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Ach du lager! German brewers face massive price-fixing probe

- The Washington Times - Tuesday, August 20, 2013

MUNICH — In a major blow to one of this country’s signature industries, Germany’s top breweries may be facing hundreds of millions of dollars in fines for colluding to raise beer prices over the past two decades.

The possible penalties were first reported in the German magazine Focus, which obtained what it said were internal documents detailing the probe from the Federal Cartel Office in Berlin. The report represents a significant expansion of the beer price-fixing probe, which originally was thought to be targeting just a two-year window from 2006 to 2008.

Germany is Europe’s largest beer producer, with more than 1,300 breweries producing 5,000 beers, and it is second in the world in annual per-capita beer consumption at 226 pints, trailing only the Czech Republic. The research firm Canadean Ltd. last month reported that German beer prices overall increased by 3 percent in 2012, even though beer consumption in Germany has been flat since 2011 and is projected to decline in the coming years. Overall consumer prices were up 2 percent.

“These seem to be the broadest price hikes in the German beer market since 2008,” Guenther Guder, head of the German Beverage Wholesaler Distributors Federation, told the German news agency DPA last month before news of the expanded antitrust investigation broke.

The probe has emerged as Germans prepare to celebrate Oktoberfest in a little more than a month. The world’s largest beer festival, an annual event that started in 1810, is expected to attract about 7 million tourists. But the price-fixing scheme could drain a little foam from the steins of celebrants this year.

The names of all of the breweries thought to be involved in the price-fixing scheme are not known, but Focus reported that the scandal is much bigger than originally thought. Earlier reports suggested that the collusion took place only from 2006 to 2008.

According to a document from the Federal Cartel Office that was more than 100 pages long, this was “most likely just the tip of the iceberg.”

According to Canadean, eight of the top 10 German brewers distribute their wares throughout the country and account for some 49 percent of Germany’s entire beer volume consumed.

Volker Kuhl, head of the Veltins brewery, acknowledged to investigators that Germany’s beer leaders came together to set prices during phone calls and in hallways at industry meetings. The largest producers would agree on a price structure, and then would pass the instructions to smaller brewers.

“It often came to a branch-wide beer price increase,” he said in the document.

The official sponsor of Germany’s national soccer league, Bitburger Brewery Group, and the beer association in North Rhine-Westphalia, the country’s most populous state, have admitted to taking part in the price-fixing activities, according to the Focus report.

German breweries are known traditionally for their integrity. Germany’s beer purity law, known as the Reinheitsgebot, has ensured that producers make quality beer for more than 500 years. It requires that breweries use only water, barley, hops and yeast in the beer.

Germany isn’t the only country where antitrust regulators have been looking into rising concentrations of power in the beer market.

In the biggest antitrust case of the Obama administration, federal officials this spring forced U.S. market leader Anheuser-Busch InBev to sell the U.S. operations of Mexico’s Grupo Modelo to rival Constellation Brands for an estimated $4.75 billion before approving their proposed merger. The original $20 billion takeover by Anheuser-Busch would have given the combined company control of nearly half of the U.S. beer market.

The divestiture order was one of the largest in history and instantly made Constellation the third-largest beer vendor in the U.S.

German antitrust officials have not focused only on beer.

Last month, regulators raided the offices of Deutsche Telekom, a German telecommunications giant that owns T-Mobile, and France’s Orange SA, accusing the companies of conspiring to set prices as Internet service providers.

Earlier this year, German regulators also accused online bookseller Amazon.com of antitrust violations by preventing traders on the website from selling their products for lower prices elsewhere. Actions also have been announced in recent months against cable television broadcasters and railway equipment manufacturers.

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