Bangers and cash: German sausage makers fight ‘cartel’ fine

The Federal Cartel Office slapped a 338 million euro ($400 million) fine on a string of German sausage producers in 2014, accusing them of colluding for decades to squeeze higher prices out of meat lovers.

But the powerful industry hit back with many of the accused exploiting a legal loophole to escape the penalty, leaving just a small group of companies on the hook for a fraction of the bill.

Of the 22 firms and 33 individuals initially fined — including big name brands Herta and Boeklunder — just four sausage producers appeared in the Duesseldorf regional court to contest their share of the punishment — some 22.6 million euros.

They are Heidemark Maesterkreis, Wiesenhof, Franz Wiltmann and Ruegenwalder Muehle as well as five company officials.

They deny accusations of belonging to a so-called “sausage cartel” and refuse to pay up.

Eleven other firms have accepted penalties to the tune of some 70 million euros.

But the remaining companies made use of a legal sleight of hand and simply restructured to make nearly 240 million euros of the total bill disappear.

Under the loophole — dubbed the “sausage gap” — parent companies could not be held liable for the anti-trust fines of a subsidiary if that subsidiary ceased to exist.

The legal trickery ended earlier this year with a change in German competition law.

Wolfgang Ingold, the chief executive of Franz Wiltmann, told industry publication Lebensmittel Zeitung he had been advised to employ the same tactic.

“But we have nothing to hide and we want to see that confirmed by a court,” he was quoted as saying.

– Wurst-case scenario –

The legal action is not without risks.

In a worst-case scenario, the court could impose an even heftier fine if it believes the accused have been telling porkies.

The Duesseldorf court has scheduled hearings in the case until May.

The “sausage gap” loophole is expected to loom large over the proceedings, according to Rene Grafunder, a Berlin-based expert in competition law at Dentons law firm.

“It seems odd that small and medium-sized companies have to pay millions in fines, while their larger competitors get away without any punishment at all,” he told DPA news agency.

The “Wurstkartell” claims stunned Germans when they first came to light in a country known for its fondness of bratwurst.

Although consumption has fallen slightly in recent years, Germans still eat on average 60 kilos of meat annually, with sausages and processed meats making up around half that figure — equivalent to a hot dog a day.

The cartel was nicknamed the “Atlantic group” after the Hamburg hotel where the first meeting was held to discuss pricing in the early 1980s, according to the FCO anti-trust watchdog.

Acting on an anonymous tip-off, the FCO found that the companies kept in regular touch and colluded to force German food retailers to pay higher prices for their pork and poultry products.

The “wurst” scandal capped a record year for the FCO, coming hot on the heels of 280-million-euro fine imposed on three large sugar producers for anti-competitive behaviour.

Also in 2014, more than 10 breweries were fined over 300 million euros for fixing beer prices.