(Published in the Official Journal. Only the published text is authentic:
L 258 , 22/09/97 )

THE FACTS

A. The subject of the proceeding

1. This proceeding is concerned with certain practices of Irish Sugar plc (hereinafter referred to as "Irish Sugar") in relation to the commercialisation of sugar in Ireland in the period from 1985 onwards.

2. The proceeding was initiated by the issuance of a statement of objections against Irish Sugar and certain other parties in April 1993. On the basis of the arguments put forward by the parties and new complaints by competitors of Irish Sugar within Ireland, the Commission undertook further fact-finding and issued a revised statement of objections against Irish Sugar in March 1996.

B. The product concerned

3. The product concerned by this case is sugar. Sugar is produced from sugar beet or cane. With the exception of part of the South of Spain and the French DOM, sugar cane is mainly grown in tropical and sub-tropical areas outside the Community. The ACP countries have the right to export to the Community a certain quota of cane sugar, free of import levy.

4. For the purposes of the present decision, three different types of sugar can be distinguished: white granulated, liquid and speciality sugars.

5. White granulated sugar is the final product after processing beet and refining cane. Different qualities are identified in the relevant Community Regulations[3]. The standard quality is EC II sugar. White granulated sugar represents the major part of Community production and consumption. It is sold to industry and the retail trade. Industry uses white granulated sugar as an ingredient. Industrial users are supplied mainly with sugar in bulk or bags. The retail trade resells white granulated sugar to the final consumer. The main form in which this is done is one kilo packets.

6. Liquid sugars are mainly used in the food-processing industry. The highest quality is made by dissolving white granulated sugar. Lower grades are made only from cane by blending liquors produced at various stages of the cane-sugar refining process.

7. Speciality sugars are all dry sugars other than white granulated. This category includes ACP direct consumption raws, brown sugars, caster sugars, icing sugars and other milled sugars, and also syrups and treacles[4].

8. Sugar is a sweetener. Other groups of sweeteners are starch and artificial sweeteners. They contain a wide range of products from isoglucose to sorbitol, saccharin, cyclamates or aspartame. Each of these products has its own specific properties and can be substituted for sugar in different industrial processes. For a number of reasons varying from product to product, i.e. Community quota, lack of bulking quality or higher prices, they have had only limited impact on the total sales of the natural sugars derived from cane and beet.

C. The Common Agricultural Policy Sugar Regime

9. The sugar regime of the CAP[5] is designed to support the production of sugar within the Community. The last revision of the sugar regime took place in May 1995, when the Council decided[6] to extend the regime for a further period of six years (i.e. to the 2000/2001 marketing year inclusive). Each Member State is allocated two quotas; an "A" quota, and a "B" quota. The total A quota is in principle intended to equal the Community's annual consumption. The B quota is intended to provide a surplus, so that demand can be met even in the event of crop failure in certain geographic areas.

10. A system of price support exists, but only for A/B quota sugar. Any sugar produced by Community undertakings in addition to their A/B quota is referred to as "C" sugar, and must be either sold on the world market without support or stored and used as part of the following year's A/B sugar.

11. The proportion of the total A/B quota assigned to each Member State is decided upon by the Council. The quota allocated to each country is then divided amongst the national sugar producers by the government in question.

12. Each year the Council fixes a number of institutional prices in relation to the purchase of sugar beet and its processing and sale, the most important of which is the intervention price, that is the price at which any manufacturer may sell A/B sugar to national intervention boards. Companies selling into intervention receive the intervention price for their processed sugar. As part of the measures to ensure that the sugar regime is self-financing, a charge - the production levy - is applied to all A/B sugar. Intervention price plus the storage levy represents the guaranteed minimum price for A/B sugar. This is known as the effective support price. The storage regime is also self-financing.

13. In the context of the Uruguay Round the previous import regime with a threshold price and variable levies has been replaced by fixed tariffs, which will be reduced by 20% over six years.

14. The Council also fixes minimum prices that the processors must pay to beet growers for the sugar beet.

15. Processors of beet sugar may sell A/B sugar freely throughout the Community. If they are unable to sell all their sugar in this way, they may either sell into intervention, or export it onto the world market. If they choose the latter option they receive an export refund which is calculated on the basis of a tendering system.

16. In addition to A/B sugar, the Community provides price support for a limited amount of sugar imported pursuant to the Lomé Convention[7].

