Brussels, 23 May 2024
The European Commission has fined Mondelēz International, Inc. (Mondelēz) €337.5 million for hindering the cross-border trade of chocolate, biscuits and coffee products between Member States, in breach of EU competition rules. The Commission remains committed to bringing down unjustified barriers to ensure a better functioning of the Single Market. Territorial supply constraints by suppliers are a type of non-regulatory barriers to a proper functioning of the Single Market.
The infringement
Mondelēz, headquartered in the US, is one of the world’s largest producers of chocolate and biscuit products. Its portfolio includes well-known chocolate and biscuit brands such as Côte d’Or, Milka, Oreo, Ritz, Toblerone and TUC and until 2015 coffee brands such as HAG, Jacobs and Velours Noir.
The Commission’s investigation found that Mondelēz breached EU competition rules: (i) by engaging in anticompetitive agreements or concerted practices aimed at restricting cross-border trade of various chocolate, biscuit and coffee products; and (ii) by abusing its dominant position in certain national markets for the sale of chocolate tablets.
In particular, the Commission found that Mondelēz engaged in twenty-two anticompetitive agreements or concerted practices, in breach of Article 101 of the Treaty on the Functioning of the European Union (‘TFEU’), by:
- Limiting the territories or customers to which seven wholesale customers (traders/“brokers”) could resell Mondelēz’ products. One agreement also included a provision ordering Mondelēz’ customer to apply higher prices for exports compared to domestic sales. These agreements and concerted practices took place between 2012 and 2019 and covered all EU markets.
- Preventing ten exclusive distributors active in certain Member States from replying to sale requests from customers located in other Member States without prior permission from Mondelēz. These agreements and practices took place between 2006 and 2020 and covered all the EU markets.
The Commission also found that, between 2015 and 2019, Mondelēz abused its dominant position, in breach of Article 102 of the TFEU, by:
- Refusing to supply a broker in Germany to prevent the resale of chocolate tablet products in the territories of Austria, Belgium, Bulgaria and Romania where prices were higher.
- Ceasing the supply of chocolate tablet products in the Netherlands to prevent them from being imported into Belgium, where Mondelēz was selling these products at higher prices.
The Commission concluded that Mondelēz’s illegal practices prevented retailers from being able to freely source products in Member States with lower prices and artificially partitioned the internal market. Mondelēz’ aim was to avoid that cross-border trade would lead to price decreases in countries with higher prices. Such illegal practices allowed Mondelēz to continue charging more for its own products, to the ultimate detriment of consumers in the EU.
The Fine
The fine was set on the basis of the Commission’s 2006 Guidelines on fines (see press release and MEMO).
In setting the level of the fine, the Commission took into account the gravity and duration of the infringements as well as the value of Mondelēz’ sales relating to the latter.
In addition, the Commission took into account the fact that Mondelēz cooperated with the Commission under the cooperation procedure and expressly acknowledged its liability for the infringement of EU competition rules. Therefore, the Commission granted Mondelēz a 15% fine reduction. Based on this methodology, the Commission imposed a €337.5 million fine on Mondelēz.
Background
Traders and retailers try to procure products in the internal market where the prices are lower and trade them to markets where prices are higher. This generally leads to price decreases in countries where prices are higher. 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. They can also lead to less product diversity. Therefore, restrictions to parallel trade amount to non-regulatory barriers to a better functioning of the Single Market and are among the most serious restrictions of competition. In the Transition Pathway for the Retail ecosystem published in March 2024, the Commission proposed to initiate a dialogue between the stakeholders concerned, i.e., international suppliers of branded products, retailers and consumers, to try to find solutions.
As part of its own-initiative investigation of suspected anticompetitive practices covering the EU, in November 2019 the Commission carried out unannounced inspections at the premises of Mondelēz in Austria, Belgium and Germany. The Commission opened formal proceedings in January 2021.
Article 101 of the TFEU prohibits anticompetitive agreements and concerted practices between undertakings that affect trade between Member States and that have as their object or effect the prevention, restriction or distortion of competition within the internal market. Article 102 of the TFEU prohibits the abuse of a dominant position that may affect trade within the EU and prevent or restrict competition. The implementation of these provisions is defined in Regulation No 1/2003.
The cooperation procedure is inspired by the well-established cartel settlements procedure and concerns situations outside cartels where companies are willing to acknowledge their liability for an infringement of the EU competition rules (including the facts and legal qualification). In addition, companies can voluntarily provide or clarify evidence or help in the design and implementation of remedies. The cooperation framework allows the Commission to apply a simpler procedure and the cooperating companies to obtain a reduction in fines. The Commission assesses on a case-by-case basis whether a case would be suitable for cooperation, taking into account the probability of reaching a common understanding with the company within a reasonable timeframe. There is neither a right nor an obligation for companies to pursue the cooperation path.
