Bundeskartellamt examines dairies' conditions of supply 

The Bundeskartellamt has initiated an administrative proceeding to examine the conditions which the dairies have set farmers for the supply of raw milk. In a test case it will examine first of all the conditions of supply set by the large north German dairy DMK Deutsches Milchkontor GmbH and its parent company, Deutsches Milchkontor eG.

Andreas Mundt, President of the Bundeskartellamt: "Last year marked the end of the milk quota regime. This important change has had hardly any effect on the contracts between the milk producers and dairies. Long-term contracts, the obligation to supply all of the milk produced to one dairy and a very transparent price system, also for the food retail trade, limit the farmers' scope of action. This could restrict competition between the dairies for the procurement of raw milk and prevent effective quantity control by the market. This situation could be to the farmers' detriment."  

The authority's investigations focus above all on long contract periods and clauses which oblige the producers to supply their total production volume exclusively to "their" respective dairy. Also under scrutiny are so-called reference price systems which lead to the price amendment of one dairy resulting in corresponding price changes by other dairies. This can prevent negotiations from taking place which take account of the added value created by and the marketing strength of the individual dairy in its payouts to the milk producers. The authority is following up the suspicion that the farmers' scope for competitive action is being restricted by a nationwide network of long-term contracts and that new dairies are thus being foreclosed from the raw milk market.

The Bundeskartellamt had already pointed out competition problems in the conditions of supply for raw milk in its final report on its milk sector inquiry in 2012 (see press release of 19.01.2012).

Andreas Mundt, President of the Bundeskartellamt: "Our proceeding cannot solve the current crisis in the milk market. However, conditions of supply which comply with competition law can help to make the market function better in the medium term."