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• France: The Autorité de la concurrence fines French and German Millers for several anticompetitive Practices foreclosing French Packaged Flour Market On 13 March 2012, the Autorité de la concurrence (the Autorité) established the existence of a cartel between French and German millers whereby producers from both countries limited access and exports to each other’s markets. This finding of infringement resulted in an overall fine of € 95 500 000 imposed on five French and eight German millers.

The Autorité also found that the majority of French millers were grouped together within two joint-ventures, France Farine and Bach Mülhe, whose object was the fixing of prices and the allocation of customers in the marketing process of flour packets to food retailers and hard-discount operators. This finding in turn led to the imposition of a total of € 146 900 000 fine on seven millers.

The Franco-German cartel was uncovered following a leniency application by a German miller, Wilh. Werhahn GmbH in March 2008, which led the Autorité to open an investigation into the flour milling sector. Further evidence of the cartel was gathered through unannounced inspections carried out in France as well as in Germany – valuable documents and pieces of evidence were communicated by the Bundeskartellamt to the Autorité in the course of the investigation pursuant to Article 12(2) of Regulation 1/2003.

It transpired from the investigation that the details and workings arrangements of the Franco-German cartel had been brokered during twelve consecutive meetings which spanned from 2002 to 2008. The French and German millers had on these occasions decided on a “non-compete agreement” aimed at maintaining the respective German and French exports of packaged flour at a level not exceeding 15 000 tons. This agreement was combined with an occasional smoothing mechanism of prices of German imports – which tend to be cheaper – along commonly established principles in order to meet in practice an agreed quota. Finally, beyond the allocation of markets between France and Germany the cartel also provided, in certain instances, for the allocation of customers, in the context of the submission of bids in tenders organised by hard-discount operators.

The cartel thus impeded the integration of the French and German packaged flour markets. It has particularly harmed consumers in France, where prices are higher and price-elasticity is relatively low in the absence of a substitute product.

The second infringement related to agreements between the French millers on the marketing of their packaged flour production to food retailers and hard-discount operators. These agreements were carried out through two joint-ventures, France Farine and Bach Mülhe, which were set up, respectively, in 1965 and 1971.

Decisional practice on horizontal commercialisation agreements is relatively scarce. The Autorité’s decision illustrates the distinction between, on the one hand, legitimate agreements which induce efficiency gains and contribute to the rationalization of the final segments of the value chain and, on the other hand, illegal agreements, such as those in the case at hand, which support price-fixing and customer-allocation amongst competitors.

The Autorité found that France Farine marketed the packaged flour produced by its shareholders to food retailers, applying a single selling price that had been previously jointly set, i.e., a single price for products sold under the “Francine” brand name, and a single price for products sold under private labels or under “low price” brands.

Once the commercial negotiation with its food retailer customers was concluded, France Farine allocated customer orders on the basis of a criterion based on location: France Farine sent each order to the miller that was the “closest to the ordering customer site”.

In the same way, the Autorité considered that Bach Mülhe’s organization and functioning enabled its shareholders to offer a single selling price for packaged flour sold to hard-discounters, to apply a uniform commercial policy and to share customers and outputs among themselves.

The combination of the aforementioned practices meant that the restrictions on competition existed across the board on all segments of the packaged flour sector, i.e., national brands and private labels, low price and hard-discount brands.

See press release of 13 March 2012 (in English)