ANTI-TRUST CASE AGAINST NESTLE PHILIPPINES FILED IN RTC QC

Nestle execs face trial

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.

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."

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?"

***

Anti-trust bills timely

"Anti-trust bills timely"
by Willie S. Baun
Originally published in People's Journal, 01 February 2011, STREETLIGHTS, p. 4

"Multinational companies, particularly those dealing in "fast-moving goods," have enjoyed an array of privileges that otherwise would not be available to them, not even in their own countries.

What makes the FMCGs so profitable in the domestic market, apart from the usual bias for the "imported," is the participation of local distributors.

Numerous small enterprises take on the difficult job of bringing the FMCGs to the buying public, and set their profit margins based on standard retail prices and bulk-discount costs.

In effect the MNC plays commissary that merely takes care of administrative matters but somehow gets the lion's share of the income earned by the distributors.

'In and of itself,' observed a trade official, 'this is already a rather one-sided business deal.' It was added when flagrantly abused by a giant MNC to the graver prejudice of the distributors - the alarm bells should ring against anti-trust.

Two distributors in particular claim to have fallen under the mercy of one such MNC due to its alleged predatory pricing in direct conflict with the corporate codes enforced by the Department of Trade and Industry.

As this case wider currency in business circles, so has "Anti-Trust" attained buzzword standing. Soon enough, I believe, Senate President Juan Ponce Enrile and Sen. Miriam Defensor-Santiago would be asked to include FMCG distributors and other such outsource companies in appropriate bills they have proposed.

Legal proceedings between the MNC and the distributors showed the multi-national may have perjured. That, moreover, the MNC's counter-affidavits and joint counter-affidavits versus the predatory pricing charge are inconsistent with one another and with the facts of the matter at bar.

When their attention was reportedly called, the MNC executives seemed unmindful of the resulting perjury charges. 'Their rebuttals were at best amusing, and, at worst dismissive. Yeah, as in 'we didn't know or realize we were lying!''

They also posited that 'privilege' and 'right' were synonymous and took issue with the distributors for the focusing on semantics. Cited in the MNC's defense, the Webster's Encyclopedic Dictionary defined 'privilege' as a 'right, immunity, or exemption only by a person beyond the advantages of the most.'

On the other hand, Black's Law Dictionary, the authority on legal terms and legal definitions, indicates 'privilege' as a 'particular and peculiar benefit or advantage enjoyed by a person, company, class, beyond the common advantages of other citizens.'

Common sense, of course, tells us that a right is inherent while a privilege is bestowed. Then again, there's no guarantee that common sense is precisely what it says it is.

In any case, here's Mr. Webster just once more; Anti-trust, adj., Pertaining to the regulation of or opposition to trusts, cartels, pools, monopolies, and other organizations and practices in restraint of trade.

So there, Jose, and trust JPE and Miriam to get it right all the way."

In BusinessWorld

Published in BusinessWorld, 01 March 2011, BULLETINS, page 6/S2

(Click on image to enlarge)

Bullies in the spotlight

"Predatory Nestle" by Ducky Paredes (original article appears here).

NESTLÉ S.A, one of the largest food and nutrition companies in the world, operates in 86 countries and employs 283,000 people. Here, it is Nestlé Philippines, Inc. (NPI).

NPI is once again the subject of complaints, filed by two of its Filipino distributors for allegedly engaging in predatory pricing and for two separate cases of perjury.

What is predatory pricing? Wikipedia defines it as "the practice of selling a product or service at a very low price, intending to drive competitors out of the market, or create barriers to entry for potential new competitors. If competitors or potential competitors cannot sustain equal or lower prices without losing money, they go out of business or choose not to enter the business."

What is surprising here is that the complaint of predatory pricing comes from its own distributors who feel that Nestle itself is the predator that would devour them.

