A Spanish court confirmed that the major dairy companies formed a “milk cartel,” collaborating to fix low prices for the milk they bought from farmers. Financial compensation could reach hundreds of millions of euros.
One of the highest courts in Spain has confirmed farmers’ claim that dairy companies formed a cartel to control the price of milk for 13 years, opening the door for further financial compensation.
On February 21st, the National Court (Audiencia Nacional) of Spain upheld a decision from the National Commission on Markets and Competition that nine dairy companies and two associations formed a cartel to fix prices and reduce competition by exchanging information.
The contentious administrative chamber of a Court whose jurisdiction encompasses the most serious crimes like terrorism, organized crime, or financial crimes causing serious damage to the national economy, confirmed the fines of 28 million euros (30 million dollars) for five companies and ordered the recalculation of fines in the case of four others due to prescribed periods.
Decrease in bargaining power of farmers
The National Court determined that the competing companies in the dairy sector exchanged information on prices and other commercial conditions and contacted farmers to inform or convene on market strategies, concluding that they then exchanged information to manage excess milk production.
Further, it ruled that through the exchange of information, competitors “reduced the level of uncertainty between them, with the consequent decrease in competition and the bargaining power of the farmers in order to control the supply market for raw cow’s milk, which constitutes a single and continuous infringement, regardless of the fact that not all companies have participated in all the conduct.”
The judges confirmed the fines of 11.6 million euros (12.5 million dollars) imposed on Lactalis Iberia, 8.5 million euros on Calidad Pascual, 6.8 million euros on Nestlé, 930,000 euros on Schreiber Food España and 53,000 euros on Central Lechera Galicia.
The fines for Puleva, the leader of the Spanish dairy market, which amounted to 10.2 million euros, Comercial Alimentaria Peñasanta (21.8 million euros), and Danone (20.2 million euros) need to be recalculated because the infringements occurred before 2006 and thus fell into the statute of limitation.
The Court found the fines proportionate and with sufficient motive, thus rejecting most of the appellants’ assertions that the sanctions were arbitrary. It annulled the fine of 60,000 euros for the Association of Galician Dairy Companies (Empresas Lácteas de Galicia) because it lacked motivation, although the Court confirmed it participated in the cartel.
The companies had been collaborating to lower the prices of milk between the years 2000 and 2013.
The price of milk is a recurrent source of tension between farmers and the dairy industry. Last year, Puleva faced strong opposition from Andalusian farmers when it sought to reduce the price, particularly given that the company sources one-third of its milk supply from this region.
In 2015, the National Commission on Markets and Competition issued a fine of 88 million euros (95 million dollars; nearly 100 million dollars in 2015) to what is often referred to as the “milk cartel.”
Defendants filed an appeal but the commission confirmed the sanctions in 2019. The fine was reduced to 80.6 million euros but the dairy companies appealed before the National Court.
A door for financial compensation to more farmers
The decision could ultimately be appealed to the Supreme Court but it nevertheless opens the door for farmers to seek financial compensation for the competition infringements.
Eskariam, a law firm specializing in commercial litigations and class actions operating in Spain, which defended the farmers in Court, says it has collected more than 7,000 complaints for the joint civil lawsuit across the country so far. The company estimates that farmers can claim 10% of their turnover during the sanctioned period, regardless of whether the farms are still in activity.
Union agrarias, a farmer’s union from Galicia that initiated the lawsuit “celebrated that, after years of struggle and demands, the National Court recognizes the existence of the milk cartel.”
The union will now focus on “promoting the individual demands of the farmers affected by the cartel” and determine the compensation each can claim.
It believes that nearly 50,000 farmers could seek compensation, according to the number of farms that sold milk during those years, which could amount to 1 billion euros in financial damages. Farmers have until July to join the class action lawsuit.
The verdict also comes in the middle of several heated protests by farmers across several European countries, denouncing for the most part their financial struggles in front of market prices, the administrative red tape, and environmental regulations.
