PASTA: ANTITRUST AUTHORITY FINES MANUFACTURERS AND INDUSTRY ASSOCIATIONS OVER ANTI-COMPETITIVE ARRANGEMENTS

The fines, totalling Euro 12,496,333, were determined taking into account the extraordinary increases in the cost of raw materials and the difficult state of the industry. An evaluation was made on a case-by-case of basis of the specific role played by each company in the setting up of the arrangements, any moves made to restrict price increases and operating losses made in the last three years.

The Italian Competition Authority, at its meeting on 25 February 2009, decided that the companies Amato, Barilla, Colussi, De Cecco, Divella, Garofalo, Nestlé, Rummo, Zara, Berruto, Delverde, Granoro, Riscossa, Tandoi, Cellino, Chirico, De Matteis, Di Martino, Fabianelli, Ferrara, Liguori, Mennucci, Russo, La Molisana, Tamma and Valdigrano, together with Unipi, Unione Industriale Pastai Italiani [the Italian Pasta Manufacturers Association], had set up an anti-competitive arrangement with the aim of agreeing price increases for dry pasta  products to be passed on to distributors; this conduct was punished with fines totalling Euro 12,495,333. For various reasons the companies Gazzola, Mantovanelle and Felicetti, which were also under investigation, were deemed not to have been part of the arrangement.

The manufacturers fined represent the overwhelming majority of the national market for pasta (approximately 90%) and Unipi is the most representative industry association.

The Authority also imposed a fine of Euro 1000 over the conduct of Unionalimentari [Unione Nazionale della Piccola e Media Industria Alimentare, or National Association of Small and Medium Food Manufacturers] which, in its role as business association, sent out a circular letter of its own encouraging members to apply uniform price increases.

In determining the base amount of the fines, the Authority made ample allowance for the economic situation of the pasta industry and considered the exceptional increases in the cost of raw materials as well as the overall progressive worsening of the economic performance of companies in the industry.

These two arrangements involved practically the entire pasta manufacturing industry and clearly affected the market in terms of average price increases to supermarket chains and consequently the end prices applied by the retail trade to consumers.

Specifically, the arrangement set up by Unipi and the 26 manufacturers lasted from October 2006 until at least 1 March 2008. Between May 2006 and May 2008, the price of pasta paid by retailers underwent an average increase of 51.8%; most of this increase was passed on to consumers, given that the retail price grew over the same period by 36%.

ARRANGEMENT AMONGST THE 26 MANUFACTURERS AND UNIPI

The arrangement, between October 2006 and at least 1 March 2008, was marked by various kinds of conduct; these included taking part in meetings at Unipi which assisted in setting up the anti-competitive agreement by advising the pasta industry, customers and the public as to the increases agreed upon. Once the increases to be charged to retailers were set, each company, based on those figures and its own market positioning and cost structure, decided its own pricing policies. In its investigation, then, the Antitrust Authority did not contest the need for individual companies to apply price increases autonomously, given higher raw material prices, but the joint decision and the anti-competitive method used to arrive at those increases.

In the Antitrust Authority's view, the copious documentation gathered during the course of the investigation unequivocally showed that the companies colluded on a concerted strategy of price increases. This allowed smaller companies with higher production costs (because of reduced economies of scale) to increase their prices: the retail chains, faced with generalized increases, were forced to accept the new price lists. For their part, the larger companies, not wanting to be the only ones to raise prices, avoided the risk of losing significant market share.

The investigation found that some companies (Amato, Barilla, Divella, Garofalo, Rummo and Zara) also had a key role in coordinating the arrangement: they operated in close collaboration with Unipi through restricted meetings to monitor the progress of the price lists and to check how the arrangement was holding up.

UNIONALIMENTARI'S ARRANGEMENT

On 31 August 2007, Unionalimentari sent out a report of its own aimed at steering members toward a uniform increase in prices. In a market in which over 100 companies operate, this provided a clear point of reference for price increases.

AGGRAVATING AND MITIGATING CIRCUMSTANCES IN THE CALCULATION OF THE FINES