Fines imposed on companies found in breach of EU antitrust rules are paid into the general EU budget. These proceeds are not earmarked for particular expenses, but Member States’ contributions to the EU budget for the following year are reduced accordingly. The fines therefore help to finance the EU and reduce the burden for taxpayers.
Action for damages
Any person or company affected by anticompetitive behaviour as described in this case may bring the matter before the courts of the Member States and seek damages. The case law of the Court of Justice of the European Union and Council Regulation 1/2003 both confirm that in cases before national courts, a Commission decision that has become final constitutes binding proof that the behaviour took place and was illegal. Even though the Commission has fined the cartel participants concerned, damages may be awarded by national courts without being reduced on account of the Commission fine.
The Antitrust Damages Directive makes it easier for victims of anticompetitive practices to obtain damages. More information on antitrust damages actions, including a practical guide on how to quantify antitrust harm, is available here.
Whistleblower tool
The Commission has set up by a tool to make it easier for individuals to alert it about anticompetitive behaviour while maintaining their anonymity. The tool protects whistleblowers’ anonymity through a specifically designed encrypted messaging system that allows two-way communications. The tool is accessible via this link.
More Information
More information on today’s decision will be available on the Commission’s competition website in the public case register under the case number AT.40632 once any confidentiality issues have been resolved.
Quote(s)
Prices for food differ between Member States. Trade over borders of Member States in the internal market can lower prices and increase the availability of products for consumers. This is especially important in times of high inflation. In today’s decision, we find that that Mondelēz illegally limited cross-border sales across the EU. Mondelez did so to maintain higher prices for its products to the detriment of consumers. We have therefore fined Mondelēz €337.5 million.
Margrethe Vestager, Executive Vice-President in charge of competition policy
Source – EU Commission
Remarks by Executive Vice-President Vestager on the adoption of an antitrust decision against Mondelēz for cross-border trade restrictions
Today, the Commission has finedMondelēz 337.5 million euros. We have done so because they have ben restricting the cross-border trade of chocolate, biscuits and coffee products in the European Union.
We find that Mondelēz illegally restricted retailers from sourcing these products from Member States where prices are lower. This allowed Mondelēz to maintain higher prices. This harmed consumers, who ended up paying more for chocolate, biscuits and coffee.
Mondelēz is one of the world’s largest producers of very well-known brands that many of us would buy on a daily basis. Just to name a few,Milka, Toblerone, Côte d’Or, Cadbury, Tuc, Lu, RitzandOreoare allMondelēz brands.
So this case is about the price of groceries. It is a key concern to European citizens, even more obvious in times of high inflation where many are living in cost-living crisis. It is also about the heart of the European project: the free movement of goods in the Single Market.
In the Single Market, traders can buy products in Member States where prices are lower and they sell them in Member States where prices are higher. By doing that, putting a pressure for prices to come down. This is called ‘parallel trade’. It increases competition, lowers prices and increases consumer choice.
EU citizens should benefit in this respect from the Single Market. They should be able to buy cheaper products when they can be sourced at a cheaper price from another Member State. They should be free to do so in supermarkets, when retailers import the cheaper product. And any company that hinders this freedom engages in illegal behavior and should be sanctioned accordingly.
We started looking at this case back in 2019. We carried out inspections at the premises of Mondelēz.
Our investigation showed that Mondelēz engaged in two different types of infringements.
First, Mondelēz entered into anticompetitive agreements to restrict the cross-border trade of its products. This is a breach of Article 101 of the Treaty.
Second, Mondelēz abused its dominance for chocolate tablets in certain national markets also to restrict imports. This is a breach of Article 102 of the Treaty.
Looking at the first infringement type. We find no less than 22 separate breaches of Article 101. These agreements pursued two main goals:
First Mondelēz entered into agreements with certain traders to determine the territories where they could sell Mondelēz’ products.
Why would it do that? Because, by restricting parallel trade, Mondelēz isolated national markets within the European Union from outside competition.
In this specific case, Mondelēz was selling a range of products at different prices in different Member States. It wanted to control where and to whom its products were resold by the traders.
In Member States where it charged higher prices, Mondelez ensured that prices remained high. To achieve this, Mondelēz agreed with traders on the territories where they would sell or not sell. There were eleven separate agreements concerning seven traders.
Second, Mondelēz blocked some exclusive distributors in certain Member States from selling Mondelēz’ products to customers located in other Member States. These distributors enjoyed an exclusivity to sell certain products in a given territory. But traders or retailers from other Member States are normally free to buy products from them. But Mondelēz prevented distributors from making such sales. Either by imposing contractual restrictions or by asking them to request permission on a case-by-case basis. Mondelez restricted eleven distributors in this way.
These are very serious restrictions of competition. They fragment the Single Market. They isolate national markets within it. And they prevent the free movement of goods across the European Union. This conduct harms consumers and deprives them from the benefits of the Single Market.
