European Commission Opens Investigation Into Mondelēz for Alleged Cross-Border Trade Restrictions

If the average person were asked, “What’s the first word that comes into your mind when you think of chocolate and cookies?”, the answer might be “sweet.”  The tenor of competition in the global snack food market, however, is anything but sweet.  The confectionery industry, for example, is not highly concentrated, with a small handful of global companies holding the dominant market share but many hundreds of other manufacturers in the United States, the United Kingdom, and Europe.   Even in competitive industries, however, there may be times in which a leading firm may prefer bridled to unbridled competition.

On January 28, the European Commission (EC) announced that it has opened a formal antitrust investigation into the global snack producer Mondelēz International.  The investigation is to “assess whether Mondelēz has restricted competition in a range of national markets for chocolate, biscuits and coffee by hindering the cross-border trade of these products between EU Member States, which would be in breach of EU antitrust rules.”

The Commission expressed concern “that Mondelēz may have restricted the so-called ‘parallel trade’ of its chocolates, biscuits and coffee between EU Member States through agreements and unilateral practices.”  In particular, it stated that it “will investigate certain potentially anti-competitive practices by Mondelēz including:

  • “Possible limitations of the sales territories within the EU through agreements that determine in which Member State a trader can or cannot sell the products, or that restrict passive sales;
  • “Possible curtailing of parallel trade through agreements that raise prices or limit volumes specifically for customers that trade the products across Member States;
  • “Possible agreements with customers not to engage in parallel trade or not to procure products from parallel trade, inter alia, in exchange for payments or other forms of compensation;
  • “Possible restrictions on the languages used on packaging either unilaterally or through agreements with traders, thereby creating friction on sales to certain other EU Member States;
  • “Possibly refusing to supply certain traders with a view to restricting imports into certain markets.”

The EC noted that its investigation stemmed from “repeatedly voiced” concerns by European Union (EU) citizens, EU Member States’ competition authorities and the European Parliament “that prices for common food and drink products can significantly vary between EU Member States including between neighbouring Member States” as well as allegations “that operators raise obstacles to trade from Member States where products are cheaper to Member States where products are more expensive (so-called parallel trade).”  The EC evidently augmented these reports with a number of what it termed “unannounced inspections at the premises of Mondelēz in November 2019.”

In light of Mondelēz’s prominence in the global snack industry, the EC investigation will bear close watching this year.  As the EC made clear in this case, “no legal deadline for bringing an antitrust investigation to an end. The duration of an investigation depends on a number of factors, including the complexity of the case, the cooperation of the undertaking with the Commission and the exercise of the rights of defence.”

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