No objections to cooperation between Radeberger and Früh for the production of Kölsch

The Bundeskartellamt has today announced that a cooperation between the Radeberger Group KG (“Radeberger“) and Cölner Hofbräu P. Josef Früh KG (“Früh”) for the production of Kölsch can been deemed to fulfil the legal requirements for an exemption from the prohibition of cartels and that there is no need for any action by the authority.

The aim of the cooperation is for Früh to take over the brewing of Radeberger’s Kölsch brands (Dom, Gilden, Küppers, Peters, Sester and Sion) by contract brewing from 2021 onwards. Radeberger will remain as a competitor since all the other business functions, in particular the distribution and marketing for these six Kölsch beer brands, will continue to be carried out by Radeberger independently of Früh.

Andreas Mundt, President of the Bundeskartellamt: “We have examined the cooperation between the two Kölsch breweries in detail to see if it could impair competition in the market. There are many reasons to assume a single product market for Kölsch because many consumers in Cologne and the surrounding area are unlikely to switch from one kind of beer to another. The production cooperation can be expected to create significant efficiency gains for both companies, which will continue to market their beer independently of one another. Our examination has shown that due to the market conditions these efficiencies are most likely to benefit consumers. We therefore have no objections to the cooperation”.

The investigations conducted by the Bundeskartellamt show that final consumers and gastronomy customers in Cologne and the surrounding area are unlikely to switch from Kölsch to other types of beer. The reason for this is that Kölsch is a protected geographic indication of origin, the breweries (in accordance with the Kölsch Convention formerly recognised by the Bundeskartellamt) and the sales area of Kölsch are limited to Cologne and its surroundings and that Kölsch has a paramount market presence in this area. Radeberger and Früh each have a share of less than 20 percent of this Kölsch market.

The cooperation between the two Kölsch breweries will result in significant savings in production which will create the necessary conditions for keeping Radeberger’s Kölsch brands under the umbrella of Radeberger. The flow of information and cost transparency resulting from the cooperation in production to Früh’s benefit could have anticompetitive effects as well as the mutual dependence due to the contractual commitments. However, the flow of information was reduced by the parties to the absolute necessary for implementing the cooperation. Furthermore, Radeberger and Früh’s areas of focus still differ in terms of brand strength, customer groups and package types and the two companies cannot be regarded as the closest competitors.

In this market, which has long been in decline, price competition with the other two leading breweries is expected to intensify as a result of the cooperation, which will ultimately benefit consumers. There is good reason to assume that Radeberger will pass on the efficiency gains from the cooperation to its customers in the form of price concessions and/or use them to increase expenditure on distribution and marketing in order to secure its market position. Früh will also have incentives to use the cost advantages gained from the cooperation to consolidate its position against its major competitors Reissdorf and Gaffel.

The Bundeskartellamt has therefore concluded that the cooperation can be deemed to fulfil the requirements for exemption from the prohibition of cartels and has decided not to take any action against it. However, the cooperation between the parties must not be used as a platform for interactions which would further restrict competition, such as price-fixing agreements.