sa loob ng 100 taon sa pamamagitan ng mga de-kalidad na produkto at magagandang serbisyo sa ating mga pamilya.

Subalit tila iba ang ipinapakita nila sa publiko at ang kanilang pakikitungo sa mga lokal nilang ka-partner sa negosyo tulad ng Forefront II Trading Corp. (FDI 2) at Service Edge Distributor Inc. (SEDI) na matagal na umano nilang iniisahan. Ito ang pinag-ugatan ng problema na nauwi sa demanda.

Isa sa mga patung-patong na hinaing ng grupong Pinoy ay ang pakikipagsabwatan at pakikipagrelasyon ng babaeng area sales manager (ASM) ng NPI sa dating presidente ng FDI 2. Ang relasyon ng dalawa ang sinasabing naging dahilan ng pagkalugi ng Forefront. Upang umano sumikat ang babae at lumaki rin ang kanyang komisyon, walang puknat na order ng mga produktong Nestle ang ginawa ng naturang FDI 2 president na humantong pa sa pagiging Distributor of the Year ng kumpanya sa dalawang magkasunod na taon - 2005 at 2006.

Ang malungkot at kagulat-gulat nito ay nang busisiin ang mga libro ng kumpanya, lumabas na ang laki ng lugi nito dahil ibinibenta pala sa presyong palugi ang mga paninda. Inireklamo nila sa NPI ang immoral conduct ng ASM dahil ang pagpasok niya sa relasyon sa pinuno ng FDI 2 ay salungat sa Code of Ethics ng Nestle. Ang masakit nito, ang reklamo nila ay hindi inaksyunan ng Nestle hanggang tuluyan nang nabangkarote ang FDI 2. Ang dahilang binigay ng NPI ay ang relasyon ng dalawa ay walang kinalaman sa kumpanya at pawang gawain lamang ng consenting adults.

Ang isa pang reklamo ng mga Pinoy partner ay ang hindi pagbabalik sa kanila ng milyun-milyong pisong dapat nilang matanggap tulad ng kanilang mga paluwal sa pag-promote ng mga produkto ng Nestle, withholding tax, pasahod sa mga extra personnel at iba pang mga bayarin. Imbes umanong tulungan, bagkus ay ini­pit pa ang Forefront at pinayuhan pang i-resign na lang nito ang pagiging distributor ng Nestle.

Binantaan pa umano sila na pati ang kontrata ng sister company nitong SEDI ay babawiin din kung hindi sila susunod sa kagustuhan ng multinational. Dahil kapit sa patalim at nalulugi nga ay napilitan silang pumayag. Para naman may masabing consuelo de bobo, binayaran umano sila ng kaunti subalit pinapirma naman sila ng isang quit claim na nagsasaad na tapos na ang pananagutan sa kanila ng NPI, na hindi naman totoo.

Dagdag pa ng grupo, minamandohan din daw sila ng NPI na ibenta ang mga produkto kahit sa presyong palugi para patayin daw ang kumpetisyon, bagay na lalo nilang ikinalugi sa dahilang hindi nila kinayang mabawi ang mga gastusin nila para sa gasolina, trucking, taxes at loan interest. Ang direktibang ‘yun ng NPI ay ang tinataguriang predatory pricing.

Dahil sa mga demandang isinampa sa kanila, mukha yatang mahuhubaran ng maskara ang tila doble-karang multinational. Balatkayo at pakitang-tao lamang ang lahat ng sinasabi nilang corporate social responsibility o pagtulong sa mga komunidad na panay ang labas sa media. Nahaharap sila ngayon sa kasong unfair trade practices, perjury, offering false testimony in evidence at predatory pricing sa Makati at Quezon City. Bantayan din sana ang kasalukuyang CEO ng NPI na si John Miller at baka makaalpas din ito tulad nina Nandkishore at Nozcek.

* * *

Basahin ang aking mga kolum sa www.duckyparedes.com/blogs. Mag-email sa duckyparedes@yahoo.com."

