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AFCA files application for imposition of appropriate fine on Brau Union and for termination of infringements of ban on abuse of a dominant market position and ban on cartels

The infringements concern the production and sale of beer and other drinks and comprise anti-competitive exclusive purchasing obligations, single branding and tying, allocations of markets and customers, exchange of strategic information with competitors, as well as anti-competitive abusive exclusionary conduct, some of which are still ongoing.

Brau Union is Austria’s largest brewery and 100% owned by the Heineken Group, which is based in the Netherlands.

In the market for producing and selling beer, Brau Union holds an important market position, having taken over and now owning several domestic breweries, with a broad range of different brands (e.g. Kaiser Bier, Schladminger, Reininghaus, Villacher, Fohrenburger, Gösser, Schwechater, Edelweiss, Schlossgold, Puntigamer, Zipfer, Wieselburger and many more). Brau Union also sells beer brands of international brewers in Austria, as well as other drinks such as cider, wine, sparkling wine and non-alcoholic drinks as merchandise.

On 14 June 2024, the Austrian Federal Competition Authority (AFCA) filed an application with the Cartel Court to impose an appropriate fine on BRAU UNION AG, and BRAU UNION Österreich Aktiengesellschaft (hereinafter referred to jointly as “Brau Union”) and, pursuant to § 29 para. 3 of the Federal Cartel Act (KartG), on the parent company Heineken International B.V. Fines may also be imposed on parent companies that belong to the same economic entity as an undertaking involved in the infringement. The AFCA is not accusing Heineken International B.V. of having itself been involved in the infringements. The applications for termination of ongoing infringements are only directed towards Brau Union.

Extensive AFCA investigations

AFCA’s application to the Cartel Court was preceded by extensive investigations due to the suspected misuse of a dominant position and anti-competitive agreements with drinks wholesale competitors by Brau Union.

Ever since October 2021, the AFCA has been receiving more and more anonymous complaints about Brau Union through its whistleblowing system. In April 2022, the Cartel Court carried out a dawn raid at Brau Union at the instigation of the AFCA. Physical and electronic data was compounded in connection with these suspicions. This was the AFCA’s first dawn raid based on suspected market abuse.

In the course of the dawn raid, Brau Union requested that the Cartel Court review certain individually specified electronic documents that, in the company’s opinion, were subject to legal professional privilege. This privilege allows the company subjected to a dawn raid to object to the inspection of documents by invoking a legally recognised duty of confidentiality or a right to refuse to testify. The Cartel Court confirmed AFCA’s course of action during the dawn raid. The documents in question had to be handed over to the AFCA to be added to its investigation file (see press release of 12 September 2022).

In addition to evaluating the compounded data, the AFCA also sent comprehensive requests for information to market participants and questioned witnesses. In December 2023, Brau Union was confronted with a statement of objections listing the anti-competitive allegations and given the opportunity to reply in accordance with the law.

Infringement of ban on abuse of a dominant market position and ban on cartels

In the course of the investigations, suspicions of a number of breaches of the ban on abuse of a dominant market position and the ban on cartels were confirmed. The alleged practices included:

1. Abusive exclusionary conduct

  • Abusive exclusionary conduct may comprise various illegal practices such as exclusive dealing, rebates and termination of existing supply arrangements. Abusive exclusionary conduct means that the competitive opportunities of third parties (current or potential competitors) are significantly restricted by a dominant company.

2. Prohibition of competition and exclusive purchasing

  • An exclusive purchasing obligation is any arrangement that forces a customer to purchase more than 80% of its contractual products from the dominant contractual party. This restricts the customer’s ability to purchase rival products.

3. Single branding and tying

  • Single branding is when the supplier imposes an obligation on the customer not to include any products from different competitors in its product range. Single branding may lead to competing products being refused access to the relevant market.
  • Tying exists when the supplier obliges the customer to buy additional products from the supplier’s range of products. This can restrict the customer’s economic freedom since the supplier is abusing its dominance in the market to promote the sale of its less popular products.

4. Allocations of markets and customer groups (partially terminated)

  • When companies allocate markets and customer groups, they agree not to compete in certain territories or among specific groups of customers. This may lead to a reduction in intra-brand competition.

5. Exchange of sensitive information

  • The exchange of sensitive data may include information about customer bases, sales volumes and turnover with individual customers, i.e. current strategic information. Whether this is a breach of cartel law depends on the specific characteristics of any such information. The illegal exchange of sensitive information may result in strategic uncertainty over market activity being reduced or eliminated, thereby facilitating the monitoring of the market and the monitoring of market entries by competing companies.

In the AFCA’s opinion, the above infringements restrict the sales opportunities and market entry of competing brewers and oust existing drinks retailers from the market.

Assessment of fines

The AFCA applied for an appropriate fine; it is at the Cartel Court’s discretion to set the actual amount. To allow the Court to decide freely on the basis of all relevant circumstances, the AFCA applied for the imposition of an appropriate fine. The Cartel Court may impose fines of up to 10% of an entity’s total turnover generated in the preceding business year if that entity is found to have breached cartel law.