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Bundeskartellamt Advises Against Further Mergers in the Food Sector

 

The German Bundeskartellamt (BKartA) cleared the acquisition of the Rügen Feinkost GmbH by the Homann Group (press release of 11 July 2011). Nevertheless, the BKartA simultaneously advised against further mergers and acquisitions in the food sector in an exceptionally explicit way. The sector has already caught the BKartA’s intensive attention and remains in the focus of inquiries.

Decision

• Legal Analysis

According to the BKartA’s analysis, the undertaking affected the domestic sales market for refrigerated delicatessen salad and fish specialties. The combined market share of both parties amounted to around 35 - 40% and therefore considerably exceeded the rebuttable presumption of market dominance. Still, despite the large market shares and the considerable gap to competitors, the BKartA found the presumption rebutted.

In its reasoning, the BKartA stressed the strong buyer concentration of power in the hands of the retailers. In addition, the main competitors still had sufficient free production capacities and were able to expand their existing capacities. Finally, most retailers had organized their procurement operations in such a way that smaller, merely regionally active competitors could also be considered as potential competitors, enabling the trading companies to switch their demand at any time

• Warning

In both the decision and case summary, the BKartA gave explicit warnings concerning further mergers in the affected markets: “Taking into account the whole market development on both the seller’s and the buyer’s market”, this constituted a “borderline decision”. Due to the increasing concentration of the food retail market and the “flood of consolidations” among the food producers, further mergers might lead to market collapse. In the words of Andreas Mundt, president of the BKartA:  “we shall make sure that structures in this market will not worsen in future as any further mergers would increase the danger of the market becoming highly concentrated, to the detriment of the consumer."

Background: Focus on the Food Sector

Currently, there is a focus of the BKartA’s inspections on the food sector. In addition to the warnings listed above there have been a number of various other proceedings, for example:

§  In February, the BKartA launched a sector inquiry on procurement power in the food retail business. Its purpose is to determine whether and to what extent the four large retailers enjoy purchasing advantages over their competitors. Another inquiry regarding the milk sector is not completed yet and still pending (interim report).

§  Apart from this, the BKartA is currently running various proceedings concerning suspected vertical price fixing and horizontal so called “hub-and-spoke” systems in the consuming goods and food retail industries (see activity report 2009/2010, p. 70, German only). Cases of suspected abuse of a dominant position are currently under examination as well, for example the case of food retailers demanding unjustified contract conditions from contractors (so called “wedding discounts”).

§  In the recent past, the BKartA imposed fines amounting to € 38 million on producers of consumer goods on account of exchange of anti-competitive information (press release of 17 March 2011). In the coffee roaster case, fines were imposed amounting to € 190 million on account of fixed price increases (press release of 21 December 21 2009 and 6 June 2010).

In the light of findings in the milk industry, the BKartA has published new standards for market information systems complying with competition provisions (Newsflash) and announced further investigations of other market information and benchmarking systems.

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Dr. Christian Bahr Partner, Antitrust bahr@sbr-net.com	Dr. Sascha Dethof Partner, Antitrust dethof@sbr-net.com
SBR Schuster Berger Bahr Ahrens Lawyers
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