Moving now to the second infringement type: the abuse of dominance, which is a breach of Article 102 of the Treaty. We find two such abuses.
In one instance, Mondelēz took Côte d’Or tablets off the market in the Netherlands. It did so to prevent retailers from reselling them in Belgium, where Mondelēz sold many more Côte d’Or tablets at higher prices.
In another case, Mondelēz prevented a wholesaler from buying its chocolates in Germany, where they were cheaper, and resell them elsewhere in the European Union. Mondelēz refused to supply this wholesaler for four years. By doing so, Mondelēz prevented this wholesaler from putting pressure to lower its prices in several Member States.
Such abuses artificially partitioned the Single Market, and that has a negative impact on price and consumer choice in the EU.
Now, I also want to recognize Mondelēz’ cooperation in the investigation. We have a cooperation procedure in our toolbox, which requires companies to acknowledge the infringement and to cooperate. In exchange, companies obtain a reduction of the fine that they are to pay.
This procedure leads to considerable advantages in terms of speed and efficient resolution of cases.
So the Commission has decided to reduce Mondelēz’ fine by 15% in light of its cooperation.
This brings me to the level of the fine.
The infringements covered a large part of the European Union. They lasted between 2006 and 2020, except for coffee products which Mondelēz divested back in 2015.
We set the fine in view of the factors that we usually use. We considered the value of Mondelēz’ sales of the products concerned, the gravity of the infringement, the duration of the infringement and Mondelēz’ cooperation.
Finally, we also took account of the fact that this type of behaviour has already been sanctioned in the past. This is really not a novel case. We have a clear case practice. We have a track-record of fighting territorial restrictions. The fact that they are illegal and violate competition rules is well established and companies need to bedeterred from engaging in this type of illegal conduct.
Based on these elements, we decided to impose a fine of 337.5 million euros.
Today’s decision is another example of our efforts to deter companies from engaging in illegal behaviour that fragments the Single Market. We have taken decisions against the beer brewer AB InBev in 2019 and against Valve and video games makers in 2021.
We are determined to uphold the fundamental freedoms in the EU and to ensure that EU citizens have access to the biggest variety at the lowest prices that the market can offer.
The cost and quality of food is a core priority for European citizens. This case is also part of a broader effort to enforce competition rules in the food retail industry. This is a sector in which we have several ongoing investigations, such as the ones in food delivery services and in energy drinks.
Our sustained enforcement of competition rules in this sector is an important part of the effort to ensure that consumers have access to lower prices, especially in times of high inflation.
Thank you very much.
Source – EU Commission
EuroCommerce: Mondelez €337.5 million fine is a step forward for the Single Market
Today’s fine is the outcome of an extensive Commission investigation of Mondelez’s actions that clearly signals that practices by large manufacturers known as territorial supply constraints must end. The Commission concluded that Mondelez used illegal practices to prevent retailers from freely sourcing in the Single Market, to avoid price decreases in countries with higher prices.
Christel Delberghe, Director General of EuroCommerce, the association representing retailers and wholesalers, commented:
“Now is the time for the Commission to act beyond individual cases. Retailers and wholesalers have been hindered for far too long by the practices of large manufacturers who deny them the freedom to source products where they want to in the Single Market. In this case, Mondelez prevented suppliers from selling chocolate, biscuits and coffee to retailers and wholesalers as part of a deliberate strategy that meant they could not seek out the best deal across the EU. This, ultimately, means that at a time when household budgets are under immense strain, some EU consumers are paying more than their neighbours when they can least afford it.”
The investigation by the Commission concerns practices used by large manufacturers limiting which goods are made available for sale across the EU. These unfair practices can take the form of refusing to supply particular products from a specific branch to a retailer based in another country or limiting the number, range or languages used on packaging. This makes it difficult for retailers to go to the branch of a multinational supplier that may be offering a better price or a wider choice. A Commission study estimates that this costs consumers at least €14 billion across the EU.
Concluding, Christel Delberghe, added:
“This decision also comes on the eve of a discussion in the Competitiveness Council on the Future of the Single Market in Brussels. It is time for the Commission to act and stop large manufacturers from denying retailers and consumers the benefits of a truly #SingleMarket4All.”
Territorial supply constraints have been gaining attention across the EU, in addition to the Benelux countries that have long complained of the problem. Recently, the Czech Prime Minister highlighted the different prices with its neighbours and the Greek Prime Minister has called on the Commission to take action. Several member states are currently supporting a Dutch non-paper that calls on the Commission to prohibit unfair practices in territorial supply constraints that discriminate a retailer and wholesaler on the basis of their place of establishment through existing or new EU rules.
For more information, please see: It’s high time for the Single Market to benefit all – EuroCommerce
Source – EuroCommerce (via email)