Meat Cartel

Despite Cartel Fine, One Small German Sausage Maker Vows to Fight On

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  • Why it matters

    Why it matters

    Hans-Ewald Reinert, 51, runs his family sausage-making company H. & E. Reinert, which employs 1,400 people and has an annual turnover of €350 million. He denies being part of a price-fixing cartel.

  • Facts

    Facts

    • German authorities imposed a fine of €338 million ($458 million) on several sausage makers on July 14.
    • The decision is the third major industry in Germany to be fined for price fixing this year.
    • Mr. Reinert, the patriach of Reinert, plans to appeal the double-digit million euro fine on his firm.
  • Audio

    Audio

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Aside from beer, few food items evoke such strong associations with Germany like sausage. From the country’s beloved bratwurst to other countless, regional varieties, sausage in Europe’s largest economy is big business.

But a crowded market combined with Germans’ penchant for shopping at discount supermarket chains like Aldi and Lidl apparently enticed sausage manufacturers to engage in widespread price collusion for years.

The Bundeskartellamt, Germany’s federal cartel authority, on July 14 imposed fines totaling €338 million ($458 million) on 21 manufacturers and 33 individuals for raising prices for sausages, known as “wurst” in German, that they sold to Aldi. The companies included brands well-known in Germany such as Nestle’s Herta, Meica, Wiesenhof and Böklunder. But smaller producers were also punished, including family-run sausage maker Reinert, which was handed a fine in the low double-digit millions of euros.

 

Source: DPA
Germans on average consume 54 kilos (121 pounds) of pork each year. Source: DPA

 

Meat products magnate Hans-Ewald Reinert, the patriarch of Reinert, denied any wrongdoing in an exclusive interview in the latest edition of WirtschaftsWoche.

“I’m not a member of a cartel. We will appeal the decision,” he told the business weekly. “Aldi isn’t the least bit interested if we go to them and demand a price hike!”

Mr. Reinert said his firm was too small to have any sway with Aldi, which is Germany’s leading discount supermarket chain.

“We’re a B- or C-class supplier. There were only a few suppliers that had good relations with Aldi at the time in question, and we weren’t one of them. That’s why I cannot accept this fine,” he said.

 

STREITGESPRAECH,  ANDREAS  Mundt, HANS Ewald REinert, Duesseldorf, 14.7.2014
Andreas Mundt (left) and Hans-Ewald Reinert (right). Source: Frank Beer, photograph for German magazine WirtschaftsWoche

 

The cartel office investigation was sparked by an anonymous source, who gave details on regular meetings to fix prices by a group of sausage makers known as the “Atlantic Group.” The group was named after the hotel in Hamburg where their meetings allegedly took place.

A number of deals were reached in these forums in recent decades, especially in 2003, to jointly raise prices for sausages. Most of the price fixing occurred in conversations on the phone, either via direct calls or on organized conference calls, the cartel office said.

But Andreas Mundt, president of the Bundeskartellamt, told WirtschaftsWoche that even smaller producers such as Reinert played an important part in pressuring Aldi.

“We have clear testimony from members of the cartel,” Mr. Mundt said. “Aldi has a leading role in setting prices in the (retail food) sector. When Aldi raises or lowers prices, the rest of the sector follows shortly thereafter.”

It’s difficult to underestimate the popularity and economic impact of sausage in Germany. The average German consumes about 54 kilos (121 pounds) of pork per year and can choose from a meaty myriad of 1,500 types of sausage.

Mr. Reinert said unless he won an appeal, the cartel office ruling would curb his firm’s investment for the next several years.

“It means a company might have to pay its entire profits for four or five years to the federal treasury,” he said.

But Mr. Mundt said his office had carefully applied the fines according to the respective might of the sausage makers.

“Of the overall fine of €338 million, 84 percent falls on the six sausage manufacturers belonging to concerns worth billions,” he said.

 

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