Heineken Face EU Fines for Curbing Rivalry

transnationale.org tech at transnationale.org
Tue Mar 12 05:22:39 GMT 2002

Heineken NV and Carlsberg A/S may be fined after the European Commission charged that they conspired to curb competition in the Dutch and Danish beer markets from 1993 to 1996. 

The European Union's antitrust regulator said evidence collected in raids two years ago showed the two brewers broke EU law by agreeing not to sell ``intensively'' in each other's territory. The companies denied the allegations. 

Competition Commissioner Mario Monti is cracking down on price fixing in industries from vitamins to papermaking. He took on Europe's beer industry last year with a 47 million euro ($41 million) fine against Interbrew SA, the Belgian maker of Stella Artois. 

``We wouldn't be surprised if there were a fine on Heineken of about 60 million euros and 40 million euros on Carlsberg,'' said Gerard Rijk, an analyst at ING Barings with a ``sell'' rating on Heineken and ``hold'' on Carlsberg. 

Shares in Carlsberg dropped as much as 13 kroner, or 3.7 percent, to 340. Heineken shares fell as much as 39 cents, or 0.8 percent, to 46.7 euros. 

Cartel Penalties 

``Although the alleged infringement appears to have been terminated, the commission treats this kind of behavior very seriously because market sharing is amongst the most blatant forms of anticompetitive practice,'' the commission said. 

Companies involved in cartels in Europe face fines as high as 10 percent of annual sales. The leveling of formal charges does not make fines a certainty, the commission said. The companies have a right to see the evidence and dispute the charges in a hearing. 

Monti handed down a record 2 billion euros in fines in 2001, including a 462 million-euro penalty against Roche Holding AG -- the largest ever against a single company. That figure equaled about 2.4 percent of sales. 

Heineken, the third-largest brewer, had revenue of 7.9 billion euros in 2001. Carlsberg, the No. 5, had revenue of 34.5 billion kroner ($4 billion). 

``The commission bases the case on a few contacts between Carlsberg's and Heineken's former chief executives,'' Carlsberg said in a statement distributed by the Copenhagen Stock Exchange. ``In our opinion such contacts were courtesy relations and ordinary business discussions.'' 

Two Markets 

Carlsberg beer has been sold on the Dutch market since 1966 and Tuborg since 1982. In Denmark, Carlsberg's home market, the brewer has a market share of about 70 percent. 

``Heineken doesn't share the European Commission's opinion and will study this case further and prepare its defense,'' the company said in a statement distributed by Euronext Amsterdam. 

Heineken is also being investigated for its operations in France, following raids carried out on the company's Paris offices in January 2000, the commission said. It has yet to decide on whether to issue formal charges in the case, which includes French brewer Kronenbourg SA. 

The arrival of euro paper money and coins in 12 European countries in January is raising consumers' awareness of national price differences on products from toothpaste and cosmetics to washing machines and cars. 

Euro Pricing 

While Denmark is one of the three EU countries not using the currency, it keeps the krone closely aligned with it. Eighty-six percent of Europeans expect to use the currency to make cross- border price comparisons easier, an EU poll found yesterday. 

Last year's penalty against Interbrew, the world's No. 2 brewer, came along with fines on three smaller Belgian brewers and three in Luxembourg. The EU antitrust authority has also raided the offices of Royal Grolsch NV of the Netherlands and Birra Peroni of Italy. 

Probes of brewers in France, the Netherlands and Portugal are continuing, the commission said without naming the companies. 

Unlike in the U.S., there are no provisions under EU law for victims of a cartel to obtain damages, or for the perpetrators to face criminal proceedings. 
(Bloomberg, 1/3/2002)


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