Even in Italy, Nestle has had its problems

December 15, 2005 DETAILS EMERGE IN TAINTED NESTLÉ FORMULA SCANDAL The discovery of contamination in various Nestlé baby food brands has caused a huge stir in Europe. Millions of litres of formula have been pulled from the shelves and a top official in the Italian government has threatened legal action against the corporation’s CEO. It is now clear that the contamination was caused by IsopropilThioxanthone (ITX), a fixative of printing ink used on liquid milk cartons (produced by TetraPack, a large company that serves many other food companies for different kinds of foods and beverages). It is also apparent that Nestlé has been less than responsible is recalling potentially contaminated baby formula, prompting government intervention and seizures of the product. This episode demonstrates yet again Nestlé’s willingness to preserve its own profits at the expense of infant health, and the inherent dangers presented by mass-produced baby food. July 2005: First tests of Nestlé ready-to-feed liquid formula in the Marche region of Italy show contamination by ITX. Further tests were ordered on other Nestlé products: Nidina 1 for infants, Nidina 2 for babies 6 to 12 months, Latte Mio and Mio Cereali for children 1 to 3 years. September 2, 2005: Official results released confirming contamination were sent to the Italian Ministry of Health, but were not publicised. September 8, 2005: The EU is alerted of ITX seepage in a packet made in Spain. September 2005: SPAIN: Nestlé carries out a recall of milks from its factory in Northern Asturias region, but the same products in Italy, France, and Portugal remain on the shelves. October 2005: Italy sends an alert to the EU authorities. November 9, 2005: Italian authorities declare Nestlé’s Nidina and Mio milks “unfit for human use” and seize 2 million litres of the products. The seizure was not publicised. November 15, 2005: Nestlé starts recalling further quantities of the same products. This recall was also not publicised. November 22, 2005: Following further laboratory tests, products with expiry dates of September 2006 are recalled following an Italian court order, and 30 million litres are seized. It's only at this point that the news begins to appear in Italian (and foreign) media. November 23, 2005: A full page announcement by Nestlé in main Italian newspapers says the company has taken decision to " recall the products autonomously" as "a measure of exceptional (extreme) precaution towards consumers". While Nestlé refers to a voluntary “recall” authorities call it a “seizure” or “confiscation.” November 23, 2005: The press reports Nestlé CEO Peter Brabeck as saying there was an agreement made in the summer with Italian Health Minister Storace and the EU to continue selling the tainted milk and progressively discard and replace it with uncontamined products. November 24, 2005: Minister Storace denies any agreement to get rid of contaminated products and threatens Brabeck with a lawsuit for false information. November 25, 2005: Brabeck sends a letter to Minister Storace apologizing for a “memory lapse.” November 25 2005: Storace says he will press ahead with a lawsuit against Nestlé CEO Peter Brabeck. November 30 2005: A consumer association, Altroconsumo, independently tests 30 other products (yoghurts, fruit juices etc) packed in TetraPack cartons; 6 of them test positive for ITX. December 1 2005: Other milks (Parmalat, Granarolo, Newlat; all for the general population) are withdrawn for the same problem everywhere in Italy. December 12 2005: Italian police investigate the assumed agreement between Nestlé and the Italian Minister Storace. The Police Office of Ascolo Piceno is investigating 7 people form Nestlé and Tetrapack. January 10 2006: Italy reports "migration of isopropyl thioxanthone from packaging of milk for babies" to the EU's Rapid Alert System for Food and Feed (RASFF). Evidently the contamination is still not under control. It is now clear that the problem was caused by TetraPack. But why did Nestlè, the first company that had its product tested, not act transparently? and why did the Ministry of Health and the EU authorities not act immediately?

More multinational shit on the small guy. You've been Nestled Part II Central Luzon, Philippines Horror Stories

1. Maria Luisa Vistan (or Isa Vistan) was the Regional Sales Manager (RSM) of Central Luzon (CL) of Nestle Philippines Inc (NPI) from 2005 to 2009. The RSM is highest ranking Nestle Manager in a particular area with a rank of Vice President. Prior to that she was a sales manager in the same area under another RSM who left. She took on the responsibility in an acting capacity at first and then eventually being promoted officially to the position

2. An RSM, being in sales, is tasked to hit sales targets in his/her particular area of responsibility and as such, has the authority to execute and implement various customer related programs (including authorizing discounts) in aid of hitting this target.

3. CL, under Isa Vistan, was a consistent performer in the Nestle Philippines world, always hitting or even exceeding its target during her tenure. In fact, CL garnered the Best Area Award in 2007 and 2008. As such, Isa Vistan was a trusted and valuable employee of NPI.

4. Obviously as some part of damage control to unfavorable public opinion in April and May, NPI issued a press release in July 6 in the Philippine Star highlighting what they have done to improve the business of one of the CL distributors. The projection of NPI being a helpful and values-oriented business partner through Isa, in retrospect to the CL distributor scandal that exploded, served to highlight how evil they are when a crisis is happening.

5. A few weeks later, word from one of the CL distributors was that Isa Vistan had disappeared. As it turns out, 5 of the 6 CL distributors had in their possession recently bounced checks from a particular customer who gets goods in large quantities from all of them. They will later find out that this particular customer was operated by Isa's husband. Furthermore, the bounced checks were from Isa's account!

6. NPI subsequently sent auditors to the various distributors to do an investigation and has since kept mum about this issue.

7. Since then, through regular contact through several conduits and informants both internal and external to NPI, the real scenario of what had happened emerged.

8. Isa, in her capacity as RSM, commanded the distributors to give preferential discounts (of 10% to 12%) to the said customer. Distributor only gets 4% discount so Isa promises she will reimburse them the balance. One particular distributor has a letter in an NPI letterhead from Isa of this promise.

9. Customers who get preferential discount sells goods to Metro Manila (MM) wholesalers at 8% to 10% off. Manila distributors therefore cannot compete because of the low prices. MM NPI sales management therefore gets hit with their targets. With their mentality of "Hit target at all costs", they coerce and threaten MM distributors to compete with the prevailing pricing at the distributors cost, causing them to lose money. Nestle hits its targets while the poor distributor loses a lot.

