Italy: Decision on the Infant Food Market

Last Updated: 21 December 2005
Article by Gabriele Accardo

On 12 October 2005, the Italian Competition Authority ("the Authority") fined baby milk producers 9.743 million lira for engaging in concerted practices to fix the price of infant food in restraint of competition. The investigation, on which we previously reported in our newsletter of August 2005, concerned the anti-competitive conduct of the following baby milk manufacturers in the infant food market: Nestlé Italiana S.p.A., Nutricia S.p.A., Milupa S.p.A., Nutricia Italia S.p.A., Plasmon Dietetici Alimentari S.r.l., Heinz Italia S.r.l., Humana Italia S.p.A., Star S.p.A., Mellin S.p.A., Abbott S.p.A., Milte Italia S.p.A., Chiesi Farmaceutici S.p.A., Dicofarm S.p.A., Bristol-Myers Squibb S.r.l. and Syrio Pharma S.p.A. ("the producers").

PREVIOUS DECISION

In a previous decision of 2 March 2000 the Authority fined Nestlé Italiana, Heinz Italia-Plasmon, Nutricia, Milupa, Humana and Abbott around 6 billion lira for the conclusion of an anti-competitive agreement that their products should only be sold through pharmacies and not through main supermarkets and chain stores in order to keep price levels artificially high.

THE INVESTIGATIONS

The investigations were commenced on the basis of consumer complaints that baby milk prices (infant milk, follow-on milk and special milk) were considerably higher in Italy (sometimes more than double) than those charged by the producers for the same products in other Member States. Prima facie indications of anti-competitive behaviour were that the products were rarely sold in supermarkets (only 10 percent) and that there were no parallel imports from other Member States where the products were sold at lower prices.

THE PRELIMINARY FINDING

The Authority’s preliminary finding was that, given the lack of economic justification, the imposition by the manufacturers of higher prices in Italy than in other Member States for the same products may be due to collusion by the producers to co-ordinate their commercial policies.

It is noteworthy that this was the first case in which the Authority relied on the support of the Competition Authorities of other Member States under Council Regulation 1/2003 (that came into force on 1 May 2004). Investigations were conducted simultaneously on the premises of the manufacturers concerned in Italy, France, Germany and Spain on the grounds that there were no parallel imports from other Member States where considerably lower prices are charged.

THE DECISION

By decision of 12 October 2005, the Authority has now confirmed its preliminary finding of parallel behaviour. During the period from 2000 to 2004 there was an increase in the price of baby milk which, as a result, exceeded the price of baby milk or comparable products in other Member States by between 100% to 150%, for special milk by 300% and for follow-on milk by 200%. Secondly, there was parallel behaviour when the producers carried out a simultaneous and comparable reduction in price in response to a request from the Minister of Health to lower prices.

The Authority found that the producers’ parallel behaviour was the result of a deliberate concerted practice. The intent element, which distinguishes mere parallel behaviour from a concerted practice in breach of Article 81 EC, was evidenced by the fact that the producers had been in direct and indirect contact. From 2000 to 2004, the producers were in indirect contact when they fixed and later recommended an increased selling price to pharmaceutical distributors. As a result, the producers could keep each other informed of the date when new prices were released to distributors. There was further evidence that the producers had been in direct contact from March to April 2004. Following the request from the Minister of Health, the producers attended meetings at their registered offices. The Authority further indicated that, following the commencement of the investigation on 8 July 2004, there had been a 25% reduction in the price of baby milk, better information about the product characteristics of baby milk, increased direct sales to final consumers or via organised distribution networks and entries on the market of new products at lower prices.

The producers’ submission that the high prices were justified (on the basis of prevailing market conditions, high marketing costs and the high number of paediatricians which the producers informed) was rejected by the Authority as implausible and ill-suited to explain the differences in price.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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