Competition Authority condemns Lisbon Breadmakers' Association for information exchange on the pricing of bread for sale to the public

I. The Competition Authority's Ruling

Following an enquiry opened as a result of a complaint, the Competition Authority has found the Lisbon Breadmakers' Association (LBA) guilty of contravening Article 4 of Law No. 18/2003 of 11 June. More specifically, the LBA adopted a 'decision by an association of undertakings' for the purpose of preventing, restricting or distorting competition, by means of the exchange of information on prices. The CA has imposed a fine of € 1,177,429.30.

The Competition Authority ascertained that, between 2002 and 2005, the LBA operated a system for exchanging information with its associates on the pricing of bread sales to the public, in order to “directly or indirectly fix purchase or selling prices or interfere with their establishment by free market forces, thus causing them artificially either to rise or fallArt. 4 (1) a) of Law No. 18/2003 of 11 June. In setting the fine, in pursuance of the law applicable, the CA considered the aggregated turnover of the 14 associated undertakings that took part in the unlawful behaviour: this amounted to a total of € 17,661,442.87.

With this conduct, the LBA promoted distortion of the free operation of the market for bread sales to the final consumer. This represents a serious breach of the rules for the protection of competition in a basic sector, that of essential foodstuffs, that has merited the Competition Authority's particular attention In effect, according to the statistical indicators provided by the INE (National Institute of Statistics), it can be seen that, in the Foodstuffs and Non-Alcoholic Beverages category, the subgroup “bread and cereals” registered the highest rise in prices in the period covered by the Competition Authority's ruling against the LBA. Appeal against the Competition Authority's decision falls under the jurisdiction of Lisbon Commercial Court, in accordance with Article 50 (1) of Law No. 18/2003 of 11 June.

II. Explanation for enterprises, economic agents and consumers

For a better understanding of this matter, the Council of the Competition Authority has provided the following explanations:

  1. Independently of the form they take, decisions by associations of undertakings aimed at coordinating the competitive behaviour of their associates, especially when the object is to raise prices, is a competition offence, provided for by Article (4) (1) a) of Law No. 18/2003 of 11 June and punishable under that legislation with a fine not exceeding 10% of the aggregated annual turnover of the associated undertakings that have taken part in the unlawful behaviour;
  2. In accordance with the uniform legal practice of the Court of Justice of the European Communities a decision by an association of undertakings, independently of the form it takes, even if it is not binding on its members, is still a breach of Article 81 (1) of the Treaty of Rome – which corresponds to Article 4 (1) of Law No. 18/2003 of the 11 June – since it represents a faithful expression of the will of the association to coordinate its members' behaviour in the marketplace;
  3. Whenever the Competition Authority is unofficially informed, in a third party's complaint or by an undertaking or person involved in anti-competitive practices (in the latter case, under the system of immunity and exemption from fines), there is an investigation at the level of practices by associations of companies aimed at coordinating their members' behaviour, in particular with regard to incitement to raise or standardise prices, whether this occurs in the form of direct communications to associates or through advertisements or the taking of public positions;
  4. Law No. 39/2006 of 25 August sets forth the system of exemption from and special reductions in the fine in cases of administrative offences involving the breach of the competition rules. Under this legislation, an undertaking or person that informs the Competition Authority of an anti-competitive practice in which they have played a part or for which they may be held responsible, may obtain total exemption from payment of the fine (immunity), a reduction equal to or greater than 50% of the fine or a reduction in it of up to 50%. For more information on the system of exemption from or special reductions in fines, including the “Application form for exemption from or a special reduction in the fine under Law No. 39/2006 of 25 August”, please visit the Competition Authority's site at www.concorrencia.pt/DispensaCoima.asp.

      (Nº 21/2008)