Mondelez braces itself for heavy fine

An antitrust investigation by the European Commission threatens to cost Mondelez a lot of money: the confectionery manufacturer is setting aside 300 million euros and admits the final figure could be even much higher.

Settlement or fine?

In early 2019, searches took place at Mondelez offices in Austria, Belgium and Germany as part of an investigation into unfair trading practices. The multinational was suspected of price-fixing and so-called territorial supply constraints, a practice that international brand manufacturers use to prevent retailers from sourcing outside their own market, for example by limiting available volumes or adjusting packaging.

That investigation is now said to be drawing to a close, and Mondelez – which says it is cooperating with the European competition authority on the matter – is preparing for a possible settlement in the antitrust proceeding: the producer of Milka and Oreos has set aside 300 million euros for this purpose, according to the annual report accessed by Reuters news agency. The amount is based on its own estimates, but could be considerably higher, the company said. Indeed: instead of an agreement, a heavy fine could follow that amounts to up to 10 % of the company’s global turnover.

Abuse of power

The Mondelez case is not unique, although such proceedings and fines are rather rare. In 2019, AB InBev was fined 200 million euros because the brewer prevented Belgian retailers from importing cheaper Jupiler and Leffe beer from the Netherlands and France. The multinational limited the volumes available, changed the design and format of packaging and provided single-language product information. Distortion of competition and abuse of dominance, the European Commission concluded at the time.

Such territorial trade restrictions are a controversial tactic, which retailers say goes against the principles of the European single market. But manufacturers point out that price differences between European countries are mainly due to differences in legislation, excise duties and operating costs. Private label products also show significant price differences within the single market.