This is an unprecedented fine in the retail sector in Portugal. The Competition Authority (AdC) imposed fines amounting to 304 million euros on six supermarket chains, two beverage suppliers and two individual executives. The offenses of indirect concertation on consumer prices are at stake.
The sentence handed down on Monday, referring to a note of illegality adopted in March 2019, is divided into two decisions. The first includes the supermarkets Modelo Continente, Pingo Doce, Auchan and Intermarché, as well as the supplier Sociedade Central de Cervejas (SCC). These fees also include an SCC administrator and a Modelo Continente business unit administrator.
In this case, the price alignment would have been in effect between 2008 and 2017 and included products “like the Sagres and Heineken beers, but also Bandida do Pomar and Água do Luso, including to bring them up gradually and gradually on the market. retail market ”.
The second decision concerns the same supermarkets (Modelo Continente, Pingo Doce, Auchan and Intermarché), to which Lidl and Cooplecnorte (responsible for E.Leclerc) are joining. 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 Famous Grouse or Grant’s whiskey, Hendrick’s gin or even Stolichnaya vodka “.
The practice lasted more than ten years, between 2007 and 2017, “and also aimed at the gradual and progressive increase in prices on the retail market”, concludes the AdC survey.
During surveys carried out with target companies, the AdC was able to locate e-mail exchanges which show the practice of price matching. The email exchanges also reveal that the companies were aware of the illegal practice, in addition to “inspecting stores that deviated from the practice, urging everyone to charge the same price.”
Modelo Continente sentenced to 121.9 million
Most of the fines go to Modelo Continente, which will have to pay 121.9 million euros. Then comes Pingo Doce, sentenced to 91 million euros. Auchan was fined 22 million and Intermarché more than 19 million.
According to the AdC, these are “single fines”, applied on a legal basis, because the companies “had already been convicted in the first decision”.
Lidl was also fined 10.5 million euros and E.Leclerc was fined two million euros. Among the suppliers, the largest fine was awarded to the Central Beer Society (SCC), amounting to 29.5 million euros, while Primedrinks was ordered to pay seven million euros. Among those targeted are also an administrator of SCC, sentenced to a fine of 16,000 euros, and an administrator of Modelo Continente, sentenced to 2,000 euros.
The fines are subject to appeal, which “does not suspend the execution of the fines”. The AdC explains that “companies can ask the Competition, Regulation and Supervision Tribunal to suspend the execution of decisions as long as they demonstrate that they cause considerable damage and provide an effective guarantee for their replacement. “.
The values are determined “by the volume of sales of the target companies in the relevant markets, during the years of practice, and cannot exceed 10% of the turnover of the company in the year preceding the decision.
The ADC stresses that “he imposed an immediate end to the practice, and it is not possible to exclude that the behaviors studied are still in progress”.
These are the first sentences adopted in Portugal concerning indirect retail pricing practices. In 2017, surveys “and recipients who represent a large part of the large retail distribution market, thus affecting the majority of the Portuguese population”, launched the AdC.
In this case, the illegality notices were adopted in March 2019, “with the possibility offered to the persons concerned to exercise their right to be heard and to defend themselves, which was duly assessed and taken into account in the final decision”.
The AdC also reveals that, during the investigation phase, “additional stages of proof required by the target companies were carried out, the results of which were also taken into account in the final decision”.
How the price match works
The practice in question is called hub and spoke and is classified by the AdC as “very serious” because it harms the consumer, “by depriving him of the choice of the best price”.
In this type of collusion, communication between supermarkets takes place indirectly, through the intermediary of the common supplier, who acts as an intermediary. “This is a practice in which distributors use the contacts they have with the common supplier to ensure, through this, that everyone has the same selling price to the public (PVP), in ensuring a general increase in PVP and avoiding direct contact to each other, as normally happens in a cartel, ”explains the entity led by Margarida Matos Rosa.
“With the use of a common supplier, the participating companies ensured the alignment of their selling prices with the public, restricting price competition between supermarkets and depriving consumers of differentiated prices”, underlines the AdC.
In this type of practice, “everyone involved benefits from the combination of the alignment and the price increases. Only consumers are harmed ”.
The competition says the convictions may not end there, as investigations in the retail industry continue. “AdC raided the premises of 44 entities during 2017, the results of which were incorporated into 16 administrative processes, including more than ten in this sector”.
So far, investigations have resulted in seven charges. In addition to supermarket chains and suppliers of alcoholic and non-alcoholic drinks, companies in the bread and packaged cakes sector and, more recently, personal care, beauty and cosmetic products have been notified.
In June 2020, AdC accused Modelo Continente, Pingo Doce and Auchan of using the commercial relationship with Bimbo Donuts to align selling prices to the public.
In July, a new indictment was issued, also against Modelo Continente, Pingo Doce and Auchan, and suppliers Sumol + Compal and Sogrape. This accusation also targeted Lidl, in the case of non-alcoholic drinks and juices, and Intermarché and E.Leclerc, in the case of alcoholic beverages. In addition to the companies, this indictment targeted, individually, two directors and one 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 agreeing consumer prices in supermarkets with alcoholic beverage supplier Marcas Activas.
And in December, those targeted were Modelo Continente, Pingo Doce and Auchan, as well as cosmetics and personal care supplier Beiersdorf.