The wurst has happened

Published On 25/07/2014 | By Smriti Arora | Cartels, Enforcement

As reported by our European colleagues, the German Federal Cartel Office (FCO), the Bundeskartellamt, has imposed a 338 million euro fine on 21 sausage manufacturers and 33 individuals involved in concluding price-fixing agreements. This comes off the back of recent findings of similar price-fixing in the beer industry and now begs the question: will the FCO target apple strudel makers and achieve a trifecta of its country’s cuisine?

Cartel Conduct

After the FCO obtained first indications of cartel conduct from an anonymous tip off, it launched an investigation which revealed that well-known sausage manufacturers had been meeting and arranging to fix prices for several decades. The meetings began at the Hotel Atlantic in Hamburg. Since 2003, the “Atlantic Group” met and arranged for jointly implemented price increases for the sale of sausage products to the retail market.  Due to the heterogeneity of the products, with differences in type of packaging, branding, and type of sausage, the companies set price ranges for agreed product groups such as raw, boiled or cooked sausage. As a result of this price-fixing, these manufacturers were able to demand higher prices for their products from retail sellers.

Fines Imposed

In its press release, the FCO stated 11 companies cooperated and admitted to the conduct during the course of its investigation, with that cooperation taken into account as a mitigating factor in the calculation of their fines.

Whilst the FCO did not disclose individual fines, it did state that the penalties ranged from a few hundred thousand euros to the high millions. Andreas Mundt, President of the FCO, stated that the key factors in the calculation of the fines were:

  • The seriousness and duration of the infringement, which in this case was quite high given the conduct spanned across so many manufacturers and over several years;
  • The cartel-related turnover (the turnover received by the products which were the subject to the cartel agreement); and
  • The overall turnover of the company, where the statutory level of fines is up to 10% of overall turnover.

Given that large and well-known companies such as Herta (a subsidiary of Nestlé), Bell Deutschland Holding and ClemensTönnies-Gruppe were fined, some sources report that such companies were fined close to 100 million euros. In calculating the overall turnover of such companies, the FCO looks to the “economic unit” which is the company group behind the company.

For the 15 or so small and medium sized companies, the fines accounted for approximately 2% of annual turnover. Overall, the FCO has assured the market that where a company provided evidence, the economic situation and financial capacity of that company was taken into account in determining the penalty.

What’s next?

The companies have 2 weeks to appeal the decision to the Düsseldorf Higher Regional Court. So far Nestlé, the Bell Group, and Germany’s largest sausage processor Zur Mühlen Gruppe have indicated an intention to appeal these fines.

Image credit: Reiner Kraft / Wikimedia Commons

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About The Author

is a Solicitor in the Competition team at King & Wood Mallesons, based in the Sydney office. She is an avid tennis fan and hopes to attend each grand slam.

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