D. The sugar market in Ireland

17. Irish Sugar is the sole processor of sugar beet in Ireland and Northern Ireland.

18. Irish Sugar was set up in 1933 by the Irish Government under the name Comhlucht Siuicre Eireann, Teo. In the first half of the 1980s it made heavy losses and required substantial Government funding. In the second half of the 1980s a group rationalisation programme was implemented, as a result of which Irish Sugar gradually moved into profitability. In April 1991 Irish Sugar was privatized. The mechanism for reducing the State's holding in Irish Sugar included the incorporation of a new holding company, Greencore Plc (hereinafter referred to as "Greencore"), which acquired Irish Sugar. In the year ending 27 September 1996, Irish Sugar had a turnover of IEP 134.7 million and an operating profit of IEP 27.2 million, out of a Greencore aggregate turnover of IEP 459 million and operating profit of IEP 49.1 million.

19. Upon Ireland's accession to the Community, Irish Sugar was allocated the entire A/B sugar quota for Ireland, which it continues to hold and which amounts to 200 200 tonnes a year. This quota exceeds domestic consumption.

Table 1: Production, trade and consumption of sugar in its natural state in Ireland

* Provisional figures.

** If stocks are reduced the figures are positive. If stocks are increased the figures are negative.

Source: Statistics of the Directorate-General for Agriculture of the Commission.

20. Sugar consumption per capita in Ireland is higher than the average for the Community[8], reflecting its role as an ingredient within the relatively important food and drink manufacturing industry of the country (which, together with other agricultural related industries, accounted for 16% of overall employment in 1995[9]) as well as on the retail market.

21. Irish Sugar is the main supplier of sugar in Ireland, with an overall market share of above 90 % in the period 1985-95. Imports of sugar into Ireland have come from France, the United Kingdom (mainly Northern Ireland) and to a limited extent from Germany and Belgium. Imports from the UK are mainly imports of sugar produced by Irish Sugar. In 1993/94, imports of sugar other than that produced by Irish Sugar accounted for around [.........] [10]of the market.

22. On the industrial side, most imports since 1985 have been of French sugar and have been made through ASI International Trading Ltd and its successor ASI International Foods ("ASI"). These industrial sales are in 50 kg bags. The importation of bulk sugar from France to Ireland is more costly than the transport of bagged sugar, particularly if the tanker has to make the return journey with an empty container[11]. The Greencore Group Corporate Plan of June 1994 notes that "The vast majority of imports is in 50kg bags, with bulk sugar transport being relatively expensive because of the need for dedicated containers". Over the years, industrial users have been moving to silos for stocking their sugar, resulting in an ever declining market for bagged sugar[12].

23. On the retail sugar market, which accounts for around 25% of the total sugar market, Irish Sugar's share has been above 85% since 1985, and its main "Siucra" brand enjoys significant consumer recognition[13]. Most of its competition comes from small domestic companies. Depending on relative price differentials, there have at times been imports of retail sugar from Northern Ireland, although a significant proportion of such imports are manufactured by Irish Sugar. Irish Sugar internal documents note that its customers for retail sugar have traditionally been split 50/50 between wholesalers and retail groups ("multiples"), but that recently mutiples have been growing in importance. A few of these mutiples sell "own-brand" retail sugar. However "to-date, all sugar for own brands is sourced from Irish Sugar as the Irish source is seen as important to the customer"[14].

24. During the 1980s Irish Sugar's main domestic competitors for retail sugar were Round Tower Foods Ltd ("Round Tower"), and ASI, which imported the "Eurolux" brand of Compagnie Française de Sucrerie ("CFS") until late 1988. In the period 1984/85 up to 1986/87 the majority of Round Tower's sugar supplies consisted of imported sugar. During that period it was active as a parallel importer of Irish Sugar sugar from Northern Ireland into Ireland. It also imported sugar direct from certain destinations and purchased from ASI sugar imported from France. Since 1987/88 it has bought most of its sugar from Irish Sugar.

25. By the early 1990s Round Tower was Irish Sugar's only domestic competitor on the retail market for white granulated sugar, with a retail market share of [......]

26. In 1993 four Irish food packers, namely Gem Pack Ltd ("Gem Pack"), Burcom Ltd ("Burcom"), Tara Foods Ltd and P.J. Lumley Ltd, launched 1 kg  white granulated sugar brands,. These companies achieved a total retail market share of around 7.5% by mid-1994, with Gem Pack being the most successful (around 5% of the total market). Burcom ceased trading in mid-December 1994. ASI also launched its own retail pack in 1993, using imported French sugar, but withdrew from the retail market for the second time in mid-1994.

