In South America, the principal supermarket chains in the Republic of Chile have been charged by National Prosecutor for Economics (FNE) with fixing the prices of chicken. The accusations were spelled out in an indictment announced on January 6 in Santiago, the country’s capital city. The three chains mentioned in the indictment are Cencosud, SMU, and Walmart Chile.
The outlets affected are as follows:
Cencosud: Jumbo and Santa Isabel
Walmart: Hipermercado Lider, Lider Express, Superbodega Acuenta, and Ekono
SMU: Unimarc, Bigger, Mayorista 10, Maxi Ahorro, Alvi, Dipac, and Comer
WalMart has seen considerable growth in its Chilean operations: in March 2015, the Arkansas-based retailer announced that it was investing $180 million in distribution facilities there.
The charges stem from an earlier inquiry in the case of alleged collusion involving chicken producers Ariztía, AGROSUPER and Don Pollo. The prosecutor’s office contends that the collusion occurred, at the very least, between 2008 and 2011.
In the Court for the Defense of Free Enterprise, the prosecutor is seeking to collect the maximum penalties, which can amount to as much as $23 million from each
of the supermarket chains. The FNE said in the indictment that chicken “is a product of great demand, which has a considerable capacity for generating traffic in the locales.” According to the FNE, “The goal of the imputed conduct was to regularize the market and avoid price wars between the supermarkets.” See here
Fresh chicken, according to the FNE, represented 10 percent of the average sales in supermarkets in 2010 and 2011.
Local media reports in Chile suggest that at the end of 2011, Cencosud, SMU, and Walmart had captured 92.5 percent of the supermarket business. The FNC asserts that the agreement allegedly reached between the three retailers was in effect from 2008 through 2011, and that it was revealed during a related investigation into three chicken producers in the South American republic and an industry organization. In a case some insiders referred to as “Chicken-gate,” Agrosuper, Ariztía, Don Pollo, and the Association of Chicken Producers of Chile were accused of coordinating production quotas.
In this new case, the same chicken providers played a fundamental role - this time as intermediaries - having managed the regularization of retail prices paid by the public, and applied punishments - in terms of the supply of chicken - to the non-compliant supermarket chains.
According to the January 6 accusation, each of the businesses knew that their principal competitors applied the same rule and actively monitored any failure to comply. When any of the retailers noticed another that had not respected the rule, they would go directly to the provider for intervention.
“By means of their common providers, (the supermarket chains) monitored their competitors and demanded the application of a rule that sought to impede the sale in supermarkets of fresh chicken below the cost of its wholesale price (trade price),” declared the FNE.
Prosecutors declared that the supermarkets “consciously adhered to a shared scheme that substituted the risks of competition for a practice of cooperation among them.” The indictment claims that the retail price was established by the retailers according to the base price fixed by the chicken suppliers.
The investigation began in December 2011, when Chilean prosecutors seized computers, external hard-drives, email records and servers, and other electronic evidence belonging to the three supermarket chains now charged.
More than 146 chains of emails between the supermarkets and producers were examined. Prosecutors looked into messages between product managers at the supermarkets and the account managers at the chicken providers. In one case, an email declared: "Okay, I will raise the prices right now."
The prosecutors are demanding that the retailers "immediately halt this type of practice, and prohibits them from engaging in this in the future, whether directly or indirectly either by themselves or through related persons."
Chilean Minister of the Economy Luis Felipe Céspedes said "It is outrageous, we must make manifest our indignation as a government. It is a basic consumer product in which three businesses have colluded in affecting free competition and the consumers. He also called upon Chile's national congress to move "with all due speed" to legislate prison sentences for those convicted of price collusion. Céspedes applauded FNE's work in addressing "cartels such as these" which has been possible because of the strength of the government, which he said must continue to be "strengthened."
Maria Elina Cruz said in a radio interview that prosecutors should not close the door on investigating possible collusion in the prices of other basic consumer products. “It seems to me that they delayed in analyzing the background, but it also appears that they could have known sooner,” said Cruz in referring to the prosecutors’ case. She is a professor at Chile’s Universidad Católica and an expert in the study of free enterprise. “Evidently, this chicken issue is quite absurd because we have the example of the collusion on the part of the Association of Chicken Producers (APA) in production quotas to raise prices, and we now have collusion among the supermarkets. We have been injured by the prices of these products,” said Cruz.
"We are reviewing the accusation presented by the FNE so as to determine courses of action. Since the onset of the investigation in 2011, we have actively cooperated with the authorities and continue to do so while the court analyses the case. As a business, we are committed to free enterprise and therefore we rely on certified processes so that all of our actions adhere to its principles and norms." said Walmart in response to the FNE.
No word has emerged from the other accused parties.
Chile is considered to be the most prosperous and progressive countries of Latin America. Its current president, Michelle Bachelet, was elected in 2013 as the lead candidate of Nueva Mayoría: a coalition of leftist parties. She served before as president (2006-2010), and then moved on to the United Nations where she was the first executive director the newly-formed UN Entity for Gender Equality and the Empowerment of Women. The Chilean constitution prohibits presidents from serving consecutive terms.