10. When the issue exploded last July 2009, Isa's husband got cash advances from the MM wholesalers to the tune of up to 22million for at least one customer located here in MM. The wholesalers never got the goods they already paid for. The amount of money involved in the advance payments imply that these transactions have been going on for some time, perhaps way back to 2005. The MM wholesalers are experienced business people and will only trust someone if there has been a longstanding relationship. Also, rumor has it that there were letters with NPI letterheads given by Isa to the MM wholesalers.

11. Alleged total losses from both sides (CL distributors and MM wholesalers) are said to be approaching a billion pesos but this is unverified. The distributor (whom Nestle "helped") featured in their publicity campaign last july 6 in their Philippine Star article, lost allegedly 30 million.

12. Nestle's stand on this is that Isa is MERELY a rogue individual who acted on her own and therefore, implicitly is saying that they have nothing to do with it. However, they said that through the goodness of their heart, they will extend and pay for the legal fees for the CL distributors to sue Isa. They are insistent on this stand and are making it appear to the affected distributors that this is the only way for NPI to help. NPI is using a different kind of bullying through the use of charm (they assigned a "charming" RSM to CL) and an unwavering stand on the help they can extend. They are stringing the CL distributors out and hope that they get beaten down to the only way they want to "help". This is standard bully tactic again! The distributors think that they can't fight back since Nestle is this big giant and NPI is rubbing this in to them.

13. However, independent lawyers say that Isa, whether by verbal or written orders, bound NPI through the doctrine of Apparent Authority. please refer to previous article on topic.

14. What NPI is doing is clearly wrong on all levels.

A battle of dragons

DUCKY PAREDES

‘Ms. RSM and her husband caused losses reportedly amounting to approximately P1 billion.’

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Hopefully.

Ano yung isyu sa SM?

Meron nagtanong kung ano yung problema ko sa SM Malls eh napaka-popular ng malls nila. Ang aking, simple lang. Tignan natin yung mga labor practices nila. Walang permanenteng empleyado. Puro six months tapos lipat o re-apply. Simple lang yan. Ayaw nila magbayad ng mga benepisyo at karagdagang sweldo. Tapos yung mga tennants nila. Nagbayad na ng upa tapos sa BDO derecho yung pasok ng kita kada araw. Para yung interest sa kanila. Yung ibang tennants napaka sama ng mga condition para maglagay ng pwesto sa mall nila. Bakit hinahayaan ng gobyerno ang mga swapang na ito? Bayad din ba mga to?

Nagtatago sila sa kumot ng respectability pero hindi totoong mga tao.

Another Nestle Scandal

Colombia Solidarity Campaign Sunday, 10 January 2010

- Fighting for Peace with Justice -

Colombia Solidarity Campaign is affiliated to the European Network of Friendship and Solidarity with Colombia, which has eleven affiliates in Spain and ten from other countries. Home Bulletin archive Bulletin Issue9 - January–March 2003 Another Nestlé Scandal

Home About Background Articles Urgent Actions Video Alerts Events Bulletin archive Frontline Magazine Resources Campaigns Media Get Involved Mailinglist Links Contacts London Mining Network The London Mining Network (LMN) is an alliance of human rights, development and environmental groups. We pledge to expose the role of companies, funders and government in the promotion of unacceptable mining projects. Read the latest posts on Colombia from LMN below: AngloGold Ashanti says goodbye to Suárez, Colombia London-listed AngloGold Ashanti (based in South Africa) has a large number of mineral concessions and exploration projects in Colombia. Its operations in the Department (province)...

Another Nestlé Scandal Nestlé's money grabbing demand on Ethiopia has refocused attention on the activities of this Swiss based multinational, the largest food processing company in the world. Nestlé is at the centre of another scandal. On 22 November the DAS security police ordered Nestlé Colombia to decomission 200 tons of imported powdered milk. The milk had come from Uruguay under the brand name Conaprole, but the sacks had been repackaged with labels stating they had come from Nestlé's Bugalagrande factory, and stamped with false production dates of 20th September and 6th October 2002. The real production dates were between August 2001 and February 2002. The discovery of another 120 tons on 6th December with similarly false country of origin and production dates, points to systematic fraud. Yet Nestlé responded indignantly, apparently it has been the victim of a set up, and in any case powdered milk has for industrial purposes an eighteen month lifespan. This bluster begs the obvious question, why relabel at all? The discoveries caused a stir, with senators insisting the Attorney General conduct a full inquiry leading to prosecutions. The quality of Colombian justice, especially its partiality towards multinationals, is such that this must be in question. Nonetheless Nestlé has been sharply condemned. Senator Jorge Enrique Robledo charged it with using sub-standard, contaminated milk, "a serious attack on the health of our people, especially the children". The latest outcry amplifies persistent complaints from the trade unions that Nestlé does not respect human rights. Since the 'dirty war' erupted in the early 1980s, Colombian trade unionists have been on the front line of targeted, but unofficial, repression. The Food and Drink Workers Union SINALTRAINAL was formed in 1982. Eight of its members working at Nestlé have been assassinated. The principal perpetrators are the paramilitary death squads. Their links with official entities are an open secret. For example, the Autodefensas Unidas de Colombia (AUC) arrived in the Cauca valley in 1999. Human Rights Watch reports that it was the Colombian army who set up this new AUC front (http://www.hrw.org/reports/2001), which declared local union leaders as military targets. Within six months six trade unionists had been assassinated, including SINALTRAINAL member Omar Dario Rodriguez Zuleta in Bugalagrande on 21 May 2002. There is no evidence connecting Nestlé with this. However the logic of the violations, to eliminate trade unionists and other social movement activists, corresponds with the company's own aggressive policy to liquidate the union. In late 2001 management at another Nestlé subsidiary 'Comestibles La Rosa' threatened workers that they must either renounce union membership or lose their jobs. In February 2002 the union formally presented demands to Cicolac, Nestlés milk processing subsidiary. Management tried to break the collective agreement covering 400 workers, sack 96 workers and break the contracts of another 58 workers so that there jobs could be contracted out through labour agencies. Sub-contracting and cheaper inputs are two aspects of the same drive to cut costs. This brings us back to the cheap powdered milk imports. According to SINALTRAINAL, Nestlé-Cicolac's new policy 'has generated misery for small and medium dairy farmers and for peasants'. One area known as 'Little Switzerland', where livelihoods depend 90% on milk output, has been devastated. SINALTRAINAL is a very good example of how workers in the 'Third World' have taken the initiative in resisting the multinationals. As they say: "Nestlé converts the factories into camps for the public security forces in order to create terror in the community, destroy the unity of the workers, and misinform the members of the union, with the goal of putting them against the leaders and destroying the movement ... This reality urgently demands the globalization of solidarity against the globalization of misery, oppression, and death of the communities." These developments present a challenge to the movement in Britain, where labour relations with Nestlé have been relatively benign. Nestlé even had a stand at last year's TUC annual conference, jointly staffed by corporate executives and union representatives. It is time for a more robust and independent approach, based on relationships with unions like SINALTRAINAL in Colombia, and elsewhere to make common cause against a rapacious multinational.

