GLASSMAKERS FOR THE FOOD INDUSTRY (Conclusion of the Investigation)
PRESS RELEASE
The Italian Competition Authority concluded its proceedings initiated against Avir, Vetrerie Italiane-Vetri, Bormioli and Zignago Vetro, the main glassmakers in the national market, and held their conduct violated the Competition Act.
The Authority imposed on the parties above a fine equal to 3 per cent of the sales of glass containers for food storage (bottles and bowls). Fines amounted to 19,22 billion lire for Avir, 12,41 billion lire for Vetri, 3,33 billion lire for Bormioli and 3,09 billion lire for Zignago Vetro.
The investigation originated from the decision of such four parties to impose, starting from January 1st, 1996, on their clients - which are food manufacturers producing beer, wine, sparkling wine, spirits, jam, etc. - a new mechanism for attributing to them the costs of packages used to deliver glass containers.
The Authority ascertained that the agreement on packages was only one of the coordination mechanisms designed by the parties with respect to information exchange and price setting.
The Authority found that since 1993 Avir, Vetri, Bormioli and Zignago Vetro have been changing their respective competitive behavior to ensure the stability of the market of glass containers for food storage. In fact, the parties intended to prevent the price war occurred in 1992 and 1993 and to earn profit by preserving the achieved equilibrium (starting from 1993, the glassmakers have recorded an appreciable profit increase).
In this framework, a mechanism for exchanging information monthly was designed, through Assovetro (National Association of Glassmakers), to allow the glassmakers to know about competitors' production, sales and market shares.
The monthly contacts between the glassmakers since 1993, also in virtue of their membership to Assovetro, constituted a further important element to appraise the agreement. From the analysis of the topics discussed during such meetings, it emerged that price increase and gradual alignment, as well as the worsening of the other contractual conditions (including agreements on packages) were the result of an illegal concerted behavior pursued deliberately by the glassmakers over the years.
The seriousness of such violations was also to be related to the oligopolistic structure of the glass industry in which customers had few supply options.
The kind of the products concerned, furthermore, strengthened the dependence of the food industry on the glassmakers. Indeed, products as wine, beer or olive oil had to be stored into glass bottles necessarily, given the huge production quantities, which could not be freely canned, or packed in plastic or cardboard containers.
End users were also damaged by violations of the Competition Act by the glassmakers. The cost of glass containers, in fact, affects heavily the overall production costs: it can come to or exceed half of industrial costs, with respect to the value of the packed food. For example, it is equal to 46 % of industrial costs for beer and to 61 % for mineral water. Therefore the increase in glass price can have a negative effect also on customer prices.
The Authority ruled that the parties'behavior was a serious restriction of competition, by affecting the functioning of the market concerned to the detriment of customers. As such, Avir, Vetri, Bormioli and Zignago were ordered to pay fines, whose entity depended on their sizes and market shares, as well as the seriousness and duration of infringements.