The investigation was launched after Napier Brown, a Real Good Food Company (RGFC) subsidiary, complained to the Office of Fair Trading (OFT) about ABF subsidiary British Sugar abusing its dominant position in the sugar market.
Napier Brown’s complaint that British Sugar was charging it prices for sugar that are significantly higher than market levels has now been referred to the Competition and Markets Authority (CMA). The CMA is the OFT’s successor and begins operating on April 1 this year.
“Given the progress elsewhere within the group, which we have outlined in our previous updates, it is very disappointing that we find ourselves in the position where a major supplier is, in our view, abusing its dominant market position in the supply of sugar to us," said RGFC executive chairman Pieter Totté in the firm's third quarter trading update.
“If British Sugar is allowed to impose a price on Napier Brown, its largest customer and the UK’s largest reseller of sugar, without any reference to market pricing, the consequent impact on UK customers and consumers would be significant.”
Millions of pounds
If the complaint is successful, the penalty could amount to a fine costing millions of pounds. Pfeifer & Langen GmbH & Co, Suedzucker and Nordzucker were fined a total of €280M (£230.6M), following a previous European investigation of EU sugar companies.
Napier Brown claims to be Europe’s largest non-refining sugar distributor and says it has a 15–20% share of UK sugar supply. There are only two sugar producers active in the UK market: UK beet sugar supplier British Sugar and Tate & Lyle, which refines imported raw cane sugar.
RGFC said earlier this month (February 2014) that, after repeated threats, British Sugar temporarily withdrew supply of sugar to Napier Brown. That was despite the latter’s claims that it continued to pay over 95% of the imposed price while it sought to resolve the dispute.
“Given that British Sugar has a monopoly in the supply of UK beet sugar, Napier Brown had no alternative but to pay the imposed price under duress in order to maintain supply to its customers,” RGFC stated.
“Napier Brown believes, and has evidence to the effect, that this price is anti-competitive thereby preventing Napier Brown effectively competing commercially.
‘Abusing dominant position’
“This approach by British Sugar is, in Napier Brown’s view, in breach of undertakings given by British Sugar to the EU Competition Authorities in 1988 after it had received a fine for abusing its dominant position.”
Napier Brown said it was not currently negotiating with British Sugar and it was therefore unlikely the dispute would be resolved quickly. RGFC warned British Sugar’s actions would have a significant impact on its full-year results for the year to March 31 and the following year.
The two firms have been locked in a decades-old dispute. In 1988, the European Commission (EC) found that British Sugar occupied a dominant position in the market for the industrial supply of bulk, white, granulated sugar.
The EC ruled British Sugar had committed multiple abuses of that dominant position, to the detriment of Napier Brown (Case No IV/30.178 Napier Brown - British Sugar (18 July 1988) (vthe 1988 Decision’) (Official Journal L 284, 19/10/1988 P. 0041 - 0059)).
The EC imposed a fine of €3M (£2.47M). The penalty accounted for British Sugar’s “exemplary” behaviour following the receipt of a statement of objections, its offer of undertakings to remedy its misbehaviour and its introduction of a competition compliance programme.
ABF declined to comment on the commercial dispute.