Cadbury owner says it will engage “constructively” with the Commission

Cadbury owner says it will engage “constructively” with the Commission

The European Commission is investigating whether Mondelez International breached antitrust legislation by allegedly "hindering" cross-border trade between European Union member states in chocolate, biscuits and coffee to push up prices.

"We are opening a formal investigation to see whether Mondelez, a key producer of these products, might have restricted free competition in the markets concerned by implementing various practices hindering trade flows, ultimately leading to higher prices for consumers," Margrethe Vestager, an executive vice-president at the EC in charge of competition policy, said in a statement. 

The probe is centred on whether the US-based snacking and confectionery giant, which owns the BelVita and Oreo brands among others, restricted so-called parallel trade, where goods are sold across EU member states by traders outside of the manufacturer's distribution network.

"Restrictions to such parallel trade can lead to the isolation of a national market whereby the manufacturer or supplier can charge higher prices to the detriment of consumers," the EC explained. "Restrictions to parallel trade can also lead to less product diversity."

It added: "The opening of a formal investigation does not prejudge its outcome." 

In response, Cadbury chocolate owner Mondelez said it will engage "constructively" with the Commission in its investigation, adding in a statement: "We learned about the European Commission's announcement that it has opened a formal investigation into Mondelez International's practices related to the cross-border supply of products within the European Economic Area. We will work constructively with the European Commission as it conducts its review."

As part of its "own-initiative investigation of suspected anti-competitive practices", the Commission said it carried out unannounced inspections at "the premises" of Mondelez in November 2019, without providing more details.

John Baumgartner, an analyst at financial services firm Wells Fargo, said Mondelez had previously had kick-backs when it tried to introduce price increases in the EU given the combined purchasing power of retailers within the trading bloc.

"Even if violations are found, we would not expect it to impact Mondelez's underlying global growth potential driven by mix-accretive innovation, choco-bakery expansion, new distribution, and a revival of local brands," he wrote in a follow-up research note.