The word “nestle” means to settle snugly and comfortably or to lie in a comfortable position.

Nestlé’s modern economic colonialism: YOU HAVE BEEN NESTLED!*

* *

When you find yourself nestled in your comfort zone, waking up is the farthest thing from your mind. When you find yourself nestled in your usual ways and cozy in your old habits, change is the last thing that you would want to consider.

From the 15^th to 20^th century, colonialism was practiced by stronger countries to conquer the territory, wealth and power of the weaker ones. In principle, this practice no longer exists in contemporary times. However, abusive multinationals have replaced the system with economic exploitation to expand their sphere of control and dominance.But here is something worth considering.

Observe the practices of food processing giant Nestlé. Although it is considered one of the most successful and globally dispersed corporations in the world, having overseas operations in Africa, Americas, Europe, Oceania and Asia, its “management style” toward its own products, employees and traders is closely scrutinized by critics, labor organizations and media outfits worldwide.

John Richardson of Global Investment Watch opines, “Nestlé has a darker side with respect to its conduct as a corporate citizen. From a human rights perspective, we consider the company to be a high risk investment.”

*Other side of the coin*

The Respectful image of the Vevey, Switzerland-based maker of milk and other food products is overshadowed by criticisms that it earned through the years, and the controversies that seeped through its facades and false projectionsand criticisms it engaged and created through the years.

Back in September 2003, Nestlé workers in Korea held a strike when its management refused to include in the new Collective Bargaining Agreement (CBA) negotiation the issues of staffing levels and subcontracting. Instead of opening the free discussion of these important matters, the company locked-out its workers in the manufacturing facility, warehouse and distribution centers, and issued threatening statements of disinvestments in Korea.

Two years later, the company faced a lawsuit filed by the International Labor Rights Fund (ILRF) and several civil rights groups for its alleged involvement in the forced labor of children who cultivate and harvest cocoa beans in Africa (Ivory Coast).

In the same year, a complaint was filed by the Nestlé Japan Labor Union, the National Confederation of Trade Unions and the Hyogo Prefectural Federation of Trade Unions for its violation of the Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises.

Nestlé lived up to its record of unfair and illegal labor practices, when it openly defied a Philippine Supreme Court’s decision, dated August 2006, to resume the Retirement Plan negotiations of its 600 workers, through a CBA.

*Back to the wall strategy*

Nestlé is not only involved in unresolved labor concerns, it is also entangled in unscrupulous commercial trade dealings, where among its small and medium company partners-distributors end up being NESTLED.

In its Philippine operations, the company used coercion to terminate the contract of FDI Forefront II Trading Corp. (FDI 2), a Filipino-owned small-scale enterprise engaged in the distribution of its products in 2007.

FDI 2 was lured to do business with Nestlé in 2003, with incentives and initial assistance in the form of money, equipment, services, and good early net earnings. In 2006, after the unsuspecting distributor poured in substantial financial, manpower, and equipment investments into the business.

Under the guise of imposing additional banking and financial requirements, Nestlé surreptitiously passed on to FDI 2 all the financial risks entailed by the business.

When the distributors of Nestlé products, such as FDI 2, could no longer meet the 30-day payment deadline for their trade receivables, mainly due to the onerous transfer of financial risks to them, Nestlé “went for the kill” by transferring the financing of the inventory from an in-house arrangement into a clever bank financing scheme.

Through this scheme, Nestlé forced its distributors to deliver the profits to them in advance, and left its distributors with the burden of collecting from the customers, that even Nestle, historically could not squeeze. They called this tripartite scheme the Nestlé-Bank-Distributor revolving promissory notes line (RPNL). In sum, Nestlé covertly uploaded all the profits to its coffers, and downloaded all the risks to its “partners.”

“The transfer of inventories financing by Nestlé paved the way for reducing its receivables by 46.38 percent, or from P6.9 billion ($134.5 million per Philippine Central Bank’s annual average exchange rate) in 2006, to P3.7 billion ($80.2 million) in 2007. Its financing costs also dropped 60.8 percent or P734 million ($14.3 million) to P288 million ($6.2 million) for the same period,” explains Atty. Lorna Kapunan, legal counsel of FDI 2. Before its distributors could complain, Nestle has “tucked away the honey,” and left its partners out in the cold.

Nestlé did not only insulate itself from the losses due to non-payment by wholesalers, it also injected the “RPNL poison” into the hearts of its ailing distributors; thus, sinking them deeper into financial comatose.

Worse, Nestlé did not disclose to the banks that some of its distributors were experiencing financial difficulties.

*Unfair trade and distribution practice *

Distributors cry foul over Nestlé’s demand for unattainable sales volumes (quotas), under threats to terminate distribution contracts, if their targets were not met. Consequently, distributors had to swallow the bitter pill of giving huge discounts to their customers in order to meet their quota; and consequently finding themselves irreversibly plummeting into deeper debt.

Aggravating the situation for distributors like FDI 2 is the fact that the big clients of Nestlé like the huge groceries, supermarket chains, and wholesalers could dictate the prices of goods’ or the trade discounts. The distributors were sucked into “price wars” that they had little chance of winning.

