Germans are among the top three beer consumers in the world. Beer is big business in the country of the beer purity law. And so it is no surprise that Big Alcohol – the producers and retailers of alcohol (among others) – is highly active in Germany.
By now it is not surprising either that some of the activities of the alcohol industry are actually illegal. Big Alcohol does it again, according to findings of German authorities, exposing illegal price fixing.
Antitrust officials imposed fines of more than €90 million ($103 million) on some of Germany’s biggest retailers for illegally fixing beer prices in collaboration with the world’s largest beer brewer Anheuser-Busch InBev (AB InBev).
The officials said supermarket chains including REWE, Metro (MTTRY), NETTO and EDEKA colluded with the German subsidiary of ABInBev to increase prices several times for popular beers such as Beck’s, Franziskaner and Hasseröder.
3 Years of sustained illegal activities
AB InBev and the retailers had engaged in illegal activities of price arrangements over a three year period between 2006 and 2009. The idea of the agreement between the brewery Anheuser Busch InBev Germany Holding GmbH, Bremen (AB InBev) and retailers on shop prices for beer was to ensure that competitors would hike prices at the same time.
This long-term, coordinated and deliberate agreement effectively disabled the free market principle – so often invoked by Big Alcohol – that demand and supply are supposed to set the prices for their products.
Andreas Mundt, President of the Bundeskartellamt said in a press release:
In the sale of its premium beer brands the brewery concerned agreed with retailers on several occasions to raise shop prices and coordinated the details between them, in particular reference dates and the level of the respective price increase.
The retailers expected that the brewery would ensure that the price increase was simultaneously implemented by competing retailers. The ones suffering from such systematic price maintenance practices are the end consumers.”
The Federal Cartel Office’s (Bundeskartellamt) investigation into the beer cartel started in 2010 when authorities conducted a series of dawn raids at locations across Germany. The six-year investigation was one of the Bundeskartellamt’s most time-consuming fine proceedings and is now almost completed.
No fines imposed on AB InBev
The Federal Cartel Office informs that fines were imposed on the following companies:
- A. Kempf Getränkegroßhandel GmbH, Offenburg,
- EDEKA Handelsgesellschaft Minden-Hannover mbH, Minden,
- EDEKA Handelsgesellschaft Rhein-Ruhr mbH, Moers,
- EDEKA Handelsgesellschaft Südbayern mbH, Gaimersheim,
- EDEKA Handelsgesellschaft Südwest mbH, Offenburg,
- EDEKA Nordbayern-Sachsen-Thüringen GmbH, Rottendorf,
- METRO AG, Düsseldorf, and
- NETTO Marken-Discount AG & Co. KG, Maxhütte.
No fines were imposed on AB InBev and the retailer REWE Zentral, due to their “early and extensive cooperation” with the Bundeskartellamt in its investigations.
Illegal price arrangements seem to be common business method for Big Alcohol
Already in 2014, we analysed a case of illegal price arrangements among some of the biggest beer manufacturers in Germany. The Bundeskartellamt had imposed fines on beer brewers totalling more than €106 Million after it was able to prove the existence of price-fixing agreements between breweries, including AB InBev.
At the time, high-ranking top managers of the biggest beer producers were found guilty of price-fixing.
The intention of the price-fixing schemes was to increase the price of beer to the advantage of the biggest producers and to the disadvantage of the retailers, smaller brewers and consumers. One of the four main commercial priorities of AB InBev is the so-called “premiumization” – the move towards more expansive “premium” products, with which the company is targeting millennials. Beer companies, in fact, created the biggest cartel in German history, with a “who is who” (as one news article wrote) of Big Alcohol involved. Together they control about 50% of the German beer market.
Scandal exposes AB InBev hypocrisy, again
AB InBev has committed itself to invest over the next ten years $1 billion across their markets for dedicated social marketing campaigns to “influence social norms and individual behavior”. In 2015 alone “normalized profit attributable to equity holders was $8.5 billion”, according to AB InBev’s letter to shareholders.
What seems like a big investment on first glance, becomes a marketing move on second examination – especially in the light of such illegal activities that AB InBev repeatedly seems to engage in.
This scandal shows the hypocrisy of Big Alcohol: While AB InBev is boasting of “empowering consumers through choice” their unethical and repeatedly illegal business methods are exploiting and fooling the consumer.
The conclusion is clear: just a short time into the “Smart Drinking Goals” the carefully crafted image is falling apart and the move is exposed as another charade that doesn’t stand the test of time – not even measured against the alcohol industry’s own words, let alone against evidence-based public health and social development standards.