Dairy Industry faces milk crisis

The dairy sector continues to dominate the “high priority” list as the industry struggles with the current ‘milk crisis’.

Reports from the European Commission (EC) say that national competition authorities (NCAs) across the 27 EU member states have been giving special attention to raw milk sales after raw milk prices continue to increase since 2007.

Rocketing sales and instability has caused 21 antitrust NCA investigations in the dairy industry in the last eight years including buyer cartels and price-fixing cases.

During the last five years, the volatility of food commodity prices – such as for milk – has increased branding the situation with the name of ‘milk crisis’.

The EC said in its reports: “The milk sector has recently suffered from high volatility of prices on international markets. After prices had increased until they peaked in 2008, they fell even more, while input costs 9in particular feed and energy) continued to increase.

“Competition authorities have paid particular attention to raw milk procurement markets, thus at the level of milk processing. Several of the investigations in the sector concerned buyer cartels for purchases of raw milk. The behaviour of cooperatives vis-à-vis their members and their customers have also been investigated”.

Several examples have been investigated where raw milk buyers have colluded together including one point where the Greek NCA found out about the price lists being exchanged and discount policies about raw milk being co-ordinated amongst members of a buyer cartel.

Everywhere else, Bulgarian and Lithuanian cartels were exposed, finding that information on raw milk purchase quantities had been exchanged and agreements on purchasing prices had been made for the commodity. All firms involved were eventually fined.

The connections and relationships between farmers and co-operatives have been questioned under competition law.

NCAs everywhere have found out about cases where firms have executed strategies to exclude competitors from the retail sector.

Arla Foods, an dairy company, was fined by the Danish NCA six years ago when it emerged that the firm had paid a marketing contribution to a wholesale distributor in order to end a recent agreement with one of its rivals.

The report added: “They have investigated and imposed sanctions in respect of a large number of competition infringements in numerous markets and at all levels of the food supply chain and have ensured that mergers and acquisitions have not significantly impeded effective competition”.


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