Notes on the Decision of the Hellenic Competition Commission concerning the Athenian Brewery S.A.
By Sofia Georgiadi, Attorney-at-Law, LL.M., Associate
Following an investigation (ex officio and upon a complaint by Mythos Brewery S.A.), the Hellenic Competition Commission found that Athenian Brewery S.A. (hereinafter AB), a subsidiary of Heineken N.V. active in the production and distribution of beer in Greece, abused its dominant position, thereby infringing Articles 2 of the Competition Act 703/77 as in force (what is now L. 3959/2011) and 102 EU Treaty.
Interestingly, the investigation on the particular case was pending for 15 (!!!) years, something that has never occurred again in the Competition Law field in Greece. Also, for more than three years (from 2009 to 2012), the Commission was restrained from investigating the case pursuant a decision of the Administrative Court of Appeals, after an appeal brought by AB.
According to the press release of the Commission, a fine totaling € 31.451.211 was imposed on AB for the said infringement. The company had also been required to cease the infringement and to introduce written contracts with amended terms, so as to avoid a repeat infringement. The Brewery of Macedonia-Trace S.A., another Greek brewery company, also participated at the hearing of the case before the Commission, as a third party, supporting the complaint of Mythos Brewery S.A. and stating that the accused company violated indeed the regulations for a balanced competition in the market and therefore caused subsequent damages to the consumers and other less expanded companies.
THE LEGAL BACKROUND, THE REASONING OF THE CASE AND THE PENALTY
In the 586 pages long decision, the Commission pointed out that the dominant company AB has adopted and implemented a single and targeted policy that sought to exclude its competitors from the on-trade consumption market (e.g. HORECA chains and other retail outlets) and to limit their growth possibilities, over a period of fifteen years. To achieve this objective, AB employed various commercial practices aimed at exclusivity, including significant payments conditional upon exclusivity and/or the foreclosure of competitive brands, loyalty and target rebates. Furthermore, AB had been found to have engaged in restrictive practices at the wholesale level, by providing wholesalers with significant economic motives that promote exclusivity and by exercising pressure on them not to trade or introduce competing products.
Pursuant Articles 2 of L. 703/1977, 2 of L.. 3959/2011 και 102 of the Treaty of the European Union a dominant position is characterized as the position of the economic power of a company that allows it to impede the development of the effective competition in the relevant market and as a result offers the opportunity of an independent and dominant behavior in the market. The dominant position of a company can be detected in various ways, one of which is the occupation of a large market share.
In the present case, it is indicative that most of the years AB occupied the largest share in the market (65-75%). Together with the extensive marketing tools, the company’s particularly distinctive trademarks and its large and competitive distribution network, resulted in the creation of an accumulated marketing force that out casted all other relatively smaller companies. It is also important to keep in mind that beer (especially in Greece) is a “must stock brand’’ for every store, meaning that the practices of the Company affected a large number of both consumers and retailers.
In order to highlight the practices more that characterized the policy of AB as inhibitory for the competition in the relevant market, the Commission pointed out the specific commercial strategies that the company constantly implemented throughout the examined years.
By categorizing the practices in three key pillars, the reasoning of the Commission not only is developed very precisely, but also can be used as a useful reference for what is considered an unlawful commercial practice in the competition field and an abuse of the dominant position of a company, an element that makes this decision even more important for the Greek and European Competition law research:
– Exclusivity and relevant practices on the consumption of the product in the local market: In order to implement its strategy, AB used various practices in order to impose exclusive supply terms and dispose its trade marks, provide a variety of financial compensation and benefits in terms of exclusivity and displacement of specific competitors.
– AB practices in super-market stores: AB imposed a term in the contracts in order to achieve an acceptable shelf share in exchange for the discount credit.
– ΑΒ practices at the distribution level: Τhese practices included, among others, the imposition by the Company of credit restrictions to the distributors, the granting of in rem guarantees, terms for monetary and other benefits and the cooperation with specific wholesale endpoints.
Last but not least, it is worth mentioning the reasoning of the Commission on the calculation of the penalty. The Commission took into account the nature of the infringement, the various anti-competitive results on the consumers and the general market condition, the economic impact and power of other smaller companies in the field, the geographical range of the infringement and of course the size of the market. All these factors were associated with the long-term nature and the rule of the 30% on the net profits of the company for each year of the infringement.
The aforementioned company is certainly expected to file an appeal, requesting the suspension of the fine and claiming that it has only adopted and implemented a targeted legal strategy for the exclusion of its competitors. It shall be very interesting to see if the Commission’s Decision will be upheld or amended by the competent Courts, and what will be the impact on the Company’s marketing practices and general strategy in Greece.