Atty. Kapunan stresses: “The undeclared price war started in 2004 by Nestlé Food Service distributors selling grocery packs, and sustained by the company’s key accounts that are entitled to VAT (value added tax)-free purchases, and who are selling some of their excess inventories in the distribution areas.”

In this country, the trade in fast-moving consumer goods is, by nature, a high-volume and a low-margin business. Even if a certain distributor hits its sales volume quota, profit-sharing between the producer of the goods and the distributor is always uneven, and always in favor of the producer, and in this case, Nestlé.

“Because the current Nestlé distribution system leaves little room for profitability, an average distributor earns the 1% to 1.5% EBIT (earnings before interests and taxes) by managing its tax liabilities, particularly the local government or municipal taxes,” Atty. Kapunan underscores.

*Adherence to the Principle of Transparency*

Nestlé pays lip service to the principle of transparency, even as it ordered the pull-out of its Bear Brand (milk) products in April 2009, without full public disclosure of the reasons for the pull-out. Nestlé callously justified the order by saying it was a “mere simulation exercise” to measure the response time of its distributors.

The Swiss corporation’s colonialist savvy has taken advantage of yet another loophole to conceal its indifference to the health and welfare of the Filipino Consumers.

The Filipino public has a right to know, not only because the lives of its children hang in the balance, but also because Nestlé has built and fortified its empire on the foundational trust of Filipino consumers. And we, as a people, should collectively discern and re-evaluate the basis for that trust, and whether the repositories of our trust, continue to adhere to the principles and values that we, as a people, stand for.

*Conflict of interest *

FDI 2 was named and acclaimed by Nestlé as its “Distributor of the Year” for consecutive periods of 2005 and 2006. The Area Sales Manager of FDI was also given the distinction of “Area Sales Manager of the Year” for the same period.

After the recognition, Nestlé further increased FDI’s 2007 sales target to P776 million ($16.8 million) from P561 million ($10.9 million) in 2006, a 38.3 percent increase in peso. Ironically, Nestle’s own sales growth from 2006 to 2007 was a mere 8.3%. This clearly demonstrates that Nestlé’s imposition for FDI 2 to increase its sales volume by 38.3% is “patently unreasonable and unconscionable.”

According to Atty. Kapunan, in increasing FDI 2’s sales target, “Nestlé did not take into consideration FDI 2’s limited working capital that was already strained by an ever-growing past due accounts receivables, mainly due to Nestle’s RPNL scheme.”

The ever-increasing impositions by Nestlé led FDI 2, under its then President, to incur continuing substantial losses, especially after the transfer of other slow and poorly paying accounts to FDI 2, even though they are not covered by the original distributorship contract. This was successfully implemented by Nestlé’s Area Sales Manager who was assigned to the account of FDI 2.

More debts were subsequently incurred by FDI 2, prompting its owners to investigate the matter. They found out that the Nestlé Area Sales Manager and the FDI 2 President were having an illicit affair, the latter being a married man. FDI 2 immediately called Nestlé’s attention to this patent conflict-of-interest situation, where its area sales manager conveniently exercises power to demand higher sales targets from the FDI 2 President, being his lover at the same time.

The owners brought the issue to Nestlé’s management, but no consideration was given to them. Nestlé did not even conduct an investigation and described the relationship as a “purely personal affair between two consenting adults.”

*Corporate Social Irresponsibility*

Nestlé did not only violate its own Code of Business Conduct, it also revealed the real “corporate values” that it adheres to, when they went so low as to blackmail a distributor that is at the brink of corporate extinction. Nestlé demanded the immediate termination of the distribution agreement with FDI, under pain of losing the distributorship agreement of its sister company, Service Edge Distributors Inc. (SEDI).

Nestlé employed coercion to terminate the contract of FDI Forefront II Trading Corp. (FDI 2), a Filipino-owned small-scale enterprise engaged in the distribution of its products in 2007.

In December 2007, Nestlé secured the termination of its distribution agreement with FDI 2, and this resulted not only in the demise of FDI 2’s business, but also adversely affected the individual lives of its eighty (80) employees as well.

To pay off its increasing debt, and the unpaid wages, 13th month pay and separation benefits due to its employees, FDI 2 filed a claim for reimbursement from Nestlé P11,070,773.20 ($239,886), for inventory and advances for promotional activities, based on the provisions of its distributorship contract. FDI 2 also claimed a total of P930,920.84 ($20,171) by way of refund of the withheld EVAT (expanded value added tax) for 2007.

In March 2008, after the lapse of three (3) months, and without any explanation for the delay, Nestlé’s legal counsel demanded FDI 2 to sign a Release and Quitclaim, as a pre-condition to the payment of inventory and advances for promotional materials.

All Nestlé’s had to do was to evaluate the validity and soundness of the bases for FDI 2’s claim for reimbursement. Instead, it chose to prey on the dire circumstances that FDI 2 found itself in. Barely two years from being exalted by Nestlé as its “Distributor of the Year,” FDI 2 found its back against the wall, without an inch of respite or relief from its multinational “partner,” and being pressed against that wall by the same hand that lured it into that deadend.

The owners did not agree to sign the Release and Quitclaim, for there may be additional items/claims that the auditor may later uncover in its then on-going validation audit. However, Nestlé’s legal counsel promised that the company would recognize and pay whatever bona fide claims that the forensic audit may later establish. With this verbal assurance, one of FDI 2’s owners—unaccompanied by their lawyer—signed the Quitclaim document.

Nestlé’s legal counsel notarized the signed document in spite of having participated in the preparation of the document, a legal no-no.

FDI 2 has filed a complaint in the Supreme Court, seeking the disbarment of the Nestlé legal counsel for serious misconduct, violation of the lawyer’s oath and violation of the code of professional responsibility.

After the forensic audit, FDI 2 claimed an additional P235 million ($4.9 million) in losses, plus P252.6 million ($5.3 million) in cost of money, legal and other professional expenses incurred from September 2008 to March 31, 2009. Reneging from its previous commitment, Nestlé now refuses to recognize these claims by saying that the FDI 2 account is a closed case. They now seek to evade liability using the Quitclaim document that they obtained using false promises, unethical practice of law, and underhanded machinations.

