Disapproval of a concentration on the sugar market

The Chairman of the Office for the Protection of Competition (hereinafter “the Office”), Mr. Josef Bednář, approved by its decision of 25 August 2003, in the course of appellate procedure, the first-stage decision, which disapproved the concentration of German company Sūdzucker and French company Saint Louise Sucre.

The appeal against the first-stage decision, which was rejected by the Chairman of the Office, had been filed by both above-mentioned companies.

After examination of all facts the Chairman of the Office came to the conclusion that in case of approval of the concentration the newly established entity would have acquired such economic and financial power that would have enabled it to act in significant extent independently on other undertakings and consumers. That could then have resulted in significant restriction of competition on the market with sugar in the Czech Republic.

The Chairman of the Office in its decision considered possible impact on final consumer, because the strong position of the newly established entity could have resulted in significant increase in price of sugar. It follows from the realised analysis that in case of average yearly consumption of sugar by a four member family (145 kilos), realisation of the concentration and increase in prices by approximately 20% (i.e. up to CZK 4 per 1 kilo) would have made the family to pay approximately CZK 600 more for sugar per year.

“It was necessary to regard all the decisive criteria in assessing the application for approval of the concentration of undertakings. That means significant increase in market power by establishment of the concentrated entity, barriers to entry of potential competitors to the Czech market, strong position of the concentrating undertakings in neighbouring regions, which enables them to import sugar to the Czech Republic. We have of course considered also the possible impacts on final consumers, consisting in increase of families´ expenses for purchase of sugar or foodstuffs containing sugar”, said the Chairman of the Office, Mr. Josef Bednář.

The Chairman of the Office, Mr. Josef Bednář reminded that the proposed concentration would have substantially worsened the structure of the market, which is despite the regulatory government measures potentially competitive. The detected threat of market structure´s worsening was amplified by the continuing trend of closing the sugar refineries with low processing capacity. At the same time, accession of new sugar refineries to the market can be only hardly expected.

Press and information department