The complainants are Service Edge Distribution, Inc.(SEDI) and its sister firm, FDI Forefront II Trading Corporation (FDI 2). The first has been Nestlé’s distributor for the Caloocan, Malabon, Navotas and Valenzuela (Camanava) area since December 2001 while the latter became the distributor for northwestern Quezon City in July 2003.

The predatory pricing complaint is based on Nestlé’s alleged violation of Article 186 of the Revised Penal Code. Docketed as I.S. No. XV-03-INV-10Q-06071, the case is now pending with Quezon City Assistant City Prosecutor Maribel Arriola. Among the respondents is NPI’s former chairman and CEO Doreswamy Nandkishore, now said to be with the Nestlé main office in Switzerland.

The two distributors say that Nestle, among other things, has been forcing them to sell the company’s products to their own clients at prices controlled and dictated by Nestlé. These price bulletins do not consider the actual cost of distributing these products, and other attendant expenses such as municipal taxes of up to 1 percent of sales. Distributors are compelled to follow the price bulletins under threat of termination of their distributorship contracts.

Apart from this questioned pricing strategy, the two distributors also accuse Nestle of withdrawing its promised marketing support. One specific instance cited was when Nestle allegedly ended the in-house financing of inventories that provided a 30-day credit line to distributors. Nestle used to extend its credit line to 45-60 days without penalty to align it with the actual periods within which the distributors’ own clients usually make the payments.

They said that in place of the in-house financing, and without consultation with its distributors, Nestlé Chief Financial Officer Peter Noszek unilaterally negotiated with different banks whereby the banks would provide distributors with revolving promissory note lines (RPNL) on a strictly 30-day credit limit. Since their own clients usually do not pay within 30 days, the distributors are forced to shoulder higher interest rates and other penalties that increase their operating costs. In effect, Nestlé shifted the cost of financing inventories from Nestlé to the distributors.

Among the allegations was that Nestlé Area Sales Manager Elisa Lupena, "in conspiracy with the other respondents even forced complainant FDI 2 to deliver new supplies to customers that owed FDI 2 more than P1 million in unpaid deliveries." Nestle’s Regional Sales Manager Jose Ceballos, "in conspiracy with his co-respondents, likewise ordered complainant SEDI to give a unilateral discount of five percent (5%) discount to George Cua of the Welcome Group of Quezon City."

The same discounts were purportedly ordered by Ceballos to be given to other wholesalers and supermarket customers in its area. These discounts resulted in losses for the distributors of P8.4 million in 2007 and P8.6 million in 2009. In spite of these losses and additional expenses, they were not allowed to go beyond the prices specified in the price bulletins. The complaint includes the accusation that although additional capital from borrowed money was infused into FDI 2 in compliance with the demand of Nestlé, the company still terminated the former’s distributorship agreement on December 21, 2007, or four days before Christmas Day. Thus, the firm was forced to stop operations and lay off its employees.

The perjury charges were an offshoot of the September 17, 2010 counter-affidavits of four top officials of Nestlé, The four are Nestlé Chairman and CEO John Martin Miller, Regional Sales Manager Jose Ceballos, Chief Financial Officer Peter Noszek, and Business Executive Manager for Liquid Beverages Shahab Bacani.

In their counter-affidavits, the four officials purportedly committed perjury and offered false testimony into evidence. These are alleged in several instances covering the issues of whether incentives and discounts are mere privileges or a matter of right, the infusion of additional capital in FDI 2 and the subsequent termination of its distributorship contract, the supposed indiscretions of Area Sales Manager Lupena, the mediation entered into by the contending parties, the granting of discounts to certain favored wholesalers as ordered by Lupena and Ceballos

The perjury charges also touched on the separate disbarment case filed by the distributors against Nestlé lawyer Aileen Cero for her alleged violation of the 2004 Rules on Notarial Practice (A.M. 02-8-13-SC) when she notarized a document concerning a negotiation wherein she was a participant.