Nestle cheers and jeers

"Cheers and Jeers", People's Journal, 11 April 2011
(Original article available online here).

"Nestle Philippines, Inc. (NPI) must still be in a celebratory mood, having recently marked a century of existence among Filipinos, a great number of whom have patronized its products for much of their lifetime.

In recent weeks, and probably to highlight this very special milestone in its corporate life, NPI has engaged itself in a frenzy of corporate social responsibility projects and business related undertakings. These included mobilizing 525 of its people to conduct what it claims to be the largest carpentry lesson ever to be held anywhere in the world, one that would outshine the existing Guinness World Record of 250 people in a similar exercise.

The company even commissioned nine directors to produce short films that would “celebrate” its 100 years of operation in the Philippines.

But possibly its more significant exercise in this regard is its commitment to work with the Department of Agriculture, the Land Bank of the Philippines and Banco de Oro, to infuse more pep in the country’s coffee industry. This is supposed to pour some P3 billion into the venture, a major portion of which will reportedly be used to provide loans to coffee farmers in the country.

For this, we say “Cheers!” Let’s drink to that, and not with any alcoholic concoction, but with Nescafe, perhaps?

There’s something ironic in all these, however, because for some time now, NPI appears to have assumed the role of an oppressor, a kontrabida, as one is called in the local cinematic milieu. And that’s because the company has allegedly been enforcing its version of predatory pricing upon its Filipino distributors, which constitute anti-trust and unfair trade practice.

NPI stands accused of compelling its distributors, under pain of cancelation of distributorship contracts, to abide by its inflexible prices. It is said however, that these prices do not consider the distributors’ cost of delivering Nestle products to wholesaler and other retail outlets; the interest charges for financing the purchase of these products, and the municipal taxes that its distributors have to shoulder. This resulted in bankruptcy for one of them, and huge losses for another.

Two distributors of NPI have filed charges to this effect with government regulatory agencies. The distributors have also filed criminal complaints of perjury against top officials of Nestle. We are informed that two of these officials, former Chairman and CEO Doreswamy Nandkishore and former Chief Finance Officer Peter Noszek, have quietly slipped out of the country and are now effectively out of reach of our judicial system. The former is reportedly with the Nestle head office in Switzerland while the latter is said to have been reassigned to the US.

Incidentally, its partner in the coffee venture, Banco de Oro, has also taken NPI to court for having “knowingly made a false representation with intent to mislead the bank” into renewing the loans of one of its distributors. The false information given by NPI led to millions of losses for the bank.

What then, do we say to all these but ...”Jeers!”

Brew too hot for Nestle?

"Brew too hot for Nestle?"
by Willie S. Baun
Originally published in People's Journal, STREETLIGHT, 26 March 2011
(Also available online here)

"SOMETHING’S been percolating at Nestle Phils., Inc. but the aroma it exudes is unlikely to be as enticing as its world-famous brew. The Swiss company, largest food and beverage on the planet, faces a gamut of charges here, ranging from alleged unjust contract termination, predatory pricing, perjury and deception, to false and fraudulent testimonies.

The complainants are the Sy family-owned Banco de Oro and two of Nestle’s long-time distributors –- Service Edge distribution, Inc. and FDI Forefront II Trading Corp. -– both recognized and awarded as Nestle ace marketing arms.

Pending are charges of false and deceptive testimony filed by BDO against the Swiss multinational. The bank claimed NPI fed it with “fraudulent information” in 2009 on the financial condition of Inter-brand Logistic and Distribution, Inc.

On the basis of the NPI info, BDO trustingly extended 19 loans aside brom renewing the Interbrand credit facility for a total of P19 million exposure, all of it now in jeopardy because the company has closed shop.

In yet another case, distributors Service Edge and FDI Forefront haled Nestle to court principally for alleged predatory pricing or selling its products at prices way below actual cost. Under duress, they reportedly have had to adopt the illicit practice or face immediate contract termination.

False statements purportedly submitted in court by top NPI executives have incurred perjury charges against Chairman-CEO John Martin who is not as lucky chief financial officer Peter Nozsek who managed to slip out of the country and is now reportedly in the United States.

