The Italian Competition Authority fines 26 pasta makers and two trade associations for price fixing agreements

06 May 2009

Claudia Crupi

Following a complaint lodged by a consumer association, on October 10, 2007 the Italian Competition Authority (AGCM) started an investigation under Article 81 into pasta trade associations “Unipi” (Unione Industriali Pastai Italiani) and “UnionAlimentari” (Unione Nazionale della Piccola e Media Industria Alimentare), in order to examine possible agreements to raise wholesale prices within the national market for the production and sale of pasta.

Following the investigations, it came to light that between 2006 and 2008 several pasta producers, with a combined share of over 90% of the national market, attended meetings relating to the raising of the price of pasta. This behaviour, combined with the contribution of Unipi, appeared to restrict competition on the national market for pasta, in breach of Article 81 of the EC Treaty.

Consequently, the AGCM, with Decision no. 19562 of February 25, 2009, fined 26 pasta makers and the trade association Unipi a total of EUR 12.5 million, considering the effects of these agreements on the prices of large retailers of pasta and, consequently, on prices applied to consumers, as well as on the level of involvement of each company in the cartel.

The defendant companies requested that Article 81(3) be applied even though the agreement between the pasta makers was a hard core restriction.  The AGCM considered that in this specific case the four cumulative requirements of Article 81(3) were not met.  In particular, the AGCM found that there was no improvement in the production and distribution of the product, since even the possible exclusion from the market of the smaller companies may be a natural effect of the implementation of competition mechanisms, which tend to reward the more competitive and efficient companies. Moreover, the AGCM held that consumers were better off with lower prices of pasta even if there was a lower quantity of products to choose from.

Finally, the AGCM noted that cartels are not justifiable, even in an economic downturn.  However, the fines were calculated taking into account the extraordinary increases in costs of raw materials and the difficult state of the industry.

Source: AGCM press release, 26 February 2009 at www.agcm.it