27. Burcom initially packed both Irish Sugar sugar and imported sugar sourced from ASI, whilst the other packers sourced their industrial sugar from Irish Sugar. Since the demise of Burcom and ASI's withdrawal from the market, Irish Sugar has supplied "almost all"[15] of the bulk white granulated sugar packed by its domestic competitors for the retail market.

28. In September 1994 Irish Sugar launched the "Castle" brand of 1 kg retail sugar, at a lower wholesale price than Siucra.

29. Distribution of Irish Sugar sugar in Ireland is carried out by Sugar Distributors Limited (hereinafter referred to as "SDL"). Until February 1990, Irish Sugar held 51% of the equity (in the form of "B shares") of SDL's parent company, Sugar Distributors (Holdings) Ltd ("SDH"). The remaining 49% (in the form of "A shares") was held until 1988 by the companies Musgraves and Punch, and Messrs Garavan and Keleghan, and from 1988 on by four executives of SDH, namely Messrs Lyons, Keleghan, Tully and Garavan. At that time there was an equal number of directors for the A and B shareholders and an independent chairman. The Managing Director of Irish Sugar and a number of other Irish Sugar Directors were on the Boards of SDH and SDL. Another company, J C Cole Ltd ("JCC"), was responsible for distribution of sugar in the Western District of Ireland until it was wound up in March 1988 and its business integrated in SDL.

30. Irish Sugar has stressed that, in the period prior to February 1990, it had legal control over SDH but not management control[16]. From July 1982 onwards[17] the responsibility for technical services and marketing including, but without being limited to, marketing strategy, consumer promotions and rebating, was allocated to Irish Sugar, whilst SDL was made responsible for the funding of sales, trade promotions, merchandising and distribution of Irish Sugar products in the South and Northern markets. These responsibilities were divided into the designated areas between SDL, JCC and William McKinney (1975) Ltd ("McKinney"), with SDL responsible for sales decisions including pricing decisions for all three companies. However, these decisions were "to be taken in accordance with policy as laid down by the Chief Executive of the Sugar Division" of Irish Sugar which, as noted, funded any rebates to customers. SDL was, subject to availability of supplies, committed to purchasing its sugar requirements only from Irish Sugar and was prohibited from the sale, resale or promotion of any products "which are of a like or similar kind" to Irish Sugar products. SDL's and Irish Sugar's co-responsibilities included "advising and reviewing of pricing and promotion policies" and "communicating information as necessary to each other on all aspects of sugar marketing, sales, trading, advertising, consumer promotions and financial". To ensure that "all aspects of sugar trading" were" effectively communicated" between Irish Sugar and SDL, and that the areas of co-responsibility were properly covered, a monthly meeting was instituted between the Sugar Division of Irish Sugar and SDL. These meetings were chaired by the Chief Executive of the Sugar Division of Irish Sugar.

31. In February 1990 Irish Sugar acquired all of the remaining shares in SDH, and thus became the sole owner of SDL.

32. In addition to being the main supplier of sugar in Ireland, Irish Sugar continues to be an important supplier of sugar in Northern Ireland through McKinney. At the time that this company was set up in 1976, it was 51% owned by SDL. In 1980 SDL increased its shareholding to 60%. SDL and its parent company SDH had a clear majority on the Board of Directors of McKinney in the period 1985-1989, with seven out of the ten Directors[18]. Two of the four remaining minority shareholders in McKinney had a representative each on the Board. However, McKinney Management Committee meetings, at which commercial policy was decided, were usually attended only by Messrs Lyons, Hogan and Keleghan of SDH/SDL and Mr Wood of McKinney[19]. In 1989 SDL further increased its shareholding in McKinney to 70%.

33. The consumption of granulated sugar in Northern Ireland has fluctuated between 35 000 and 39 000 tonnes since 1984, with the main suppliers being Irish Sugar, British Sugar PLC and Tate & Lyle PLC. In the period 1984-1994 Irish Sugar held [....] of the sugar market in Northern Ireland, British Sugar accounted for around [......] and Tate & Lyle [...]. In 1994 the Greencore Group Corporate Plan noted: "Currently, we have about [...] of the retail branded market and about [...] of the industrial market" in Northern Ireland.

Industrial Sugar Prices

34. According to Irish Sugar, in the period 1985-1994, prices for industrial sugar in Ireland and Northern Ireland have shown the following pattern.