FDI 2 was “nestled” into believing that Nestlé would live up to its promise and commitment to acknowledge and pay all the bona fide claims established by the forensic audit.

Such valid claims, based on Nestlé’s “word of honor” and its other contractual obligations of Nestlé, remain unpaid up to this day.

“My client [FDI 2] has delivered to Nestlé, even at the expense of its own financial demise. But instead of rewards, it [Nestlé] delivered to our client a veritable death blow,” laments Atty. Kapunan.

In this day and age, there should be no room for unbridled profit-seeking by strong and powerful multinational companies at the expense of workers and small businesses.

Let us serve notice to our aspiring colonial masters that we are declaring economic independence. Let Nestlé know that we believe in their creed of “trust, integrity and honesty” more than they do. And that we intend to hold them responsible by the very same measure. Lest we all be comfortably “Nestléd” into sheltered scenarios being painted by Nestlé, let us all consider all the cheating, coercion, corporate bullying, business hostage-taking, window-dressing and cover-ups of Nestlé.

And let us finally consider being un-settled, un-rested and un-nestléd from Nestlé.

Laugh time, consumers & distributors!

The Deceptive Acts of Nestle Philippines

Deceptive Act No. 1: The Bait of Initial Support

1. NESTLE lures Filipino businessmen, to become Nestle products distributors, with intricate and multi-layered deceptive practices, 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 promises of even greater rewards. With good early net earnings, distributors, such as our client, were encouraged to invest more money into the distribution business.

Once engaged by the hook of early success, NESTLE systematically and deliberately withdraws these initial incentives over time. The distributor is then scooped into the net of the investments game, where the rules are pre-determined by NESTLE, and where both NESTLE’s gain, and the distributor’s demise, becomes inevitable.

When the distributors are irretrievably committed, in substantial financial, manpower and equipment investments, NESTLE bullies its local distributors to absorb nearly the entirety of the financial risks starting in the year 2006. All the hard work is passed on to the distributors, through cleverly worded contracts of adhesion, to earn the lowest return on capital (i.e. 4.12% per attached 2006 Comparative Study) among the distributors of major consumer goods in the country.

Deceptive Act No. 2: Non-Disclosure to Local Banks

2. When trade receivables from its distributors started to average about 45 days, sometime in 2006, NESTLE arranged to transfer its inventories financing from in-house to either BPI and MBTC using a tri-partite NESTLE-Bank-Distributor revolving promissory notes line (RPNL) deal.

The transfer of the inventories financing by NESTLE paved the way for reducing its receivables by 45.7%, or from Php 6.9 billion in 2006, to Php 3.7 billion in 2007. NESTLE’s financing costs dropped 60.7%, or from Php 734 million to Php 288 million for the same period. Ostensibly, this would appear as a stroke of financial management finesse. However, NESTLE only swept all the liabilities under the rug of its distributors. Ultimately, NESTLE declared freedom from the burden of collection, and conveniently insulated itself from the perils of not being paid by wholesalers, in a scheme that they euphemistically called the “Revolving Promissory Notes Line (RPNL).

NESTLE did not disclose to the local banks that some of the distributors were already having financial difficulties. This fact alone characterizes NESTLE’s propensity for highhanded and manipulative practices. Worse, NESTLE cultivated this financial arrangement into a full-blown and textbook example of abuse of right. The local distributors were then forced to accept the terms and conditions negotiated by NESTLE with the banks, such as the fixed 30-day maturity of the RPNL, even when NESTLE’s own key accounts, as well as the big groceries, supermarket chains, and wholesalers, stretched their payment terms to 45 days or longer, on the average. The resulting scenario is a reverse “pour attrui,” where an unwilling victim was handed down the raw end of a deal, where NESTLE reaps the rewards, while the distributors step into an even deeper pit of financial quagmire.

Deceptive Act No. 3: Imposing Unreasonable Quotas Under Constant Threat of Termination

3. Whenever a distributor is forced to max-out its bank credit lines, up to the critical loan to capital ratio of 12:1, any further delay in collections of trade receivables would prove to be disastrous. But since NESTLE progressively imposes stretched sales volumes, the average distributor is perennially plagued by two evils: to ignore the sales results imposed by NESTLE or to grant substantial discounts to big customers. The first option leads to termination of their contract. The second option sinks them deeper into debt. Clearly, the lesser of two evils is the second one, where NESTLE’s distributors get to keep their valued distributorship contracts, but it would ironically entail sacrificing its own business viability.

The financially trapped distributor would desperately try to continue operating, until either the bank stopped giving credit, or NESTLE terminated the contract. This unfortunate scenario happened to FDI 2 and sister company Service Edge Distributors, Inc. (“SEDI”), except that SEDI was able to solve its liquidity problems, through means that are external to, and independent from, its distribution business.

Feedback from the market indicated that at least two other NESTLE distributors, whose annual turnover of over 1 billion pesos each, are currently on the brink of financial collapse, due to the same circumstances that are programmed to squeeze the distributors dry.

4. In the Philippines, Fast Moving Consumer Goods (“FMCG”) distribution is generally, a high-volume, low-margin business. Since trading and retailing in the country, by law and by design, is dominated by small and medium scale enterprises, the average distributors of most FMCG manufacturers only have between Php 2 million to Php 5 million 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 and get the job of selling more Nestle products done,” year in and year out, even as it insulated itself without assuming any risks of its own.

NESTLE imposed unreasonable sales targets, and increased them geometrically, unduly stretching the distributors’ financial capacities to a dangerously snapping taut, and ensnaring them in a fatal “money trap.”

5. To be financially viable, an FMCG distributor, with only Php 5 million paid-up capital, should buy and sell at most Php 30 million of inventories, every month for a reasonable gearing (i.e. loans to capital) ratio of 6:1. Since on the average, about 40% of a distributor’s customers were big groceries, supermarkets and wholesalers that would not pay within 30 days, then at least Php 12 million of trade receivables would not be collected in any given month.

NESTLE, however, would require the distributor to maintain the monthly sales, and even steeps the sales volumes, under threat of contract termination. So within a short period of 6 to 12 months, the average distributor would find itself buried in Php 50 million to Php 60 million debt with a very unhealthy gearing ratio of 10:1 to 12:1. NESTLE forces its distributors to defy and abandon all business and common sense, under constant threat of contract termination.

