Court fines Arla for abusing market position
dominant position on Denmark's dairy market, further jeopardizing
the group's public image in the country.
It's been a bad few weeks for Danish-Swedish dairy group Arla. First, the firm saw all of its products removed from much of the Middle East amid a boycott of Danish goods, and now it has been found guilty of breaching Denmark's Competition Act.
The court in Arhus, Denmark, ruled that Arla had offered the wholesale retailer, Metro, a DKK200,000 (€27,000) marketing subsidy on the condition that Metro terminated its supply deal with one of Arla's rivals - the Hirtshals Co-operative Dairy.
The court found it proved that two Arla sales representatives had made the offer during a 40-minute meeting with Metro representatives back in October 2003.
Peder Tuborgh, Arla's managing director, said he was upset at the verdict, even though the fine was less than the €4m Hirtshals' lawyers had demanded.
"It can give Danish consumers the impression that Arla generally employs unlawful business methods, although the verdict clearly shows that this is not the case."
He added that the judge had cleared Arla's management of deciding to "edge out one of its small competitors" and that the judge in no way implied that Arla employees had gone to the meeting intending to make such an offer.
The ruling, however, is a fresh blow for Arla as it tries to recover from a consumer backlash in Denmark.
Arla's share of Denmark's 500m-litre liquid milk market has fallen from around 89 per cent in 2003 to 80 per cent today.
Louis Honoré, company spokesperson, said Arla had suffered from a bad press during the two-year court case, while an influx of cheap milk from Germany had made the situation worse.
"We have not been clever enough to have a dialogue with consumers in Denmark. We have focused on promoting Arla as a successful exporter," said Honoré.
Arla recently lost out to small Danish dairy Ollingegaard for the right to supply milk to convenience store chain 7-Eleven. Honoré said the group had signed another deal around the same time, but admitted "we have lost more contracts than we have won".
The group has begun taking steps to combat its image problem by setting up a number of marketing projects with Danish organic dairies, aimed at improving sector-wide co-operation. Honoré said it was also holding a "massive dialogue" with consumers on its Danish website.
