The European Commission has imposed record fines on members of a global vitamin cartel. The heavy fines totaling $755 million will hurt the cartel members, particularly Roche and BASF. However, the real damage could come from elsewhere. Now the European vitamin market has been made competitive, there is a chance of retailer price wars. These could drive producer prices down too, significantly impacting manufacturers’ profit margins.
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The EU’s Competition Commission has finally begun to bare its teeth, exposing and punishing eight companies colluding in a vitamin cartel. Cartel member Aventis acted as a whistleblower to help bring down the cartel, consequently receiving a lenient fine of around $5 million.
However, the Commission imposed record fines on the rest of the cartel, totaling $755 million, representing a toughening stance that competition experts say is long overdue. Swiss firm Roche is hit hardest with $288 million, followed by Germany’s BASF with a fine of $185 million.
The cartel of 13 members, dubbed Vitamin Inc., sought to fix higher prices through regular meetings and shared information. Both over-the-counter (OTC) vitamins and those used in the production of fortified foods were sold at fixed prices. Prices should now fall as competitive practice takes over. The effect of this is likely to be felt along the entire supply chain.
Retailers will now be more able to charge consumers lower prices. Some may take this as an opportunity to become lowest price leaders, whereas others are likely to promote general price reductions. In the context of continually growing consumer health awareness and rising interest in personal well-being, a price war may ensue.
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By GlobalDataEven if the price war fails to materialize, retailers will certainly promote lower prices. The producers will try to protect their margins as best they can, shifting some of the burden for cutting costs onto their ingredients suppliers. Yet, now the market is no longer rigged, vitamin producers need to accept that uncompetitively high profit margins are over and that retailers’ buying power will increase.
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