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It’s all bangers and cash

GERMANY: German sausage makers went to court last week to fight back against a record anti-trust fine for years of alleged price fixing in a sizzling scandal involving the nation’s favourite food.

crimeeconomicspoliticscorruption
By AFP

Sunday 31 December 2017, 05:00PM


This photo shows a reveller holding a sausage with mustard and ketchup in a piece of bread at a street party organized by the German government to mark the 25th anniversary of the Fall of the Berlin Wall in front of Brandenburg gate in Berlin. Photo: Odd Andersen / AFP

This photo shows a reveller holding a sausage with mustard and ketchup in a piece of bread at a street party organized by the German government to mark the 25th anniversary of the Fall of the Berlin Wall in front of Brandenburg gate in Berlin. Photo: Odd Andersen / AFP

The Federal Cartel Office slapped a 338 million euro (B13.09 billion) fine on a string of German sausage producers in 2014, accusing them of colluding for decades to squeeze higher prices out of meat lovers.

But the powerful industry hit back with many of the accused exploiting a legal loophole to escape the penalty, leaving just a small group of companies on the hook for a fraction of the bill.

Of the 22 firms and 33 individuals initially fined – including big name brands Herta and Boeklunder – just four sausage producers appeared in the Duesseldorf regional court to contest their share of the punishment – some 22.6mn euros (B878.73mn).

They are Heidemark Maesterkreis, Wiesenhof, Franz Wiltmann and Ruegenwalder Muehle as well as five company officials.

They deny accusations of belonging to a so-called “sausage cartel” and refuse to pay up.

Eleven other firms have accepted penalties to the tune of some 70mn euros (B2.72bn).

But the remaining companies made use of a legal sleight of hand and simply restructured to make nearly 240mn euros (B9.33bn)of the total bill disappear.

Under the loophole – dubbed the “sausage gap” – parent companies could not be held liable for the anti-trust fines of a subsidiary if that subsidiary ceased to exist.

The legal trickery ended earlier this year with a change in German competition law.

Wolfgang Ingold, the chief executive of Franz Wiltmann, told industry publication Lebensmittel Zeitung he had been advised to employ the same tactic.

“But we have nothing to hide and we want to see that confirmed by a court,” he was quoted as saying.

The legal action is not without risks.

In a worst-case scenario, the court could impose an even heftier fine if it believes the accused have been telling porkies.

The Duesseldorf court has scheduled hearings in the case until May.

The “sausage gap” loophole is expected to loom large over the proceedings, according to Rene Grafunder, a Berlin-based expert in competition law at Dentons law firm.

“It seems odd that small and medium-sized companies have to pay millions in fines, while their larger competitors get away without any punishment at all,” he told DPA news agency.

The “Wurstkartell” claims stunned Germans when they first came to light in a country known for its fondness of bratwurst.

Although consumption has fallen slightly in recent years, Germans still eat on average 60 kilograms of meat annually, with sausages and processed meats making up around half that figure – equivalent to a hot dog a day.

The cartel was nicknamed the “Atlantic group” after the Hamburg hotel where the first meeting was held to discuss pricing in the early 1980s, according to the FCO anti-trust watchdog.

Acting on an anonymous tip-off, the FCO found that the companies kept in regular touch and colluded to force German food retailers to pay higher prices for their pork and poultry products.

The “wurst” scandal capped a record year for the FCO, coming hot on the heels of 280-million-euro fine (B10.88bn) imposed on three large sugar producers for anti-competitive behaviour.

Also in 2014, more than 10 breweries were fined over 300mn euros (B11.66bn) for fixing beer prices.

 

 

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