French Flour Fines

The Autorite de la Concurrence, the French competition watchdog, has fined 14 French and German flour millers a total of €242 million for anticompetitive practices in the flour retail market. 

There were two aspects to the unlawful arrangements.

French and German millers conspired together to limit cross-border sales of packaged flour to the retail market between 2002 and 2008.  French suppliers are generally less efficient than their German counterparts, and so benefitted from keeping German imports out.  German suppliers were able to maintain super-margins in the domestic market by keeping French imports at bay. 

In addition, a number of the millers were members of cooperative production alliances, France Farine and Bach Muehle. The cooperatives also handled retail sales to supermarkets and discount markets in France for their members, and the mills were thereby found to have coordinated prices unlawfully:  “the real goal of France Farine and Bach Muehle was to fix the price of flour and divide clients between the different millers.”

The Autorite noted that in 2009, the year following the start of the investigation, imports of packaged flour from Germany to France jumped from 15,000 tons to 90,000 tons.

Regulators in Germany, Belgium and The Netherlands are believed to be investigating the behaviour of local flour mills and an investigation into supplies to commercial bakeries by the same millers, remains ongoing in France.

Comment

This investigation kicked off as a result of whistle-blowing by Wilh. Werhahn KG, Germany's second biggest milling group.  It secured immunity from fines.  

This often has a domino effect.  Companies active in neighbouring countries and related product markets are (sensibly) often prompted to carry out an audit of their own activities and may rush for immunity or leniency if they have been engaged in any questionable activities.  In addition, regulators are encouraged to go for quick wins on the basis that they may have easy access to evidence of wrongdoing, including from nervous cartelists. 

The decision also reaffirms the importance of understanding what is and is not permitted under the auspices of cooperatives and trade associations.

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