Complainants also cited Nestlé’s claim that that it never acted in an oppressive, unjust or illegal manner in its dealings with its distributors. They referred to the judgment handed down by the Second Division of the Supreme Court in the case of Nestlé Philippines, Inc. vs. FY Sons, Inc. on May 5, 2006 under G. R. No. 150780.

Nestle filed the case in the Makati Regional Trial court which ruled against it and ordered the multinational to pay defendant FY Sons P1 million in actual damages, P100,000 as exemplary damages and P100,000 as attorneys fees.

Nestlé went to the Court of Appeals where it again lost. In fact, the CA even increased to P1.5 million the amount of actual damages that Nestlé was ordered to pay FY Sons. This was for the unjust termination of the distributorship agreement with FY Sons, unfair imposition of fines, and confiscation of the latter’s P500,000 time deposit to secure FY Sons credit purchases.

Nestlé elevated the CA decision to the Supreme Court but was again rebuffed when the High Tribunal, in a decision written by then Associate Justice Renato Corona, affirmed the ruling. The Supreme Court found Nestlé "at fault and (acting) in bad faith."

Banco de Oro (BDO) also sued Nestlé for P109.792 million in damages, together with its distributor, Interbrand Logistics and Distribution, Inc. The case involved hundreds of millions of pesos in loans and credit facilities that the bank extended to Interbrand on the strength of endorsements and certifications that Nestlé made concerning the financial standing and credit worthiness of its distributor. It turned out that the endorsements and certifications were fraudulently issued.

BDO charged the defendants of having "acted in utmost bad faith, and in wanton, fraudulent, reckless, oppressive and malevolent manner." In particular, BDO accused Nestle 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 (its) products which would eventually lead to (its) benefit".

Nestlé Philippines, Inc. is a member of the European Chamber of Commerce. We wonder if there is any action that this organization is contemplating in regard to this particular multinational considering the many complaints lodged against Nestlé Philippines, Inc..

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Readers who missed a column can access www.duckyparedes.com/blogs. This is updated daily. Your reactions are welcome at duckyparedes@yahoo.com

Corporate Hypocrisy: A Study in Contrasts

Per the Filipino press article (inset), Nestle Philippines Inc. just embarked on strengthening its human resource pipeline through its Management Immersion for Leadership Excellence or MILE program (I really don't know why acronyms are "in" thing in corporations but then that's a another story). The top executives of the company were presenting Nestle business cases to the students/would-be employees in a bid to recruit them to be the next generation business leaders of this giant multinational company. Their selling point - "This is how we build champions." Their theme -" See the Nestle difference." Wow. Great salesmanship. Great program. Great company.

Or is it?

Did they include in their business case presentations anything that has to do with Corporate Ethics? How does Nestle treat its Filipino SME partners?

Yup, they do build champions - Champions of corporate greed, Champions of bullying the small companies, Champions of anti-trust practices, Champions of covering their own asses.

Yup, we see that Nestle difference - how to use size to bully, prolong and weasel itself out of clearly ethical, moral and legal issues it gets involved in.

Just look at the previous articles of this blog to see what kind of Champions Nestle builds and the difference Nestle makes.

Is there any better form of showing hypocrisy by Nestle than putting out press releases that contradict its own actions? Or by creating a student recruitment program without disclosing its own violations of its values? Please, Nestle, please show the recruits, the students, and us more of who you are.

The Real Life Soap (or shall I say, Coffee) Opera as written by Yutani Weyland (http://yutaniweyland.blogspot.com)

Monday, December 21, 2009

Nestle Philippines: Good scheming for a good life

Nice tag line. You can bet that they mean it in every sense of the words.

From 2003 to 2007, a distribution company operating in the Northern Quezon City area was illegally terminated for its services by Nestle Philippines, Inc.

Here is an overview of what is happening now not only to that Northern QC company but many others all over the country.

