Danube Foods Group fined 3 million euros - Company questions Competition Commission's decision

Danube Foods Group BV (DFG) has been informed on a fine in amount of 3 million euros that its dairies in Serbia must pay to Serbia's Competition Commission.

"This measure is based on the verdict that the Commission reached in 2008 on the market share of DFG dairies in the purchase of raw milk in 2006. On the occasion of determination of the relevant market, the Commission based its calculation on a wrong principle, that is, it included in the calculation only the milk subsidized by the state, which represents less than 50% of all produced milk in Serbia", the company DFG announced on Friday, January 28.

On that occasion, DFG CEO Peter Nagle stated:

- The state has reduced the amount of subventions for milk by 80% over the past two years. Unfortunately, the money has only been granted to a small number of farmers who produced about 340 million liters of raw milk, while the production of 1.1 billion liters of milk has been left without subventions. That means that DFG's market share could have been bigger than 100%, which is simply absurd.

A.T. Kearney, the world's leading expert group, has correctly determined the relevant market for purchase of raw milk and it has turned out that DFG dairies has a market share of 29%, which is far below the threshold of 40% that is set as the limit for determination of the dominant position by Serbia's law. The Supreme Court of Serbia overturned the Commission's verdict in February 2009.

"The retroactive nature of these fines and the manner in which the Commission conducted the process are not allowed by the laws of Serbia and they are also in violation of the Dutch-Serbian bilateral agreement on investments and the practice of the European Union", reads the statement.

Donald MacLaren, the former Ambassador of Great Britain, stated that "that recent verdict and the way in which the case was conducted significantly weaken the credibility of legal and regulatory institutions of Serbia and give a bad example at the moment when the country seeks admission to the European Union and the World Trade Organization".

DFG dairies are the only dairies in Serbia with the license for export to the EU countries thanks to investments of over 200 million euros in this sector. Besides, over the last five years, DFG has directly invested more than 50 million euros in a support to farmers and it pays them 20% higher purchase price than the average price of milk in Serbia, reads the statement.