The European Commission, steadfast in its commitment to fostering fair competition, has found that Mondelēz International, Inc. (Mondelēz) has violated the EU competition rules. As a result, the company has been fined €337.5 million for impeding the cross-border trade of chocolate, biscuits, and coffee products between Member States. The Commission’s unwavering dedication to reducing unjustified barriers ensures the Single Market functions better. Supplier-imposed territorial supply constraints, a type of non-regulatory barrier, hinder the proper functioning of the Single Market.
Traders and retailers, driven by market forces, buy products where prices are low and sell them where prices are high, leading to lower prices in high-price countries. However, limiting this trade can harm consumers and reduce product variety.
In November 2019, the Commission, as the authority responsible for enforcing EU competition rules, conducted surprise inspections at Mondelēz premises in Austria, Belgium, and Germany as part of an investigation into suspected anticompetitive practices. These inspections were carried out to gather evidence and ensure a fair and thorough investigation. Formal proceedings began in January 2021. Article 101 of the TFEU bans anticompetitive agreements and practices that affect trade between Member States and restrict competition within the internal market. Article 102 of the TFEU prohibits the abuse of a dominant market position that can hinder trade within the EU and limit competition. The rules governing these provisions are outlined in Regulation No 1/2003.
In its ongoing investigation into suspected anticompetitive practices, the Commission has proposed discussions between suppliers, retailers, and consumers to address these issues.
“Prices for food differ between Member States. Trade over borders of Member States in the internal market can lower prices and increase the availability of products for consumers. This is especially important in times of high inflation. In today’s decision, we find that Mondelēz illegally limited cross-border sales across the EU. Mondelez did so to maintain higher prices for its products to the detriment of consumers,” Margrethe Vestager, Executive Vice-President in charge of competition policy, said.
A breach of EU competition rules
Mondelēz, which is based in the US, is one of the largest producers of chocolate and biscuit products in the world. The company’s well-known brands include Côte d’Or, Milka, Oreo, Ritz, Toblerone, and TUC, as well as coffee brands like HAG, Jacobs, and Velours Noir until 2015.
The European Commission’s investigation revealed that Mondelēz, as a dominant player in the market, violated EU competition rules by (i) participating in anticompetitive agreements or practices aimed at limiting cross-border trade of various chocolate, biscuit, and coffee products, and (ii) abusing its dominant position in national markets for chocolate tablet sales.
Specifically, the Commission found that Mondelēz was involved in twenty-two anticompetitive agreements or practices, breaching Article 101 of the Treaty on the Functioning of the European Union (‘TFEU’) between 2006 and 2020 across all EU markets. The company restricted the territories or customers to which seven wholesale customers (traders/”brokers”) could resell Mondelēz products, and also prevented ten exclusive distributors in certain Member States from responding to sale requests from customers in other Member States without prior permission from Mondelēz. This context highlights Mondelēz’s actions’ significance and their impact on the market.
In addition, the European Commission found that between 2015 and 2019, Mondelēz abused its dominant position, breaching Article 102 of the TFEU. The company refused to supply a broker in Germany to prevent the resale of chocolate tablet products in Austria, Belgium, Bulgaria, and Romania, where prices were higher. Mondelēz also stopped supplying chocolate tablet products in the Netherlands to prevent them from being imported into Belgium, where Mondelēz was selling these products at higher prices.
The Commission concluded that Mondelēz’s illegal practices prevented retailers from freely sourcing products in Member States with lower prices and artificially partitioned the internal market. Mondelēz aimed to prevent cross-border trade from leading to price decreases in countries with higher prices. These illegal practices allowed Mondelēz to continue charging more for its products, ultimately to the detriment of consumers in the EU. This violation not only harmed consumers but also distorted the market, undermining the principles of fair competition and the Single Market.
A €337.5 million fine
The Commission imposed a €337.5 million fine on Mondelēz based on the seriousness of the violations and Mondelēz’s sales related to them. The fine was calculated to reflect the extent of the harm caused by Mondelēz’s actions and to deter similar violations in the future. Mondelēz received a 15% reduction for cooperating and acknowledging its liability, demonstrating the Commission’s willingness to reward cooperation and encourage companies to take responsibility for their actions.
