Dawn raids in the German food sector

22 April 2010

Jarste Akkermann

Recently the German food industry and food retailers were hit by a wave of dawn raids initiated by the antitrust agency, the Federal Cartel Office. The antitrust agency suspected the companies of having entered into illegal price-fixing agreements. With aid from the police, the officers of the antitrust agency searched at one stroke the companies´ premises and seized data and files.

The antitrust agency follows indications of reconciled retail prices between companies selling brand-name products and the retail industry regarding sweets, coffee and pet food. Other product categories are under observation and have to expect dawn raids as well.  The Federal Cartel Office Proceedings has already instituted proceedings against several companies.

Vertical price-fixing agreements between producer and retailer regarding retail prices are unlawful as well as horizontal cartels pursuant to competition law. The prohibitions of competition law affect a wide scope of agreements and promotion activities. Especially discount campaigns and sales are likely to violate competition law. The producer often fixes the price for the discount or sale articles which the retailer then has to abide to. Or producers advertise a particular brand-name product including a give-away by using the claim “Now including/For free”. The retailer is consequently forced to sale the brand-name product for the regular price and may not raise the price – because the product contains an add-on – without the claim becoming a misleading advertisement.

In December 2009 the Federal Cartel Office had already imposed fines against well-known coffee roasting companies like Dallmayr, Tchibo and Melitta because of illegal price-fixing agreements. Companies have the option to cooperate with the antitrust agency in order to reduce the fine.

This increased activity in dawn raids also mirrors the change in lead of the Federal Cartel Office. Since the beginning of 2010 Mr Andreas Mundt has taken his seat as new president of the highest German antitrust agency. He represents the stricter approach of the Federal Ministry of Economics and Technology regarding suspected cartel agreements in the industry. Therefore, further dawn raids in the food industry have to be expected. Anti-corruption in general has become the focus of antitrust agencies.

Companies, especially in the food sector, need to set up an internal procedure of how to deal with dawn raids. This can usually be part of a general compliance strategy. Staff members should be instructed regarding the extent of their obligation to cooperate when the antitrust agency and police arrive to search the premises. Preparations can also be made concerning data and files, especially if it involves communication with external law firms.