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This is an unprecedented fine in the retail sector in Portugal. The Competition Authority (AdC) imposed fines amounting to 304 million euros to six supermarket chains, two beverage providers and two individual managers. The crimes of indirect agreement of prices to the consumer are at stake.
The sentence issued this Monday, referring to a note of illegality adopted in March 2019, is divided into two decisions. The first includes the Modelo Continente, Pingo Doce, Auchan and Intermarché supermarkets, and the supplier Sociedade Central de Cervejas (SCC). This position also includes an SCC administrator and a business unit director at Modelo Continente.
In this case, the price alignment will have been in force between 2008 and 2017 and included products “such as Sagres and Heineken beers, but also Bandida do Pomar and Água do Luso, even to make them rise gradually and progressively in the retail market” .
The second decision affects the same supermarkets (Modelo Continente, Pingo Doce, Auchan and Intermarché), which are joined by Lidl and Cooplecnorte (responsible for E.Leclerc). Here, the target provider is Primedrinks. The prices of products “will have been fixed” such as the wines of the producer Esporão and Aveleda, the whiskeys The Famous Grouse or Grant’s, the Hendrick’s gin or even the Stolichnaya vodka “.
The practice lasted for more than ten years, between 2007 and 2017, “and also aimed at the gradual and progressive rise in prices in the retail market”, concludes AdC’s investigation.
In searches conducted on the target companies, AdC was able to find email exchanges showing the practice of price alignment. The email exchanges also reveal that the companies were aware of the illegal practice, as well as “monitoring stores that deviated from the practice, pushing for all to practice the same price.”
Continent model sentenced to 121.9 million
Most of the fines fall on Modelo Continente, which must pay 121.9 million euros. This is followed by Pingo Doce, sentenced to 91 million euros. Auchan was fined 22 million and Intermarché was ordered to pay more than 19 million.
According to the AdC, these are “unique bidding fines”, imposed on a legal basis, because the companies “had already been convicted in the first decision.”
Lidl was also sentenced to a fine of 10.5 million euros and E.Leclerc to two million euros. Among the suppliers, the highest fine was attributed to the Central Beer Society (SCC), amounting to 29.5 million euros, while Primedrinks was imposed the payment of seven million euros. Among those affected is also a Director of SCC, fined 16 thousand euros, and a Director of Modelo Continente, sentenced to two thousand euros.
The fines are subject to appeal, which “does not suspend the execution of the fines.” The AdC explains that “companies can request the Court of Competition, Regulation and Supervision to suspend the execution of decisions if they demonstrate that it causes considerable damage and provide an effective guarantee in its replacement.”
The amounts are determined “by the sales volume of the target companies in the affected markets, in the years of practice, and may not exceed 10% of the company’s turnover in the year prior to the decision.”
The AdC emphasizes that “it imposed an immediate cessation of the practice, since it is not possible to exclude that the investigated conducts are still ongoing.”
These are the first convictions adopted in Portugal regarding indirect retail prices. The investigations began in 2017 “and target groups that represent a large part of the large retail distribution market, thus affecting the majority of the Portuguese population,” says the AdC.
In this case, the notes of illegality were adopted in March 2019, “giving the recipients the opportunity to exercise their right to a hearing and defense, which was duly valued and considered in the final decision.”
The AdC also reveals that in the investigation phase “the complementary evidentiary procedures required by the target companies were carried out, the results of which were also considered in the final decision.”
How the price alignment worked
The practice in question is called a hub and radio, and the AdC classifies it as “very serious” because it harms consumers “by depriving them of the option at the best price.”
In this type of collusion, communication between supermarkets takes place indirectly, through the common supplier, who acts as an intermediary. This is a practice in which distributors use their contacts with the common supplier to ensure, through this, that all have the same retail price (RRP), guaranteeing a generalized increase in RRP and avoiding direct contacts with each other. , as it usually happens in a poster ”, explains the entity led by Margarida Matos Rosa.
“By using a common supplier, the participating companies ensured the alignment of their retail prices, thus restricting price competition between supermarkets and depriving consumers of differentiated prices,” says the AdC.
In this type of practice, “everyone involved benefits from the alignment and concerted price increases. Only the consumers are hurt.”
The competition says the convictions may not end there as investigations continue in the retail sector. The AdC carried out raids at the premises of 44 entities during 2017, the results of which were incorporated into 16 administrative procedures, more than a dozen of them in this sector ”.
So far, the investigations have resulted in seven charges. In addition to supermarket chains and suppliers of alcoholic and non-alcoholic beverages, companies in the packaged bread and cakes sector and, more recently, personal care, beauty and cosmetic products have been reported.
In June 2020, the AdC accused Modelo Continente, Pingo Doce, and Auchan of using the business relationship with Bimbo Donuts to align retail prices.
In July a new indictment was issued, also against Modelo Continente, Pingo Doce and Auchan, and the suppliers Sumol + Compal and Sogrape. That accusation was also directed at Lidl, in the case of non-alcoholic drinks and juices, as well as Intermarché and E.Leclerc, in the case of alcoholic beverages. In addition to the companies, this accusation was directed individually at two directors and a director of Sumol + Compal and Sogrape, as well as a director of one of the distributors.
In November, AdC accused Modelo Continente, Pingo Doce and Auchan of negotiating consumer prices in supermarkets with alcoholic beverage provider Active Brands.
And in December, the targets were Modelo Continente, Pingo Doce and Auchan, as well as the supplier of cosmetics and personal hygiene products Beiersdorf.
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