Deceptive Act No. 4: Unexplained and Non-Transparent Pull-out of its Products from the Market

6. Ethical practice dictates full disclosure and accountability to the public. On 06 April 2009, under the pretext of a “Traceability Drill,” NESTLE ordered the pull-out of its Bear Brand products covered by a specific batch of delivery. NESTLE verbally advised SEDI that “all Bear Brand stocks that arrived at the warehouse after March 30, 2009 shall be put on hold.” Batch codes were ordered inventoried to be sent back to NESTLE. NESTLE then replied to identify which batches should be pulled-out, without giving any reason or explanation. By Tuesday, April 7, 2009, NESTLE informed SEDI that this is a “mere simulation exercise” to measure the response time. By April 8, 2009, they pulled out all the stock batches that they earlier identified.

But this is not an isolated instance. NESTLE has engaged in similar covert operations in the past. They have done similar “drills” in September 2007 for Nestle Fresh milk; in May 8, 2008 for Chuckie chocolate drink; in May 27, 2008 for Chuckie chocolate drink; and in October 28, 2008 for Bear Brand sterilized milk.

These deceptive acts of pulling out the products, without full disclosure to the public of the reasons, do not only constitute fraud upon public, but also a clear manifestation of reckless disregard for the public health and welfare.

Deceptive Act No. 5: Instigating and Fueling a Price War

7. The current Nestle FMCG distribution business in the Philippines is a “buyers market,” where the big customers, such as the big groceries, supermarket chains and wholesalers, practically dictate the prices or trade discounts. This was caused by an undeclared price war started in 2004 by NESTLE Food Service distributors selling grocery packs, and sustained by NESTLE’s key accounts that are entitled to VAT-free purchases, and who are selling some of their excess inventories in the distribution areas.

NESTLE management was aware of the prevailing price war, but instead of immediately correcting the root causes of the problem, NESTLE threatened to sanction any distributor that would sell with big discounts or below FOB prices.

8. NESTLE not only tolerated, but in fact, instigated and fueled the frenzied price war that gripped all its distributors by their necks.

In a letter dated January 2007 (see attached) to George Cua, NESTLE agreed to give the Welcome Chain total of 5% discount for COD sales when account was turned over to SEDI. At 5% discount, SEDI earned nothing from the account, or at most, it earned the incentive of 1%, but only if SEDI reached the total sales target for the month, at the cutthroat levels that NESTLE dictated.

By giving such big discounts to the Welcome group, SEDI was pressured and cornered into granting the same terms to its other big wholesalers and supermarket customers, who may otherwise claim discrimination. As a result, SEDI gave up P8.4 million in 2007 and P8.6 million in 2008, in lost discounts, while spending Php 4.7 million in 2007, and Php 5 million in 2008, to service the Welcome account.

All these battles left the distributors scrounging for thin margins that were not even enough to keep them afloat. Through all of these wars, NESTLE remained the immovable beneficiary, unmoved and unharmed.

Deceptive Act No. 6: Uneven Sharing of Profits

9. When a big and highly profitable manufacturer like NESTLE demanded consistent delivery of aggressive sales targets, it is only fair that NESTLE shares in the risks.

But having cleverly shifted the inventories financing to the Filipino bankers and SME businessmen, NESTLE bullies the distributors to generate uncompromising sales targets using the threat of termination. NESTLE gets all the profits, of about 15% EBIT, which is even better than the Group or industry average of 14%. Any NESTLE distributor would be very lucky to earn 1.5% EBIT or 10 times less than what NESTLE gets.

10. While NESTLE continually exceeded its sales and profit targets and objectives, most of its former distributors like FDI 2, On Target Distribution, Inc., Cosmo Fortune and Leader Foodline had to close down for poor or unacceptable returns on capital at best or in the case of FDI 2 for massive financial losses in spite of all the money and efforts put into the business.

Deceptive Act No. 7: Condoning Tax Evasion

11. Because the current NESTLE distribution system leaves little room for profitability, an average distributor earns the 1% to 1.5% EBIT by managing (i.e. mainly by under-reporting sales) its tax liabilities particularly the local government or municipal taxes. Various distributors, in several Distributors’ Meetings, raised this issue in plenary with NESTLE management since 2002. But NESTLE chose not act, smug in their own profitability, and callous to the plight of the distributors.

By its inaction, NESTLE management likewise condoned, if not directly abetted its distributors’ non-compliance with local tax laws.

Deceptive Act No. 8: Oppression and Bad Faith in Deliberately Delaying Just Claims for Reimbursements

12. The industry practice finds the distributors advancing weekly payments of promotion expenses to their key outlets. NESTLE, however, usually and deliberately delays the reimbursements due to its distributors. NESTLE takes about 2 to 3 months to process the payment of the distributors’ claims, that on average ran from P3 million to P4 million in monthly accounts receivables. Worse, NESTLE unilaterally pays these claims in installments, and never in full.

Delayed reimbursement of legitimate business claims, and installment payments of such claims by NESTLE, has forced its distributors to borrow more money, and pay more interest, and effectively determined the fate of its distributors from one “liquidity dead-end” to another.

Deceptive Act No. 9: Handing Over the “Empty Bag”

13. In the specific case of our client leading to its illegal and unjust termination, the one-sided business relationship between NESTLE and FDI 2 was perpetrated and perpetuated through the supervision and control of NESTLE’s officers, particularly its Area Sales Manager (ASM), Ma. Elisa Lupena. As ASM, Lupena exerted pressure on FDI 2 to meet its increasing sales targets - and when those targets were met (resulting in the 2005 and 2006 awards) increasing the targets even more – FDI 2’s commitments to NESTLE escalated. FDI 2, through its then President, Mark de Vega, goaded by NESTLE though ASM Lupena, fell into a trap of getting the results for NESTLE, at all costs, and in exceeding upwardly moving targets.

NESTLE force-fed the scraps of bad debts and obstinate debtors to its distributors. Lupena exploited NESTLE’s superior contract position to put pressure on FDI 2 management, not only to meet increasing sales targets, but also to accept transfer of other slow and poorly paying accounts not covered by the original distributorship.