Nestle lures businessmen to become Nestle distributors that start with priming activities such as large amounts of actual start-up promotions, incentives and assistance (i.e. monetary, equipment, or services). Once a distributor takes the bait, they are slowly reeled in, with promising rates of return and greater rewards. With good early net earnings, distributors were encouraged to invest more money into the distribution business.

Once further engaged, Nestle systematically and deliberately withdraws these incentives. The distributor then has to play the investment game with the rules unfairly set in the favor of themselves where more often than not lead's to the distributor's demise.

When distributors are irretrievably committed in substantial financial manpower, and equipment investments, Nestle bullies them into absorbing the entirety of the financial risks. With this particular distributor, it started in 2006. All the hard work is passed on to the distributors through cleverly worded contracts of adhesion.

Fast Moving Consumer Goods (FMCG) distribution is generally a high volume low-margin business. Since trading and retailing in the Philippines is dominated by small and medium scale businesses, the average distributors of most FMCG manufacturers only have PhP 2-5 million in paid-up capital.

When its inventories financing was transferred to local banks in 2006, Nestle started to unfairly push and require its distributors to break barriers in order to sell more of their products without assuming any of the risks. Nestle then began to impose unreasonable sales targets and increased them geometrically ensnaring the distributor into a money trap.

This is their story and these are the players in the game:

1. John Miller - Current President and CEO of Nestle Philippines Inc. (NPI). Problems did not occur under him but being unfamiliar with the situation or perhaps covering his own ass, he does not want to "take the bull by the horns". He allegedly lets his committee decide what should be done, whether right or wrong, especially with how they are trying to weasel their way out of the Central Luzon incident. Could be guilty of sin of omission. Must step up and be morally upright to salvage reputation.

2. Nandu Nandkishore - Former President and CEO of NPI, now global head of infant nutrition. Problems exploded during his tenure. Perhaps, he is the instigator of the "weasel-your-way-out-by-using-SIZE-to-bully-the-small-Filipino-entrepreneur" strategy. Managed to escape by being transferred out to Switzerland. Perhaps, he is washing his hands now and leaving it up to John Miller to fix.

3. Shahab Bachani - Current Sales Director of NPI, to be transferred to Brand Marketing next January. Always blames the distributor for any problem and never himself nor his company. Perhaps, the main proponent of "Hit Target at All Costs" mentality leading to massive discounting (yet until about September, he denies that massive discounting exists). Pretends he wants to listen to the problem, concerns and opportunities of the distributor but apparently never retains anything. Possibly autistic.

4. Atty. Belen Caberte - Former Legal Chief of NPI, now serving as legal consultant to fix the mess she partially was responsible for. Reputation for being an excellent labor negotiator by allegedly bribing and granting favors to labor leaders. Purported NPI policy maker of "Using-your-own-money-against-you-to-make-you-sign-a-general-quitclaim" passing it off as a standard policy and therefore is morally correct. Also heard to direct their external legal team to delay cases against Nestle to wear out the poor Filipino victim.

5. Atty. Russell Andaya - Current Legal Chief of NPI, former second in command of Atty. Caberte. Apparently does whatever the Caberte and the board says.

6. Peter Noszek - Chief Finance Office of NPI. Possibly the one of about three sane figures in the NPI board but could be overruled by the other clowns. Excellent marathon runner.

7. Alejandrina Puno - Director of Corporate Communications. Active member of PANA board - "Truth in Advertising" yet was found out to contact by various columnists, opinion writers and editors of various newspapers to stop writing "negative" things by threatening to pull out Nestle's advertising from various broadsheets. She clearly violated the standard of PANA of not letting advertising budgets curtail journalistic freedom.

8. Atty. Aileen Cero - Legal Office of NPI. Allegedly notarized a document she negotiated that is in clear violation of notarial rules on conflict of interest. Implementor of the "Using-your-own-money-against-you-to-make-you-sign-a-general-quitclaim" NPI standard policy. Has pending disbarment case against her. Allegedly, was doing forum shopping by filing a case in a different court in relation to the pending disbarment case in the Supreme Court.