Sun. Dec 15th, 2019

The CNMC returns to fine a cartel of dairy companies for an imposition of the National Court | Economy

The National Commission of Markets and Competition (CNMC)) has sanctioned eight companies that operate in the supply market for raw cow's milk for their performance between 2000 and 2013. The illegal conduct consisted of exchanging information, which allowed them to coordinate commercial strategies to the detriment of the interests of the farmers. Such action is considered a very serious infraction and has been sanctioned with 80.6 million euros.

This file had its beginning as a result of a study on the dairy sector submitted by the Service for the Defense of Competition of Castilla y León. It showed the possible existence of restrictive behavior in the market for the supply of raw milk and a complaint made by the Agricultural Unions (Union of Small Farmers, UPA) against the milk processing companies.

After an investigation, which included simultaneous home inspections in the headquarters of some of the main companies in the sector and after the instruction of the corresponding sanctioning file, the CNMC has considered that the Association of Dairy Companies of Galicia (AELGA), Paschal Quality (formerly Grupo Leche Pascual SA), Central Lechera de Galicia (CELEGA), Peñasanta Food Corporation (CAPSA), Danone, the Dairy Industries Guild of Catalonia (GIL), Lactalis Iberia Group, Nestlé Spain, Dairy Industries of Granada (Puleva) and Schreiber Food Spain (formerly Ibero Senoble) have participated and are responsible for anticompetitive behaviors that infringe the competition legislation. The entities Industrias Lácteas Asturianas (ILAS), Milk River, Feiraco, Celtic Milk, Forlactaria and Central Lechera Asturiana have also participated in the behavior, although their infringement has been prescribed.

This procedure was already instructed and resolved in 2015. The CNMC then drafted a Statement of Facts in which certain periods of infringement were omitted for some of the companies, which led to a rectification of such data in a second statement that Nestlé appealed.

While the judicial process was being processed, the CNMC resolved the sanction procedure on February 26, 2015. However, on July 11, 2016, the National Court partially upheld the judicial remedy filed by Nestlé and partially annulled the CNMC's decision, ordering the retroactivity of the procedure immediately prior to the correction of errors. This explains why the sanctions and the duration of the conducts are in some cases different from those imposed in 2015.

The anticompetitive practices carried out by the offenders have consisted of exchanging information, at national and regional level, about purchase prices of raw cow's milk, purchase volumes of farmers and surplus milk.

Exchanges of information

These exchanges of strategic information took place in different forums and dealt with different subjects, although all of them had the common objective of agreeing and adopting a joint strategy to control the supply market for raw cow's milk. In addition, at certain times, concrete agreements would have materialized to coordinate the purchase prices of milk and for the cession of farmers among industrialists.

Thus, for example, the processing companies discussed and exchanged information on the purchase prices offered by the processing companies to their farmers, which they would offer in the future, the identity of the farmers and the volumes acquired from them, or the identity of farmers who had the intention to change the transformer and possible measures to avoid it.

This information allowed companies to adjust their behavior and avoid offering better prices and commercial conditions to farmers, limiting competition in the raw milk supply market. Therefore, the breeders lacked the freedom to set the price of their product and the company they supplied, distorting the normal functioning of the market for the benefit of the processors.

The agreements aggravated the situation in a market that is already concentrated from the perspective of demand, where there is a high negotiating power of the processing industry in front of some farmers who, in addition to being more atomized, are forced to sell the production to conserve your milk quota. Also, some of the companies exchanged information with the intention of controlling surplus milk and its conversion into milk powder, artificially conditioning the supply price of raw milk.

The Resolution of the CNMC not only proves the existence of prohibited conducts for its purpose, which was no other than to distort the normal functioning of the market, but also they produced negative effects in the market, with the livestock industry being the most affected sector.

In these exchanges of information, two associations played a proper and relevant role: Aelga and Gil, with a role of facilitators of the infringement, for which they are considered co-authors of the infringement and fined for it. The sanctions are as follows: Paschal Quality, 8,560,363 euros; Central Lechera Galicia, 53,310 euros; Corporación Alimentaria Peñasanta, 21,864,645 euros; Danone, 20,277,100 euros; Lactalis Iberia Group, 11,692,998 euros; Nestlé Spain, 6,860,000 euros; Ind. Lácteas Granada, 10,269,557 euros; Schreiber Food Spain, 929,644 euros; Asoc. Emp. Lácteas Galicia, 60,000 euros; Gremio Ind Lácteas Cataluña, 90,000 euros. In total, the sanctions amount to 80,657,617 euros. In the case of the Asturian Milk Industries, Rio Milk Group, Feiraco Lácteos, Celta Milk, Forlactaria Dairy Operators and Central Lechera Asturiana the CNMC has declared the infringement to be prescribed.

There is no appeal against the resolution through administrative channels, and a contentious-administrative appeal can be filed at the National Court within two months of the day following its notification. Any person or company that considers itself affected by the anti-competitive practices described in this resolution can file a claim for damages derived from the aforementioned behaviors for breach of the rules of defense of competition before the civil courts.

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