According to these two complainants, aside from the occasions of misconduct cited, Nestle has not been as transparent and candid in dealings related to the cases filed against it.

Nestle was also allegedly deliberately untruthful when it told media that the predatory pricing suit filed by Service Edge and FDI Forefront had been dismissed by the Department of Trade and Industry for lack of merit.

The truth, they said, is DTI declared it had no jurisdiction over the complaint “due to lack of jurisprudence and the absent of pertinent laws on predatory pricing and unfair trade practies.”

The legal tussle is being watched with keen interest by the business community in light of the massive Public-Private Partnership socio-economic program launched by the Aquino administration. Who else but the giant multinationals, like Nestle, would indeed most likely to be in the PPP – given the billions in investments the program envisions?

Needless to say, the Aquino government is expected to even now be legally on red alert for oppressive practice some multinationals would perpetrate or perpetuate to shortchange their local partners.

Streetlights kibitzer Jose is saying that NPI has just celebrated it 100th year of operations in the Philippines. He winks as he handed me a statement of the NPI about how its business conduct has been “consistent with universally accepted practices adhering to fairness, transparency, and compliance with all applicable laws.”

I do not wish to believe that for so long a time now, some multinationals hosted by the Philippines have been pulling the wool over the eyes of their Filipino partners and the government."

Nestle's idea of fairness and transparency

"Nestle's idea of fairness and transparency"
by Ducky Paredes
22 March 2011, Malaya (original article available online)

“BDO charged that Nestle ‘acted in utmost bad faith and in wanton, fraudulent, reckless, oppressive and malevolent manner.’”

WE wish to assure the public that our activities are conducted in compliance with the Nestle Corporate Business Principles, consistent with universally accepted practices adhering to fairness, transparency and compliance with all applicable laws and regulations. These same principles have governed the way Nestle has done business in the Philippines for 100 years, allowing us to earn the trust of our consumers all these years. In turn, we expect our partners to be guided by the same principles."

This is the assertion of Ms. Edith de Leon, the Head of Corporate Affairs of Nestle Philippines, Inc. (NPI), a Switzerland-based multinational company producing and marketing a wide range of consumer products.

De Leon was reacting to media articles critical of the company’s business practices that, among others, included unjust termination of agreements, predatory pricing, perjury and offering false testimony in evidence.

The particular complaints in this regard were filed by two of its major distributors, Service Edge Distribution, Inc. (SEDI) and FDI Forefront II Trading Corporation (FDI 2).

"Adherence to fairness, transparency and compliance with all applicable laws and regulations." Grandiose words, nice to hear but, if not sincerely meant, amount to nothing.

But how does her company’s actual actuations square with her lofty Corporate Business Principle?

Was Nestle Philippines being fair and transparent when, it ‘’knowingly and deliberately provided false and fraudulent information’’ in 2009 to Banco de Oro regarding the financial status of its distributor, Interbrand Logistics and Distribution, Inc. which was then renewing its loan and credit facility with the bank?

The bank renewed Interbrand’s credit facility and extended it a series of 19 loans totalling P123.25 million in the second half of 2009 on the strength of Nestle’s repeated positive endorsements and certifications about its distributor’s financial stability and payment performance. It turned out (eventually) that Nestle knew all along that Interbrand was in serious financial trouble; yet, just the same, Nestle participated in what amounted to a cover-up in order to protect and advance its own business interest.

Banco de Oro took Nestle to the court, accusing it of having "knowingly made a false representation with intent to mislead the bank into renewing Interbrand’s credit facilities and allowing Interbrand to make further availments under the same to finance the purchase of (Nestle’s) products which would eventually lead to (Nestle’s) benefit."

BDO charged that Nestle "acted in utmost bad faith and in wanton, fraudulent, reckless, oppressive and malevolent manner."

Referring to the complaint on predatory pricing filed by SEDI and FDI 2, De Leon said this was dismissed by the Department of Trade and Industry. True or false?