The pressure to accept this unconscionable burden was made within the context of a stagnant market area, where there were no material increases in the number of outlets covered by the distributorship agreement. Worse, just as FDI 2 was saddled by increasing sales burdens from galloping targets, the extent of NESTLE support- which was a crucial factor in the initial sweetening of the distributorship deal – was progressively being withdrawn.

Deceptive Act No. 10: Tolerating a Situation of Conflict-of-Interest as Long as it Served NESTLE’s Interest

14. Not only did Lupena exert pressure on the targets, she even began to interfere in the day-to-day operations of FDI 2’s distributorship. which at first, seemed odd. The progressive stretching of targets, and NESTLE’s actual interference through ASM Lupena increasingly put a strain on FDI 2’s resources and its capacity to meet its commitments. In 2005, NESTLE imposed a target of Php 498 million. In 2006, this was increased to Php 561 million and in 2007, the figure was jacked-up to Php 776 million. These figures translated into an imposed 12.7% annual growth in 2006, and 36.2% in 2007, respectively, without taking into consideration FDI 2’s limited working capital that already strained by an ever-growing past due accounts receivables.

When one compares these growth figures to NESTLE’s own sales growth of 3.71% in 2006 and 8.3% in 2007, one can clearly see that NESTLE’s expectations for its North Quezon City area distributor were patently unreasonable and unconscionable.

Through these targets, NESTLE was setting up FDI 2 for failure, and thus, making it appear that FDI 2 was running an apparently profitable distribution to the ground.

15. On October 2007, FDI 2’s owners realized that instead of earning money, FDI 2 were only raking in more debts. When they investigated the matter, they found that their own President, Mark de Vega, incurred substantial losses in the process of blindly adhering to NESTLE’s ever-increasing impositions, demands and pressures. De Vega confirmed the increasing pressure of NESTLE on FDI 2 in an e-mailed response to the owners.

16. The discovery put the FDI 2 owners in a firefighting mode. In a desperate effort to keep FDI 2 afloat, the owners raised and invested a total estimated amount of P300 million to save the company.

17. At about this time, FDI 2 owners were confronted by an unusual and unexpected twist of events, brought about by a seemingly innocuous exchange of cellular phone SIM cards between Mr. Joseph Derrick Yambao, FDI 2’s current President and Mark de Vega. De Vega’s cell phone lost battery power. So he borrowed Mr. Yambao’s phone and he inserted his SIM card there. After he had returned the cell phone, Mr. Yambao discovered that de Vega’s SIM messages were still in his phone. The messages in de Vega’s SIM card were viewable in Mr. Yambao’s phone. In one of these messages sent by NESTLE’s ASM Lupena to FDI 2’s de Vega the following exchange appeared:

SENDER ELISA LUPENA: “Baby which one do you like better, me on top or you on

top.”

SENDER ELISA LUPENA: “Depends on what? If you’re too lazy Oh I’m just

daydreaming while waiting for stupid email. Not good

to feel horny so early in the morning.”

18. Through this message, and after an internal investigation, FDI 2 discovered that the extent of Ms. Lupena’s interference in the affairs of the company crossed the line from an ordinary business relationship, albeit, skewed in favor of NESTLE – to something more personal, and that she and Mark de Vega were having an affair.

19. In November 2007, FDI 2 informed NESTLE of this affair. They warned NESTLE of a conflict-of-interest situation arising from the illicit relationship between ASM Elisa Lupena who wielded great power over FDI 2’s contractual obligations and commitments and its operations, and Mark De Vega who was charged with complying with NESTLE’s demands and sales objectives for the distributorship area.

The illicit affair compounded and aggravated the growing financial problems of FDI 2, and the existence of conflict-of-interest made it difficult to separate at which point ASM Lupena’s demands on FDI 2 were the result of her influence as NESTLE’s enforcer in the area, and her undue personal influence over de Vega to meet her own sales targets. On the part of de Vega, this conflict-of-interest made it difficult to pinpoint exactly where the line stopped between his legitimate actions as FDI 2 President, acting to increase targets to meet his company’s goals, and his actions as ASM Lupena’s lover seeking to please the former’s demands for big sales targets as part of her NESTLE Key Result Areas.

20. Instead of conducting a formal investigation after the conflict-of-interest was duly reported, NESTLE dismissed the illicit relationship as a “purely personal affair between two consenting adults.”

And why not? At this time, NESTLE awarded to ASM Lupena the Metro Manila ASM of the Year for years 2005 and 2006, on the record high’s that were chalked up by distributors under her area of responsibility, including FDI 2. NESTLE recognized FDI 2 as Metro Manila Distributor of the Year for the same years.

Deceptive Act No. 11: Coercion and Forcing the Termination of a Distributor

21. Worse, instead of helping the owners of FDI 2 to address the financial problems created by Mr. De Vega, with the evident and direct participation of NESTLE’s Ms. Lupena, and from which NESTLE actually profited by eventually achieving its aggressive sales targets, NESTLE demanded FDI 2’s immediate termination as distributor.

To tighten the screws further, the threat of termination was not limited to FDI 2, but also included SEDI, another NESTLE distributor that is owned by the same owners of FDI 2. SEDI was not in the same financial bind as FDI 2. The lumping of SEDI with FDI 2, despite being separate and distinct corporate entities, was obviously a calculated move that was intended to force FDI 2’s resignation or desistance from its distributorship agreement. The owners of FDI 2 and SEDI were given an all-or-nothing, take-it-or-leave-it ultimatum: “drop FDI 2, or lose even SEDI.”

Deceptive Act No. 12: “Take-Over vs. Simple Taking”

22. And this is not all. After the unjust termination of FDI 2, the owners of FDI 2 (and SEDI) claimed the amount of ELEVEN MILLION SEVENTY THOUSAND SEVEN HUNDRED SEVENTY THREE PESOS (Php 11,070,773.20), representing inventory taken back by NESTLE, advances made by FDI 2 for NESTLE’s promotional activities, and performance incentives due from NESTLE, and P930,920.84 representing claims for refund of withheld EVAT for 2007. These claims are due and owing to FDI 2. They were not disputed claims; in fact these claims were actually acknowledged by NESTLE. Given FDI 2’s financial condition, FDI 2 desperately needed these amounts to meet its increasing debt, unpaid wages, 13^th month pay and separation benefits for around 80 employees that were let go during Christmas time of 2007, among others.