Table 2: Average net selling prices (IEP  per tonne) for industrial sugar in Ireland and Northern Ireland

Source: Greencore/Irish Sugar

35. According to Caobisco/Committee of Industrial Sugar Users, the average indicative selling prices in IEP for industrial sugar in bulk ex-factory in Ireland during the following months between 1986 and 1994 were:

Table 3: Average indicative prices for industrial sugar in Ireland

Source Caobisco/Committee of Industrial Sugar Users

36. It should be noted that the Caobisco figures are for particular months, whereas those of Irish Sugar are annual averages.

37. Irish Sugar also makes regular sales of between [...] and [....] tonnes of industrial sugar in Great Britain. In the period 1985-1994 prices for industrial sugar in the United Kingdom (including Northern Ireland) have shown the following pattern.

Table 4: Average net selling prices (GBP per tonne) for industrial (bulk) sugar in Great Britain and Northern Ireland

Source: Caobisco/Committee of Industrial Users of Sugar indicative prices. It should be noted that over this period sterling has declined from a premium of around 18-20% relative to the Irish pound to a discount of around 2-3%.The difference between the prices in the United Kingdom and Ireland in the period 1985-1992 is thus not quite as large as the figures in Tables 2, 3 and 4 suggest.

38. Although it is not reflected in its own figures in Table 2 above, Irish Sugar has stated[20] that, from 1984 to 1993 "Northern Ireland and G.B. prices were in general lower than prices in Ireland and in the particular case of sugar were at times in the order of 18% lower in Northern Ireland". Irish Sugar accounts for the discrepancy between its figures and the price trend found by a confidential report prepared on the company's behalf by stating that "throughout the period Irish Sugar's industrial customers were powerful enough to reverse the general price trend". It should be noted that the average price for industrial sugar in Ireland takes into account the fact that Irish Sugar's two major customers[21], which account for around [...] of its sales of industrial sugar, both pay a significantly lower price than the average. As is shown in Table 6 below, no other industrial customer paid a net price of less than IEP [...] in mid-1994, the average price shown by Irish Sugar for 1993-94. In addition, a system of "sugar export rebates" applied by Irish Sugar means that those industrial customers selling their end product outside Ireland receive rebates of IEP [...] a tonne, which is reflected in the average selling price[22]. These rebates are not available to purely "domestic" customers.

39. The "Greencore Group Corporate Plan 1993/4 - 1997/8" of June 1994 notes under "Volume/Pricing Implications":

"Moving from Home Market Industrial to Northern Ireland or the UK Export would result in a loss in margin as follows:-

Margin Loss

Northern Ireland Industrial [....]

UK Industrial [....]

Retail Sugar Prices

40. According to Irish Sugar, in the period 1985 to 1994, prices for retail sugar in Ireland and Northern Ireland have shown the following pattern:

Table 5: Average net selling prices (IEP per tonne) for retail sugar sugar in Ireland and Northern Ireland

Source: Greencore/Irish Sugar

41. A handwritten note on a "Sugar Plan" slide copied by the Commission at the premises of Greencore, together with the Greencore Corporate Plan of June 1994 refers to the "home market premium" on the sugar price. A further handwritten note headed "Sugar Plan", also notes that, for various assumptions on sales prices, the "home market premium is retained"[23].

E. Facts underlying the infringement of the competition rules

I. Measures to protect the home market against competition from imports from other Member States

(i) Imports from France

42. As noted above, a high proportion of imports of sugar into Ireland since 1985 have come from France.

* Transport restriction

43. It follows from the documents on the file that in the mid-1980s Irish Sugar took steps to restrict the opportunities for transportion available to its competitors. In this respect reference can be made to the minutes of the Irish Sugar/SDL/JCC Committee meeting of 28 June 1985:

"Present situation in home retail market ... In relation to packet sugar being produced by Round Tower, it was noted that a gap of approximately [....] per tonne existed between their average selling price and the price of "Siucra" [Irish Sugar] product. On this problem it was agreed that CSET [Irish Sugar] should ensure that Round Tower were not enjoying advantageous arrangements with their supplier or shipper..." [24]

44. In particular, in the middle of 1985 Irish Sugar tried to hamper ASI from bringing in sugar from France by threatening the State-owned British and Irish shipping line company ("B&I") that it would take away all Irish Sugar business if they continued to carry French sugar, supplied by the French processor CFS, for ASI. B&I gave in to Irish Sugar and agreed that it would no longer carry sugar for ASI. This resulted in ASI initiating legal proceedings against B&I and Irish Sugar. Irish Sugar's course of action in this respect is referred to in a series of handwritten entries in the office diary of Mr Keleghan:

