Heineken and co pay high price for beer cartel

By Chris Mercer

- Last updated on GMT

Related tags European union Brewers

Heineken has landed the seventh largest fine ever handed out by EU
competition authorities, for a beer cartel it operated with other
brewers, including Grolsch and InBev.

What began with secret codes and clandestine meetings in hotels and bars more than 10 years ago, today ended in a record-breaking €219m fine for Heineken, the international brewing giant.

Never before has the European Commission hit a brewer so hard for breaching competition law, as Heineken did by operating a beer cartel in the Netherlands along with fellow brewers InBev, Grolsch and Bavaria.

Between at least 1996 and 1999 managers of these four "at the very highest levels" colluded on prices and price increases, the Commission said Wednesday.

InBev escaped a fine by effectively blowing the whistle on its cartel colleagues, but Grolsch and Bavaria were docked a combined €54m.

Heineken said it was "surprised" by the €219m fine, but added it would not affect organic growth targets for 2007.

The brewer, which could have been charged as much as €1bn under current EU law, said it intended to appeal the decision and claimed it did not co-ordinate prices with others.

It said off-trade food prices dropped in the Netherlands between 1996 and 1999, and that on-trade price rises were in line with the consumer price index.

Neelie Kroes, EU competition commissioner, gave a more damning account of the brewers' activities Wednesday morning.

"Instead of respecting the law, they instead tried to cover their tracks by holding their meetings in various hotels and restaurants and by using code names for the cartel meetings."

Commission inspectors raided the brewers' offices and it was InBev, Kroes said, which handed over decisive information on the cartel's activity.

A leniency rule within Europe's competition law means any firm engaged in a cartel can escape a fine by 'outing' its associates.

The fines are a sign the Commission is taking anti-competitive practices much more seriously.

In 2006, it imposed fines worth a record €1.8bn, a figure now already surpassed in 2007.

Kroes said : "My message to companies is clear - the European Commission will not tolerate cartels.

If you do take part in cartels you will face very substantial fines.

So don't be tempted to start."

New guidelines, set to be introduced soon, could see future fines rise even higher.

Repeat offenders could see their fines doubled, while firms could also be fined an "entry fee" for entering a cartel - likely to be between 15 and 25 per cent of annual sales for the relevant product.

Maximum fines would still not exceed 10 per cent of a company's annual global turnover, however.

Related topics Manufacturers Beer & cider Heineken

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