Mondelēz anticipates US$326m fine to resolve European Commission antitrust investigation

EUROPE – Mondelēz International predicts it will incur a cost of EUR300m (US$326m) or even higher to resolve an antitrust investigation launched against it by The European Commission.

The European Commission is investigating whether Mondelez International breached antitrust legislation by allegedly “hindering” cross-border trade between European Union member states in chocolate, biscuits, and coffee to push up prices.

The probe is centered on whether the US-based snacking and confectionery giant restricted so-called parallel trade, where goods are sold across EU member states by traders outside of the manufacturer’s distribution network.

“Restrictions to such parallel trade can lead to the isolation of a national market whereby the manufacturer or supplier can charge higher prices to the detriment of consumers. Restrictions to parallel trade can also lead to less product diversity,” Margrethe Vestager, an executive vice-president at the EC in charge of competition policy, said in a statement during the opening of the case.”

It is also investigating potential restrictions on which languages are used on the packaging, which it said could “create friction”.

In the latest details of the probe, Mondelez noted that it has been cooperating with the investigation and is currently engaged in discussions with the European Commission to reach a negotiated, proportionate resolution to this matter.

The company added there is “a possibility that the final liability could be materially higher” than EUR300m due to “the inherent uncertainty of the discussions and possible outcomes”.

Regarding the investigation’s impact on its performance, the company said: “In the fourth quarter of 2022, we began to exclude the impact from the European Commission legal matter… Due to the unique nature of this matter, we believe it to be infrequent and unusual and therefore exclude it to better facilitate comparisons of our underlying operating performance across periods.”

John Baumgartner, an analyst at financial services firm Wells Fargo commented that even if violations are found, analysts would not expect it to impact Mondelez’s underlying global growth potential driven by mix-accretive innovation, choco-bakery expansion, new distribution, and a revival of local brands.

As a wider region, Europe accounted for 36% of the company’s US$31.5bn in net sales in Full Year 2022. On a reported basis, net sales were up 2.4% and climbed 7.4% organically.

Overall, the company reported a 9.7% net revenue rise for the Full Year ended December 31, 2022, driven by Organic Net Revenue growth of 12.3 percent, and incremental sales from the company’s acquisitions, primarily Chipita, Clif Bar, and Ricolino.

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