According to the two distributors, what actually happened was that the DTI declined to make a definitive ruling on the merits of the case supposedly because it did not have jurisdiction over the complaint, due to the lack of applicable jurisprudence and the absence of pertinent laws on predatory pricing and unfair trade practices.

This is precisely why several anti-trust bills seeking to curb these abusive practices have been filed in the Senate and in the House of Representatives.

The fact is that top Nestle officials are also facing perjury charges before courts in Quezon City and Makati City and these are now being evaluated by prosecutors of the Department of Justice. Named respondents are Nestle chairman and CEO John Martin, chief financial officer Peter Noszek, business executive manager for liquid beverages Shahab Bacani and regional sales manager Jose Ceballos.

Was Nestle also being transparent when it quietly shipped out Peter Noszek, who is now reportedly in the US? Of course, there was no Hold Departure Order for him, but Nestle insiders say that Noszek’s departure was kept so hush-hush that they only found out about it one morning via an office advisory.

It may be assumed that the company also did not inform the DOJ officials concerned about Noszek’s departure. So he is now effectively out of reach of the country’s judicial system. Neat, isn’t it? Sure it would be -- for a criminal organization but, for a legitimate business? One has to wonder if similar "reassignments" are also in the works for chairman and CEO John Miller and other officers.

De Leon also asserts that Nestle’s pricing policies are compliant with the laws as well as recognized standards of trade practice in the country. But does Nestle include in these "recognized standards" the distributors’ expenses in distributing and delivering Nestle’s products to the wholesalers, dealers and other retail outlets? Does it also take into account the financing cost and high interest rates that distributors have to shoulder in purchasing Nestle products?

Both SEDI and FDI 2 claim that the price bulletins issued by Nestle for its products are so inflexible and do not take these factors into consideration.

They were allegedly also ordered by a Nestle regional sales manager to give unrealistic discounts to a favored group of wholesalers.

They also allege that Nestle’s unfair price strategy, aggressive sales targets and unilateral suspension of in-house financing arrangement caused them to incur heavy losses and placed FDI 2 in dire financial straits. This purportedly prompted Nestle to demand that additional capital be infused into FDI 2, which was complied with, using borrowed money.

In spite of having complied with the demand for additional capital, Nestle allegedly terminated the distributorship agreement on December 21, 2007. This forced the company to cease operations, with the result that it was unable to pay its employees, or to give their 13th month pay.

Again, was Nestle adhering to ‘’fairness and compliance with all applicable laws and regulations" in the case of its distributor, FY Sons, Inc.?

Nestle sued FY Sons before the Makati Regional Trial Court in relation to a dispute over supposed unpaid accounts. But the court handed down an adverse ruling against Nestle and ordered it to pay FY Sons P1 million in actual damages and P200,000 as exemplary damages and attorney’s fees. Nestle elevated the case to the Court of Appeals but to its chagrin, the CA upheld the lower court’s ruling and even raised the penalty to P1.5 million.

It was established in both the Regional Trial Court and the Court of Appeals that Nestle "indeed failed to provide support to respondent; unjustifiably refused to deliver stocks to respondent; the imposition of P20,000 fine was void for having no basis; that petitioner failed to prove respondent’s alleged outstanding obligation; that petitioner terminated the agreement without sufficient basis in law or equity and in bad faith; and that petitioner should be held liable for damages."

Nestle took the case further up -- to the Supreme Court but Nestle again received a stinging rebuff when the High Tribunal sustained the CA decision. The SC ruled that Nestle failed to prove that FY Sons owed it the sum of P995,319.81 and that the seizure of the distributor’s time deposit of P500,000 was improper.

The Court ordered Nestle to refund the amount, with interest.

Furthermore, the SC castigated Nestle for "being at fault and in bad faith" and rejected its plea for moral damages and attorney’s fee from FY Sons.

In effect, the Supreme Court said Nestle was guilty of violating certain laws and of committing unfair trade practices.

This is what Ms. De Leon calls Nestle’s "adherence to fairness, transparency and compliance with all applicable laws and regulations?"

***