Dive Brief:
- A lawsuit accusing Kraft Heinz and Mondelez of allegedly manipulating wheat futures in 2011 will proceed after a U.S. federal judge refused a defendant motion to dismiss the case.
- The purchase in question was for $90 million in wheat futures contracts made by Kraft Foods Group in late 2011, prior to its split with Mondelez in 2012 and merger with H.J. Heinz Co. last year. The prosecution, comprised of wheat futures and options traders, allege that the purchase violated the Sherman antitrust law and the Commodity Exchange Act. They also claim that the purchase depressed prices in the cash wheat market without intention by Kraft to possess the grain, leading to more than $5.4 million in illegal profit.
- The judge also dismissed claims that the defendants were involved in "wash trades" over the course of about a decade, which would make it seem that the market was more active than it actually was. The prosecution can bring up those claims again in the future.
Dive Insight:
While the lawsuit names Kraft Heinz and Mondelez, Mondelez is more likely to bear the majority of the burden of any costs from the case. The purchase occurred before Mondelez spun off from Kraft, but the wheat in question was for the snack businesses that Mondelez now owns.
Kraft Heinz "has no liability in this case," a company spokesperson told Just-Food amid a related case last year. Mondelez also said at that time that any court-ordered fine or settlement resulting from this case would be immaterial to investors.
That related case shared many allegations with this lawsuit. In April 2015, the U.S. Commodity Futures Trading Commission filed a similar lawsuit against Kraft and Mondelez regarding the wheat futures purchase.
The judge overseeing that lawsuit also rejected a defense motion to dismiss the case in December, wherein Kraft claimed it was seeking the best price for wheat amid "difficult market conditions." At the time of rejecting the motion, the judge also noted that Kraft was at the helm "during the relevant time period," so Kraft may not emerge as unscathed from that lawsuit as it presumed.
In February, the CFTC also moved to block the defendant's appeal to block two counts from the lawsuit. The CFTC said Kraft's interlocutory appeal questions mischaracterized the allegations and were not grounds for interlocutory appeal.