Watchdogs to sniff out alleged beer cartels
Cologne and Belgium: the competition watchdogs have been working overtime. In the German city of Cologne, best known for its eponymous perfume and beer, 25 cartel busters with 15 policemen in tow raided five Kölsch breweries and a private apartment on 15 December 2011 as part of an investigation into illegal price fixing.
The watchdogs’ office told media they were pursuing an initial suspicion of fraud. Whether anybody had acted as a whistleblower the watchdogs would not say.
Meanwhile, over in Belgium, the newly installed minister for the economy, Johan Vande Lanotte (probably in a effort to make up for the 535-plus days lost when Belgium was without a government), told the competition authorities to look into the matter of the recently announced price hikes by both AB-InBev and Heineken’s Alken Maes and whether they smack of price fixing.
At the end of December it was announced that AB-InBev plans to increase wholesale prices for canned and bottled beer in Belgium by 5.9 percent, effective 1 March 2012 while Alken Maes will raise prices by about 6 percent as of 12 March. The two brewers have cited rising energy, staff and raw materials costs for the increases.
We are not sure if these investigations in Belgium will lead anywhere. In free competitive markets price increases are legitimate. Underlying motives may vary – from raising profits to passing on costs – but for as long as consumers have a choice and can vote with their feet, price increases are ultimately a risky undertaking.
True, AB-InBev and Heineken alone control over 65 percent of the Belgian beer market. However, as AB-InBev alone has over 55 percent of the market, any number two player would be daft not to raise prices as soon as the market leader pushes ahead. As far as we know, imitating someone else’s price maneuvers does not constitute a cartel, or does it?
As for the Belgian consumers, there will always be the motorway to Germany where they can stock up on really cheap beers.
At first glance the allegation that Kölsch breweries may be involved in a secret cartel to the detriment of their consumers seems ludicrous. Having checked with several wholesalers, we found that wholesale prices for Kölsch beers are as high (or rather as low) as for pils beers. Moreover, for the past three years Kölsch brewers have not raised prices – because they probably saw that consumers would immediately switch to cheaper pils beers.
Consumers in Cologne may cherish their Kölsch brands, which are brewed by about 12 breweries, and still drink about 2 million hl of the top-fermenting beer each year. Again, let’s face it, Cologne’s consumers are catholic in their tastes – they like beer, any beer, but only for as long as it is affordable.
The reason why many observers think there may be something to the allegations of price fixing is that the city of Cologne is notorious for its "Klüngel", a system of mutual help, based on the principle of "I scratch your back, you scratch mine", which in Cologne can run the full gamut from tokens of friendship to outright corruption.
It is expected that the German competition watchdogs will take their sweet time to study the evidence, especially as Cologne is now in the throes of carnival when no one seems to do any work at all.
So watch this space.
