05 March 2015

CNMC fines companies €88.2 million for anti-competitive agreements in raw cow’s milk sector

On 3 March 2015, the Spanish Competition Authority (CNMC) announced the adoption of a decision fining nine companies and two associations of undertakings, operating in the market for the procurement of raw cow’s milk, €88.2 million for infringing Article 1 of the Spanish Competition Act 15/2007 and Article 101 TFEU.

The investigation originates from two different sources.  On the one hand, the regional competition watchdog of Castile-León issued a report stating that there could be anti-competitive conduct taking place in the dairy milk sector.  On the other hand, the association of small farmers (Unión de Pequeños Agricultores, UPA) lodged a complaint against the companies involved in milk processing activities.

Based on the doubts emanating from these sources, the CNMC decided to carry out dawn raids at the premises of the main undertakings in the sector.  The inquiry led to the opening of formal infringement proceedings for a possible breach of competition legislation, especially the sharing of pricing information, of purchase volumes and of raw cow’s milk surpluses.

According to the CNMC, the information exchanges took place on different occasions and covered different elements, but with the common aim of controlling the market for the procurement of raw cow’s milk.  The watchdog points out that on certain occasions the companies even reached agreements to coordinate the prices to pay to the farmers as well as the sharing of suppliers.

The information shared by the undertakings included the names of farmers, prices paid, volumes purchased, estimations of prices to be offered in the future, and even an identification of the farmers who were willing to stop supplying to one company, including proposals to avoid this happening.

The dairy sector in Spain is characterised by a highly concentrated number of companies involved in processing activities and a high level of fragmentation on the farmers’ side, with the farmers being obliged to sell all the milk they produce if they want to maintain their production quotas.

As a result of this conduct the farmers were unable to freely establish the price of raw milk and to freely choose the processing company to supply to.  Competition was thus severely restricted.

The CNMC’s investigations also proved that some of the companies even engaged in anti-competitive practices regarding agreements to control the surplus of milk by converting it into powdered milk, thus artificially conditioning the price of raw cow's milk.

Two associations of undertakings, Asociación de Empresas Lácteas de Galicia (AELGA) and Gremio de Industrias Lácteas de Cataluña (GIL), were found by the Spanish watchdog to have distributed the information, and were therefore considered to be offenders and have also been fined.

The biggest fines imposed by the CNMC, which under Spanish law can reach up to 10% of the turnover of the previous year, are the following:

  1. Danone SA, €23,2 million
  2. Corporación Alimentaria Peñasanta SA, €21,8 million
  3. Grupo Lactalis Iberia SA, €11,6 million
  4. Nestlé España SA, €10,6 million
  5. Puleva Food SL, €10,2 million
  6. Calidad Pascual (formerly Grupo Leche Pascual SA), €8,5 million

The other fined companies are Senoble Ibérica SL, Central Lechera Asturiana SAT, Central Lechera de Galicia and the two associations GIL and AELGA.

Although the CNMC discovered that the following additional companies had also acted anti-competitively - Industrias Lacteas Asturianas SA, Grupo Leche Rio SA, Feiraco Lácteos SL, Leche Celta SL, and Forlactaria Operadores Lecheros SA - time limitations prevented the watchdog from imposing a fine.

The decision taken by the CNMC ends the administrative proceedings.  However, the parties have two months from receiving the notification of the fine to challenge the decision before the Audiencia Nacional, the judicial authority in charge of reviewing the legality of administrative decisions.

In parallel, any person affected by the anti-competitive conduct described in the decision is entitled to seek loss and damages from the fined companies before the civil courts.

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