GREENCORE is likely to appeal to the European Court against the European Commission's ruling that its Irish Sugar subsidiary has been involved in anti competitive practices and the £6.6 million fine that the Commission has imposed.
Greencore has not formally committed itself to an appeal, but says it has been advised that it has grounds for appeal. Greencore will make a provision of £6.6 million in its interim results due next month, together with £300,000 for the costs of a likely appeal.
The size of the fine and the fact that the abuses took place in recent years and not just when Irish Sugar was a semi state company in the 1980s had an immediate impact on Greencore's share price. The shares fell 22p to 320p before recovering to 325p.
The Commission has fined Irish Sugar £6.6 million for the breaches of EU competition law dating, back 12 years. The fine is the highest ever imposed on an Irish company and reflects what the Commission describes as the seriousness of the breaches of community law, the period of time they have been in effect and the fact that several of the actions taken by Irish Sugar have been recognised as abuses of a dominant position by the European Court of Justice.
"Through its infringements, Irish Sugar has been able to maintain a significantly higher price for packaged retail sugar in Ireland compared with that in other member states, notably in Northern Ireland, and has been able to keep its exfactory prices, particularly for hulk sugar for domestic Irish consumption, among the highest in the community to the detriment of both industrial and final consumers in Ireland," the Commission has stated.
But Greencore said last night that many of the practices which led to the fine were historic and had been discontinued since Greencore's privatisation in 1991. The company said it had made significant changes to its trading terms and conditions in recent years but added: "Irish Sugar is examining, with its legal advisers, any further adjustments in the application of its pricing and discount policies which may be required."
The conclusions of the Commission are more far reaching than had been expected. Originally, it was thought that the Commission's investigations covered a period between 1982 and 1990 when Irish Sugar was a semi state company. But the Commission has stated clearly that in the past four years Irish Sugar has been involved in actions which had the express aim of preventing smaller competitors getting a foothold in the Irish market.
The Commission has also stated that in the 1980s Irish Sugar and its subsidiary, Sugar Distributors Ltd, sought to under mine imports from France and Northern Ireland by targeting the customers of a French importer with specially cheap rates and offering Border retailers special rebates.
The company has also, since 1985, developed a system of rebates for industrial companies involved in exporting that vary between customers for the same tonnage and vary over time without any relationship either to tonnage or currency fluctuations.
The practice constitutes unfair discrimination against those who supply only the Irish market and a distortion of the EU's common sugar regime, the Commission states. Greencore has conceded that some of these practices were "unacceptable" but said that they were carried out only for short periods and have been long discontinued.
Greencore has disagreed fundamentally with the Commission's conclusion that its policy of offering discounts to confectionery and soft drink manufacturers based on the tonnage of sugar exported in the finished product is anti competitive. "The sole objective of such discounts is to equalise the competitiveness of Irish products in export markets," said Greencore.
Since 1993, Irish Sugar has also sought to restrict competition from small sugar packers in Ireland by overcharging them for bulk supplies, claims the Commission, putting them at a competitive disadvantage against both other customers and Irish Sugar itself. Rebates offered to wholesalers and retailers, tying them to increased Irish Sugar purchases, were also deemed to be breaches of EU competition law.
But Greencore claims the Commission's decision relating to the sugar packers does not sustain the allegation that Irish Sugar was engaged in a price squeeze against the packers. Greencore claims there has never been a complaint from any of its customers other than from competing packers.