These obligations threatened to spill over into SEDI, and FDI 2, sans De Vega, had to scramble for whatever cash they could scrape from whatever source.

23. NESTLE initially ignored the claim, or gave the FDI 2/SEDI owners the run-around, in spite of the fact that the claims were not disputed, and in spite of the fact that the NESTLE executives, who had been in constant communication with the FDI 2/SEDI owners, knew that the amount would bring some relief to FDI 2, and reduce pressure upon SEDI. FDI 2’s group made several demands for the settlement of the claim. However, NESTLE continued to unjustly resist payment, obviously dangling the same as a bargaining chip in its ongoing negotiations with FDI 2/SEDI.

24. NESTLE’s indifferent posture vis-à-vis the claim for the amount of Php 11,070,773.20, and its nonchalance towards the illicit affair between NESTLE’s Lupena and FDI 2’s De Vega, took a different turn in January 2008.

NESTLE was then ready to talk to FDI 2/SEDI about the Php 11,070,773.20 claim and in fact informed the group that a check was being prepared. What precipitated this change in position was a complaint from the wife of Mark de Vega to NESTLE regarding the affair. To address this, NESTLE conveniently allowed ASM Lupena to resign, thereby washing its hands from the sordid affair and all the entanglements it entailed.

25. Clearly, NESTLE recognized that there is a problem with their business policies, as evidenced by this sudden change in position. But then again, NESTLE saw this valid claim as an opportunity to sweep the entire sordid affair from under the proverbial rug. The FDI 2/ SEDI owners were in dire need of capital. The undisputed claim for the amount due to FDI 2 was being dangled as a bargaining chip. NESTLE saw the unfortunate situation of FDI 2 as an opportunity to procure a quitclaim from FDI 2/SEDI. The NESTLE officials smelled the desperation of FDI 2/SEDI in their efforts to obtain from NESTLE what was rightfully theirs. NESTLE held all of the cards stacked in their favor, and exploited every advantage to the hilt.

Deceptive Act No. 13: Simple Blackmail

26. So on March 2008, the FDI 2 and NESTLE officials met regarding this claim. Ordinarily, the NESTLE representatives would just turn over the check and ask FDI 2 to sign an acknowledgment receipt. To their surprise, instead of a simple acknowledgment receipt, NESTLE officials showed a check to the FDI 2 group, and informed them that they have to sign a “Release and Quitclaim,” directly implying that the signing of Release and Quitclaim was a pre-condition for the release of the check.

27. FDI 2 then informed NESTLE that there could be possible claims that the audit might uncover which were not part of the original claim and that the document that NESTLE was foisting as a condition of payment would have forced FDI 2 to waive other just and valid claims resulting from the ongoing audit. But NESTLE was adamant that FDI 2 sign the quitclaim. FDI 2’s legal counsel strongly advised his clients not to sign the quitclaim, wanting no part of the farce.

28. But despite the absence of any legal representation, NESTLE (through its legal counsel) seized upon the situation and had FDI 2 sign this quitclaim, insisting on this as a pre-condition to the release of the check, and on the misrepresentation that NESTLE would honor a bona fide claim, should there be some arising after the forensic audit being conducted by FDI 2.

29. To reiterate, NESTLE prevailed upon FDI 2 to sign the document as a condition sine qua non to the turning over of the claim check, in spite of the absence of the latter’s counsel. FDI 2 asked NESTLE at least three (3) times for assurance that NESTLE will honor legitimate claims, even if this quitclaim was signed. All three times, NESTLE said yes. So under these circumstances FDI 2, through Mr. Yambao reluctantly signed the Release and Quitclaim document.

30. As if this was not enough, NESTLE’s legal counsel, to say the least, irregularly notarized this document, when she was a negotiating party to the same.

31. When FDI 2 made such a good faith claim, NESTLE declared in a letter dated 21 October 2008 that the FDI 2 issue was “closed as far as NESTLE is concerned,” contradicting its verbal assurances and representation that NESTLE would address any other just and valid claims, and leaving FDI 2 “holding the bag.”

Clearly, under existing policies and specific acts stated above, NESTLE has demonstrated its monopolistic, anti-Filipino and anti-SME stance against its distributors. By virtue of the specific acts against our client, NESTLE has likewise shown an utter lack of scruples. It has demonstrated its opportunistic and predatory attitude towards the very same distributor that has performed for NESTLE, even beyond its already-aggressive sales targets.

Our client has “delivered” to NESTLE, even at the expense of its own financial demise. But instead of rewards, NESTLE has “delivered” to our client a veritable “death blow.”

Your good office is aware that it is State policy to develop a self-reliant and independent national economy effectively controlled by Filipinos. Likewise, the State recognizes the indispensable role of the private sector, encourages private enterprise, and provides incentives to needed investments. (Sections 19 and 20, Article 2 of the 1987 Constitution).

To this end, Section 1, Article 12 of the same Constitution states:

[T]he State shall protect Filipino enterprises against unfair foreign competition and trade practices.

In the pursuit of these goals, all sectors of the economy and all regions of the country shall be given optimum opportunity to develop. Private enterprises, including corporations, cooperatives, and similar collective organizations, shall be encouraged to broaden the base of their ownership.

Also, Article 28 of the Civil Code provides:

Unfair competition in agricultural, commercial or industrial enterprises or in labor through the use of force, intimidation, deceit, machination or any other unjust, oppressive or highhanded method shall give rise to a right of action by the person who thereby suffers damage.

The foregoing actions of NESTLE are clearly indicative of its unfair trade and distribution practices. Its practices, while designed to ensure maximum profitability and minimum risk to itself, are destructive to its Filipino distributors, as well as the Philippine economy. Worse, there is no doubt that all the profitability is channeled directly to NESTLE’s main office in Vevey, Switzerland, with the Philippine entrepreneur and ultimately the Philippine economy taking all the risks and losses.