EU hits Cadbury & Oreo-maker Mondelez with $366 mn fine for market rigging

Mondelez has been accused of hindering the cross-border trade of chocolate, biscuits, and coffee products within the European Union

Mondelez International, the maker of Oreo and Cadbury Dairy Milk chocolate, has been fined 337.5 million Euros ($366 million) by the European Commission for hindering the cross-border trade of chocolate, biscuits, and coffee products within the EU. This action breaches EU competition rules aimed at ensuring a better functioning Single Market by removing unjustified barriers.

Illegal practices to maintain higher prices

Margrethe Vestager, the EU’s competition chief, stated that Mondelez had illegally limited cross-border sales to maintain higher prices. “This case is about the price of groceries. It’s a key concern to European citizens, especially in times of very high inflation and cost-of-living crises,” she said during a press conference.

The European Commission’s investigation, which began in 2019 and led to a formal investigation in 2021, revealed that the US multinational food and confectionery company abused its dominant position in certain national markets. The company restricted supplies to prevent lower-priced products from entering higher-priced markets. For example, Mondelez ceased supplying chocolate bars in the Netherlands to prevent them from being imported into Belgium.

Details of infringement by Mondelez

In a release, the EU commission outlined the specific violations by Mondelez, which include:
 

1) Territorial and customer restrictions: Mondelez limited the territories or customers to which seven wholesale customers (traders/brokers) could resell its products. One agreement even required higher prices for exports compared to domestic sales. These practices occurred between 2012 and 2019, affecting all EU markets.

2) Exclusive distributors: Mondelez prevented ten exclusive distributors in certain Member States from responding to sales requests from other Member States without prior permission. These agreements spanned from 2006 to 2020 and impacted all EU markets.

3) Supply refusals: Between 2015 and 2019, Mondelez refused to supply a broker in Germany to prevent the resale of chocolate tablets in Austria, Belgium, Bulgaria, and Romania, where prices were higher.

4) Supply cessations: Mondelez ceased supplying chocolate tablets in the Netherlands to prevent their import into Belgium, where the company sold these products at higher prices.

These violate EU’s ‘Anticompetitive Agreements’ and ‘Abuse of Dominant Position’ articles.

Impact on retailers and response from Mondelez

The commission concluded that Mondelez’s practices hindered retailers from sourcing products freely from EU member states with lower prices.

A spokesperson for Mondelez International responded, stating that the incidents were isolated and had mostly been addressed before the commission’s investigation. The company emphasised its strong culture of compliance and noted that it had made an accrual for the fine last year, meaning no further financial measures would be necessary.

In the quarter ending March 31, 2024, Mondelez reported $4,750 million in gross profit, with a gross profit margin rising to 51.1 per cent, primarily due to favourable changes in mark-to-market impacts from derivatives and higher adjusted gross profit margins. Net revenue of the company stood at $9,290 million for the quarter.