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Competition clamp-down shows need for compliance culture, lawyers say

By Jess Halliday , 22-Jan-2010

As the competition authorities are stepping up scrutiny of the food sector, all companies should ensure they have compliance structures in place and do not view national activities in isolation, say lawyers at CMS Cameron McKenna

In the last week The Netherland’s competition authority said it unearthed evidence of a big cartel in the country’s flour sector during an investigation carried out last year. Similar investigations have also been conducted in Germany, Italy and Belgium.

Meanwhile, in Germany, 15 confectionery, coffee and pet food companies have been told they are under suspicion for price-fixing.

Other national investigations in individual member states have delved into practices such wide-ranging product areas as dairy, milk, pasta, eggs, poultry, beef, vegetable, fruit, olive oil, chocolate, coffee and herbs.

The law firm says this flurry of investigations shows the intention of the national authorities in Europe to focus on the grocery sector. Indeed, a recent report for the European Commission called on national authorities to “maintain vigorous and coherent enforcement in the sector”.

This means companies should not regard national territories and any competition issues within them in isolation. They also need to ensure they have a compliance culture in place and well-organised dawn raid procedures in place.

Susan Hankey, a partner in CMS Cameron McKenna’s competition team, told FoodNavigator.com that boards need to understand that they have a duty of compliance, and senior management and sales teams also need to understand the issues.

Far-flung teams

But the “far flung nature” of large sales teams can make competition an issue. “It is hard to know what one of 2000 people is going all the time,” she said.

For individuals at the sharp end, competition issues need to be presented easily; each member of the sales team needs to comply – but is also under pressure to grow the business and meet targets.

While the basic rule of not discussing prices with competitors is straightforward, information can be spread via a loop. For instance, two suppliers would discuss prices with a common customer, but not with each other. If the customer, a supermarket, tells one about the other’s pricing policies, they could end up acting uncompetitively via the loop.

“Competition law is rarely black and white,” said Hankey.

She added that the competition authorities are concerned to understand how the consumer goods sector operates in terms of information exchange, category management and promotional activities.

Penalties

The penalties for being part of a price-fixing cartel can be tough, as a number of companies in the sector have found to their cost.

For example, in 2008 the European Commission slapped fines of €60.3m on banana importers Dole and Weichert, the latter including the Del Monte brand, for price fixing between 2000 and 2002.

The cartel was found to have been operating in Austria, Belgium, Denmark, Finland, Germany, Luxembourg, The Netherlands and Sweden.

Chiquita was not fined, as it provided information on the cartel to the enquiry.

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