"17 July 1985 - Chris Comerford [Managing Director of Irish Sugar] - Brendan Byrd [representing B&I] - B&I will not be handling any French sugar from Monday 22 July. Last years tonnage 228 x 20 = 4560 - Year to date 91 x 20 = 1820 - 1420 to April ... Charles Lyons gave promise to Brendan Byrd that Tanktrans [a subsidiary of Irish Sugar] would put extra business in B&I..."

"1 August 1985 - B&I advised P.C. [Peter Cunningham of ASI] that CSET [Irish Sugar] applied pressure to them not to deliver to PC - Crude and Deceitful attempt to put pressure on PC prior to discussions. PC had meeting with Alex Spain [director of B&I]. [25]"

The B&I claim was settled out of Court. It was agreed that Irish Sugar would pay CFS a certain amount of indemnity. Irish Sugar has admitted that it advanced "the proposition" to B&I to withdraw its custom if B&I continued to ship CFS sugar from France to Ireland.

* Selective pricing

45. In a note dated 8 March 1988 to the members of the CSET (Irish Sugar)/SDL/JCC Executive regarding French sugar imports Mr Keleghan (then Sales Director of SDL) noted the following:

"...We have established that it would cost approx. [....] to bring all customers to a maximum of [....] per tonne. (...) I do not envisage dropping prices to all customers, thereby involving the heavy cost referred to above, however, where we meet up with new low prices we must respond carefully and ensure that we hold customers at all levels no matter how small. This I am aware is a slightly risky step, as we may have some very small users enjoying terms equal to or better than some bigger ones. I feel this is a risk we must take however. In the meantime we have initiated increased vigilance at Industrial Customers level with a view to establishing the extent of any increased activity by ASI.[26] "

* Product swap and fidelity rebate

46. It has been shown above that traditionally ASI's retail sales of white sugar were made through Round Tower[27]. However, from 1987/88 onwards Round Tower was receiving nearly all of its sugar from SDL. As the existing business of ASI came under severe pressure in the industrial sector, ASI decided in 1988 to launch a 1 kg  sugar packet of CFS under the brand name "Eurolux" to the market in Ireland.

At the Board meeting of SDH of 28 June 1988 this issue was discussed and the minutes record that:

"... With regard to the retail market, Mr Keleghan advised the board that as he had forecast at the March meeting, ASI did launch a retail pack on the market. While they had so far been unsuccessful in their launch, it was his belief that they would succeed in getting some small quantities of sugar into some independent retail shops...

Mr Comerford (Managing Director of Irish Sugar) stated that the sugar industry has never before faced a challenge such as we were now facing. If we did not succeed in meeting this challenge, then the future of the sugar industry in Ireland would be very bleak indeed. He was quite pleased with the response so far to the challenge but was concerned about the cost to both (Irish Sugar) and (SDL) which would be very high..."[28]

48. Upon presentation and introduction by ASI of "Eurolux", SDL took certain actions which upon complaint by ASI have been challenged in court under Irish law by the Director of Consumer Affairs and Fair Trade. These actions are described in the affidavit of Mr Anthony Brennan, Authorized Officer acting on behalf of the Director before the Irish High Court on the following lines.

49. ASI concluded a deal with the Irish wholesale group Allied Distribution Merchants ("ADM") for the supply of 1 kilogram packs of granulated sugar in or about February 1988. ADM agreed to purchase 1 500 tonnes of 1 kg packs of Eurolux sugar and the first consignment of 24 tonnes thereof was delivered in mid-April to the ADM warehouse for distribution to retail outlets of the Londis chain of stores. ADM issued on 15 April 1988 a bulletin to all its members, that is to say the retail outlets of the Londis chain, advising them of the availability of the sugar. According to the affidavit of Mr Brennan, following the issue of the said bulletin, Mr Keleghan of SDL had a meeting with Mr Lane (Chief Executive of ADM). The affidavit indicates the following:

