Bundeskartellamt imposes fines on sugar manufacturers

Today the Bundeskartellamt has imposed fines amounting to around 280 million euros on the three major German sugar manufacturers Pfeifer & Langen GmbH & Co.KG, Cologne, Südzucker AG Mannheim/Ochsenfurt, Mannheim, and Nordzucker AG, Braunschweig, for concluding anticompetitive agreements on sales areas, quotas and prices.

The infringements involved the sale of sugar for the processing industry (so-called industrial sugar) and sugar for the end consumer (so-called retail sugar). They took place over several years up to the Bundeskartellamt's search in 2009 and in some cases date back to the mid '90s.

Andreas Mundt, President of the Bundeskartellamt: "The sugar manufacturers formed a "territorial cartel" and for many years agreed to generally limit their sales of sugar in Germany to their respective home sales areas and not to get in the way of the other cartel members. Sugar was exported rather than sold to customers in their competitors' sales areas. The aim of the agreements between Nordzucker, Pfeifer & Langen and Südzucker was to achieve the highest possible prices for their sugar. This type of coordination was not permitted under the European sugar market regulation. In spite of the quota system and minimum price guarantees, competition for sales areas, customers and customer prices is still possible in the sugar market and is also necessary to maintain functioning residual competition in order to protect customers against even greater distortion of competition in this sector. The fined companies have used the European quota system, the minimum price guarantee and the resulting high market transparency for coordination purposes and have further limited the residual competition. The case is an expressive example of how extensive market regulation can help to restrict competition to the detriment of customers."

The basic agreement to uphold the home market rule made frequent contacts at director and sales level necessary. The territorial agreement was protected by measures to guarantee prices and quantities in Germany and to control imports and exports. Whenever the basic consensus between the sugar manufacturers to respect key sales areas was endangered or there was need for adjustments, meetings were held on an individual basis. These either took place at director level (strategic perspective) or at sales manager level (operative perspective). The themes of discussion at these meetings were, for example, plant closures, expansion strategies, the allocation of quotas and agreements on prices for processing and industrial sugar. Issues such as amendments to the European Sugar Market Regulation, EU eastern enlargement or changes in the import-export flows also triggered consultations to achieve largely homogeneous "customer and volume management".

From 2005 onwards the EU Commission gradually decreased the European production quotas for sugar, without issuing guidelines for companies on their individual renunciation of quotas. Subsequently Nordzucker, Pfeifer & Langen and Südzucker agreed in 2008 under the umbrella of the German sugar industry association (Wirtschaftliche Vereinigung Zucker) on their future production volumes and their respective quota renunciation. The companies committed this cartel law infringement in order to jointly prevent an oversupply of sugar in Germany and a subsequent fall in price. According to statements by industrial customers this action did indeed lead to substantial price increases and to bottlenecks in the supply of sugar. In contrast to accounts given by the companies, the Bundeskartellamt has no reliable evidence that representatives of state agencies were involved in this agreement. However, such a restriction of competition could not have been legalised even by state approval or initiation.

Nordzucker AG has cooperated extensively with the Bundeskartellamt within the scope of its leniency programme and obtained extensive immunity from fines. In calculating the fines, which are based on a level of fines amounting to 10 % of the respective total turnover of the respective companies and the gravity of the offence, the Bundeskartellamt also took into consideration the cooperation and, in some cases, confessions offered by the companies.

All the companies concerned agreed to have the proceedings terminated by settlement. The fines imposed today are not yet final and can be appealed to the Düsseldorf Higher Regional Court.