Have you been overpaying for beer?

AB-InBev
The European Commission (@EU_Competition) is investigating AB InBev (the company behind Budwiser, Corona and Stella Artois) for a potential abuse of dominance. According to the EU competition enforcer, the beer giant designed a strategy to prevent supermarkets from selling their beers to supermarkets in other EU member states.

 

EU-tradeEuropean competition laws try to make sure companies compete fairly in the European Union. Being one of the main provisions of the ‘constitution’ of the EU, these laws clearly seek to ensure that the Union’s core project – the creation of a single, unified market – is facilitated by these competition provisions. For this reason, EU competition law prohibits practices that can hinder the operation of the European single market. The clearest example of such practice is blocking parallel importing.

The EU single market cannot be magically created. Companies need to expand to neighbouring Member States and trade must freely flow between countries. A common practice by companies that sell in different countries is to make use of domestic distributors. Take AB InBev for example. They export their beer in your country, then a distributor deals with the stock, transports it to supermarkets and there it is sold to you. During this process, the producer (AB InBev in this occasion) sets an export price, the distributor sets a higher price, and the supermarket sets an even higher price. So, for example, the price of a Corona might be €1 when it arrives in your country but €4 when it’s sold in your local shop.

Price

These cost differences create a window of opportunity for distributors and supermarkets. Let’s say that the price of Corona in the Netherlands is €2.50. If Corona is sold in Belgium for €3.50, Dutch supermarkets can just export their excess stock to Belgian supermarkets. This practice is called parallel trading and it can lower the prices of goods for the benefit of European citizens everywhere. What companies, like AB InBev, tend to do to make sure that they are in control of prices in each country, is to design strategies to make it difficult for supermarkets to do parallel trading. According to the Commission, AB InBev did exactly that.

Parallel-trade

The case concerned the trade of beers in France, Belgium and the Netherlands. French and Dutch supermarkets sold their beers to Belgian supermarkets. According to the
press release, AB InBev changed the labels of its beers – removing the Dutch text Translationfrom the beers sold in France and the French text from the beers sold in the Netherlands – to prevent the supermarkets from doing parallel trading. This (cleverly designed) strategy can prevent parallel trading because of the 
product-labelling requirements of Member States (especially in countries with more than one official language like Belgium). AB InBev also, allegedly, stopped selling or limited the quantity of their sales to Dutch retailers to reduce their stock.

The investigation is at the stage of issuing of a ‘statement of objections’. That means that AB InBev has not yet been found to have violated EU competition law. The statement simply notifies the company that some behaviour appears problematic. AB InBev has some time to offer propositions to change its behaviour to comply. If not, official proceedings can be commenced.

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