Producers committed cartel conduct in effort to influence the prices of chickens

The Office for the Protection of Competition (the Office) by its first-instance decision which has not come into the force imposed sanction in total amount of 14.208 million CZK on seven poultry-producers for prohibited cartel agreement.

Competitors AGRODRUŽSTVO JEVIŠOVICE, Collective farm PETŘÍN, Collective farm “Roštýn”, ZEVA CHLÍSTOVEC Inc., SUŠÁRNA POHOŘELICE Ltd., AGROPRODUCT Ltd. and KARLOV Inc. on 13 December 2006 agreed in Jevišovice on common strategy in setting the sales prices of slaughter chickens valid from 1 January 2007. The objective was to reach price level of minimum 20,- CZK for 1 kg live weight in I. quality class mainly in dealing with the most important customer Kostelecké Uzeniny Ltd. Companies mentioned above agreed simultaneously on joint conduct and participation on negotiations on increase of slaughter chicken prices with aforementioned customer on 14 December 2006 and successfully acted upon this strategy.

The Office has claimed that through the realized agreement the parties to the proceeding have precluded the risk of market competition, when single competitor has no information about intended behavior of its rival. Nevertheless it is completely natural for market competition that competitors are obliged to accept harsh bargain from time to time account on further functioning on relevant market and not even longtime inadvisability of competition participation does not justify anticompetitive conduct of subjects which are in mutual competitor position. Such behavior cannot be justified not even by the means of circumstances influencing the slaughter poultry production (e.g. aviary influenza, energy costs growth) linked with cost of production or other competitors´ market behavior. Such joint behavior of mutual competitors should be evaluated as anticompetitive because every competitor should be acting separately and bear the resulting risk of such acting.

The parties to the proceeding must have known that their behavior was eligible to influence the chicken price level which did subsequently happen (also retail poultry price subsequently increased). Statement signed in Jevišovice is - in addition to mentioned above - explicit manifestation of will to coordinate slaughter poultry sales price towards the common customer. In this case such a major anticompetitive infringement is concerned that the Office has decided to impose a fine upon above mentioned companies even with regard to their unfavorable economic results in year 2006 in area of broiler breeding. During the assessment of the amount of the fine the Office took account of companies turnover. The highest sanction were imposed on companies which had initiatory role in the cartel. These were AGRODRUŽSTVO JEVIŠOVICE and SUŠÁRNA POHOŘELICE ltd.

Amount of the sanctions per single company:

AGRODRUŽTVO JEVIŠOVICE – 8,248,000,- CZK

Collective farm PETŘÍN – 590,000,- CZK

Collective farm “Roštýn” – 469,000,- CZK

ZEVA CHLÍSTOVEC Inc. – 343,000,- CZK

SUŠÁRNA POHOŘELICE Ltd. – 3,528,000,- CZK

AGROPRODUCT Ltd. – 434,000,- CZK

KARLOV Inc. – 596,000,-

The Office has not considered the agricultural primary industry for the first time. Example of this is a cartel of poultry companies in 1999. Poultry company Libuš, Intergal Vrchovina, Moravskoslezské drůběžářské závody PROMT and Jihočeská drůbež  conducted concerted action during the bargaining for the frozen chickens supplies prices for store chains.

External Relations Department