Bell contesting EUR100m fine from German cartel office

Bell contesting EUR100m fine from German cartel office

In a story that grabbed the headlines worldwide, 21 companies and 33 individuals in Germany have been hit with fines totalling EUR338m for allegedly fixing the price of one of the country's staples - sausages. Companies including Nestle, Bell Group and Zur Muhlen Gruppe, Germany's largest sausage maker, were handed fines. Some will appeal, including Bell Group, the Switzerland-based meat products group. Bell CFO Martin Gysin told Dean Best why the company believes it should not be penalised.

It is not often companies at the centre of cartel allegations want to speak at length to the media. Often, for legal reasons, they prefer to keep quiet and when some do open up, prepared statements are offered.

In the wake of last week's announcement from Germany's cartel office, the Bundeskartellamt, of fines for 21 suppliers and 33 individuals for fixing the prices of sausage and ham products, some of those censured said they would appeal.

The Bundeskartellamt had said "well-known sausage manufacturers" had met over "several decades" to discuss market developments and prices. Crucially, however, it claims between 2003 and 2009 specific agreements were struck to fix the price of sausage and ham products.

Nestle, one of the companies set for a fine, told just-food it and its Herta subsidiary had not taken part in the alleged discussions or meetings to fix prices. Another, Zur Muhlen Gruppe, Germany's leading sausage supplier, simply said it would appeal its fine but declined to comment further.

After the Bundeskartellamt issued its decision, a third company set for a fine, Switzerland's Bell Group, promptly issued a fuller statement to say its penalty of EUR100m was "unjustified" and it would "vigorously defend" its position. Bell is now the owner of two German firms, Zimbo and Abraham, said to have been involved. The fine, it went on to argue, was "factually incorrect and legally inappropriate". It was a firm rebuttal and one unusual in its tone and length.

Following some discussions with Bell, CFO Martin Gysin agreed to speak to just-food about the ruling, the fine and the company's decision to appeal.

Bell acquired the meat products suppliers Zimbo and Abraham in 2008. Gysin points out the Bundeskartellamt's evidence says the last time Zimbo and Abraham were said to be involved in any discussions was in the summer of 2008, before Bell acquired the businesses.

Gysin acknowledges Zimbo and Abraham had had discussions with other suppliers but insisted Bell believed the companies had not made made any illegal agreements.

"In our opinion, there has been some co-ordination to fix the moment of price increases but not to fix prices itself," Gysin tells just-food. "We do not agree with the Bundeskartellamt that these co-ordinations have really been illegal."

And the context for what Bell calls "co-ordination" is a second plank of the company's defence - the power of food retailers and in particular Aldi in Germany. "There are 300 producers facing five retail chains and one of these retail chains has the only price power. Is it really a cartel when you are faced with a monopoly?" he says.

Aldi, Gysin contends, is the "only decision-maker on price" in Germany. "Everybody else says we will not move our price until Aldi has moved. You are faced with a complete price-fixing monopoly," he argues. "When you ask for a higher price and your customer says 'I am not going to give anything until Aldi gives something', what are you supposed to do? You've got your back to the wall. It is understandable that they made some co-ordination in this situation."

Bell also argues the evidence against Zimbo and Abraham is poor. "There are some handwritten notes, call notices and nobody sees who were talking to whom and so on. This is not reliable," Gysin argues.

For its part, the Bundeskartellamt is resolute. It believes it has the evidence suppliers, including the companies that are now Bell subsidiaries, took part in illegal agreements to fix the prices of certain products.

"It's our understanding that [there were] price agreements and that they took part in these price agreements," a spokesperson for the cartel office tells just-food.

What about Bell's contention that the discussions were simply "co-ordinations"? The spokesperson says: "That is their opinion. We made a decision and now they can appeal against it."

He adds: "Discussions are allowed. You can talk about the situation in the market. Competitors meet regularly on different occasions and they have lots of subjects to discuss and lots of subjects where they have to agree. However, when it comes to price, it's a very easy example of something that's not allowed. Here we have a crystal clear price agreement case that it is outside of those discussions in our opinion."

The Bundeskartellamt spokesperson is also clear about the retail landscape faced by suppliers in Germany. While Gysin says Aldi's "monopoly" is "not forseen by competition law", the cartel office says it took the retail landscape into account when awarding the fines.

"This is something we saw and this is the reason for the fines to be, in sum, lower than in other cases. The difficult situation faced by these companies with a very powerful retailer sector and very powerful slaughterhouse companies on the other side is something we can consider in the area of calculating the fines," the spokesperson says. However, he adds it should not be used as an excuse. "It's nothing that can make an illegal price agreement legal."

Gysin also argues the changes Bell has made to its company in 2012, including the former Zimbo and Abraham subsidiaries, means the company is not liable for a fine. "We restructured our group in 2012. German law says in some circumstances the succession of interest doesn't go over to the new company. This is a special point in German law. This is the main reason we don't think we should pay it," he argues.

When the Bundeskartellamt issued its decision last Tuesday, it said any company that wanted to appeal had two weeks to take their case to the Düsseldorf Higher Regional Court. Bell plans to lodge its appeal in the coming days but Gysin warns the case could take "years".

"I assume most of the bigger companies, which are faced with high amounts of fines will go to the court," Gysin says. "There will be at least ten to 12 that will apply."