Dangerous territory: when collusion takes over from co-operation

Co-ops and collusions: the importance of members and director vigilance

While co-operatives are seldom embroiled in collusion scandals, there have been several instances where some European co-operatives were found to have collaborated at the expense of consumers.

Coop Norway is among three grocery chains currently being investigated by the Norwegian Competition Authority for allegedly co-operating in a way that may have led to higher grocery prices to the detriment of consumers. The regulator claims the three grocery chains agreed to allow their employees to access each other’s grocery stores with a view to scan shelf prices. Its preliminary assessment found that the grocery chains had used the price information collected to coordinate prices since 2011.

The authority is considering imposing fines. The grocery chains, including Coop Norway, claim that they have used the price information they have collected to compete vigorously. However, the regulator is considering imposing a fine of NOK4.8bn (£410m) on Coop Norge AS.

“The Authority’s preliminary assessment is, however, that the grocery chains have used the collected information to limit competition. They have in a number of cases, used the information in question in a manner, which may have lifted prices,” it said in a statement.

Related: Co-ops vs Competition law … ‘Co-operation among co-ops’ doesn’t fit within the way we construct competition law’

Another recent scandal involved 12 French companies, including the co-operative Cooperl. Cooperl has recently obtained a suspension of the payment of the €35m (£31.6m) fine imposed on it by the French regulator, after warning that repaying the fine in full could result in
its bankruptcy. Cooperl was found guilty of price-fixing its cold meat products between 2010 and 2013.

Swiss supermarket Coop was also among the companies mentioned in the scandal. The retail co-operative was fined only €6m (£5.4m) after agreeing to work with the authorities for a more lenient sentence. French Competition Authority (l’Autorité de la Concurrence) said in a statement in July 2020 that “the manufacturers concerned … were coordinating to buy cheaper cuts of ham from abattoirs, and/or were also agreeing on price increases for pork products that they intended to apply to supermarket chains for their private labels or ‘premium prices’.”

The authority said the companies had been in contact by telephone before the start of negotiations with abattoirs and agreed price fixing in supermarkets “through multiple telephone exchanges and at least six secret meetings between competitors in Paris and Lyon”. It added that the actions concerned “a very large number of everyday consumer products,” including cured ham, cooked ham, sausages, rosette and chorizo.

Throughout this time, Cooperl maintained its innocence, arguing that itself and its subsidiary, the Brocéliande breeders brand, did not get along with their competitors and that in 2013-2014 its market share had increased to the detriment of competitions in other countries. The co-op also contested the validity of a piece of evidence submitted by its competitor Campofrio – a notebook belonging to one of their directors.

“Cooperl and Brocéliande have always protested their innocence in this case and recall that they have also lodged a complaint about forgery, use of forgery, slanderous denunciation and fraud in the judgment against their whistleblower, requesting leniency,” the co-op said in a statement published in March 2021.

A similar scandal involving the banking sector saw Crédit Agricole fined €114.7m by the European Commission in 2016 for allegedly participating in a cartel in euro interest rate derivatives. The Commission claimed that the French co-operative bank, along with several other banks had colluded on euro interest rate derivative pricing elements, and exchanged sensitive information, in breach of EU antitrust rules.

Barclays, Deutsche Bank, RBS and Societé Générale admitted guilt and were fined €824.6m in 2013 while Crédit Agricole, JP Morgan Chase and HSBC chose not to settle. The decision was reached following an investigation under the Commission’s standard cartel procedure. 

The Commission said that over different periods between 2005 and 2008, the seven participating traders were in regular contact through corporate chat rooms or instant messaging services, exchanging confidential and sensitive information about their trades and strategy. It added that through these exchanges the cartel aimed to distort a pricing component for euro interest rate derivatives, the so-called Euro Interbank Offered Rate (Euribor), which is based on quotes submitted daily by a panel of banks, of which the seven banks were part.

“Crédit Agricole firmly believes that it did not infringe competition law. Accordingly, it will appeal the Commission’s decision before the European courts,” said Crédit Agricole in a statement at the time.

“Payment of the fine will not affect the 2016 financial statements given the provisions set aside previously.”

These incidents show that co-ops are not immune to collusions. Members and boards of directors need to remain vigilant to try to prevent their co-ops from acting like some of the other market players.