Cartel agreement Billa/Julius Meinl

The Chairman of the Office for the Protection of Competition, Mr. Josef Bednář, has by its decision of 13 October 2003 imposed a total fine amounting to 51 million CZK on the companies BILLA (28 million CZK) and JULIUS MEINL (23 million CZK).

This amount represents the second largest fine effectively imposed by the Office so far.

“These companies infringed the Act on the Protection of Competition in years 2001 and 2002 by agreeing to co-ordinate and unify their purchase prices for goods and their commercial terms vis-à-vis their suppliers. This constitutes a price cartel that is generally considered as a particularly serious restriction of competition,” stated the Chairman of the Office for the Protection of Competition, Mr. Josef Bednář.

In case such agreements are concluded between horizontal competitors on the demand side of the market, their purchase terms in the area of prices are brought closer and unified. “In this way, the cartel participants cease to compete in their purchase prices for the goods and restrict thus the contractual freedom of their suppliers to negotiate the price on the basis of an individual relationship of demand and supply,” pointed out Mr. Bednář.

Within the framework of their co-operation, the companies BILLA and JULIUS MEINL exchanged information about their purchase prices and bonus and discount systems. Subsequently, they compared them and required the suppliers to accommodate their so far financial terms for the purchase of goods to the level of those of the other party to the proceeding, in case its terms were more advantageous, and furthermore required a financial compensation to balance any resulting differences. A requirement by both companies of another payment, a so called alliance bonus, was illegal as well and it was justified in fact only by the possibility to supply the same range of goods to both retail networks.

“In case the suppliers would not have agreed with these terms, they were facing a risk of termination of the contract from the side of the parties to the proceeding. At the same time, it is highly probable that such a risk of termination of supplies would have been rather significant for the supplier, taking into account the alternative sale possibilities for the goods in the market. The objective of the companies BILLA and JULIUS MEINL had been to achieve higher profits and enhance their competitiveness in the market. Nevertheless not by way of a fair competition but by means of conclusion of a prohibited agreement,” stressed the Chairman, Mr. Josef Bednář.

“By preventing the realisation of the price cartel agreement, the antimonopoly office has taken measures in favour of the final consumer, said the Chairman, Mr. Bednář. Even though the effects of this price agreement would not have been recognisable in the market in the short term, a reduction of choice of goods and increase in prices would not have been excluded from the long-term perspective. “The Office thus prevented any negative effect of this agreement on the consumer,” added the Chairman, Mr. Bednář. Apart from sanction and prohibition of the agreement, the parties to the proceeding were also ordered to remedy the situation. The companies BILLA and JULIUS MEINL are obliged to inform all their suppliers affected by this infringement within 30 days of the decision of the Office and to submit to the Office for the Protection of Competition the copies of these communications together with certificates of their delivery.

Press and Information Department