"At the said meeting Mr Keleghan informed Mr Lane that if the quantity of sugar purchased from the defendant (about [....] tonnes per annum) was reduced then the defendant [SDL] would "bonus back" their sugar. In effect this meant that ADM could not sell or compete and they lost their bonus from the defendant. Mr Lane informed Mr Keleghan that he had a large quantity of the first delivery of Eurolux Granulated Sugar in his warehouse unsold. Mr Keleghan offered to buy this sugar to sell to manufacturing industry and he agreed to allow the amount he received for it as a credit in ADM's account. (...) The amount of Eurolux sugar purchased by the defendant was 21.01 metric tonnes.[29]"

Mr Brennan further notes in his affidavit:

"I say that in reply to my question as to why more sugar was not ordered, Mr Lane replied that he considered the market was not ready for Eurolux sugar at present. He added that ADM had an agreement with SDL whereby ADM normally buy [x] tonnes of sugar and get this at the [3x] tonne rate, which is a more advantageous rate. If they were to reduce the amount of sugar purchased this agreement would no longer be of effect and they would not be able to obtain the sugar from the defendant [SDL] at the[3x] tonne rate."[30]

It follows from the evidence on the file that the 21 tonnes of Eurolux sugar in question were collected from ADM on 22 April 1988.

50. Similar actions took place with regard to the retailer Kelly's Spar Supermarket. According to Mr Brennan's affidavit, Kelly had bought half a tonne of Eurolux sugar from the agent of ASI around mid May 1988. The Eurolux sugar was placed on the shelf and at first the sugar sold well. It is further reported in the affidavit of Mr Brennan that some four weeks later, SDL called the shop and asked how Eurolux was selling. The affidavit states that Mr Kelly informed SDL that if he could get a better price for sugar from Irish Sugar he would not want to sell the Eurolux sugar. Mr Kelly stated that the man representing the defendant (SDL) informed him that

"if he wasn't able to shift it they would swop it for him.[31]"

The affidavit continues by stating that about two hours later the Eurolux sugar was collected and exchanged for an equivalent quantity of sugar from Irish Sugar.

51. In his replying affidavit Mr Keleghan of SDL said, in essence, that both ADM and Kelly were concerned as to whether they would be able to sell all of the Eurolux sugar which they had been delivered. Both ADM and Kelly would have been aware that the Irish market was not ready for Eurolux sugar. In the case of Kelly, SDL noted that Mr Kelly himself had asked to arrange to swap Eurolux sugar for the Siucra brand.

52. It follows from the documentary evidence of the file that although the actions relating to the product swap were taken by SDL, Irish Sugar was duly informed by ASI of the difficulties it encountered. In a letter of 18 July 1988 Mr Loane of ASI wrote the following to Mr Comerford, the Chief Executive of Irish Sugar at Irish Sugar's address in Dublin.

"Dear Mr Comerford

I am writing to bring to your attention unfair trade practices being initiated either directly by your company or by Sugar Distributors Limited which is controlled by you in relation to our efforts to market our Eurolux 1 kg Retail Sugar in Ireland. We have requested the Director of Consumer Affairs and Fair Trading to investigate specific difficulties we are experiencing.

Specifically this letter is to advise you that we object very strongly to your companies substitution of our product in the Spar retailer, Kelly's of Boyle. With or without the agreement of the proprietor this action contravenes existing legislation and we respectfully demand that you restore our product here and in other instances where this practice has occurred.

We specifically object to the use of oppressive tactics on other individual retailers who are enjoying the benefits of Eurolux and would continue to so do if left unthreatened.

We seek your assurance that you will desist from restrictive practices and unfair trading and compete with us on equal terms as we are entitled to expect under the rules of the European Community."[32]

53. The Director of Consumer Affairs and Fair Trade was seeking an injunction in the High Court to restrain SDL from acquiring 1 kilo Eurolux sugar from wholesale or retail outlets. The injunction was however not granted on the ground that there was no evidence "that there was a continuing breach of the relevant Orders or that it was likely that there would be further breaches."

(ii) Imports from Northern Ireland

54. In the period between 1985 and 1990, and in particular during a price war between the UK sugar producers British Sugar PLC and Tate & Lyle PLC, Irish Sugar was faced with the problem of cross-border imports from Northern Ireland to Ireland. In principle all sugars in Northern Ireland, regardless of their origin, could be used for these imports. They included both sugars from competing producers such as British Sugar's Silver Spoon and Irish Sugar's own sugar which was being re-imported either in bulk or in retail packets (under the McKinney label). At several meetings this matter was discussed, leading to various specific actions which were designed as a defence against these imports.

* Restriction of supply

55. At an internal meeting between Irish Sugar and SDL concerning packet sugar of 23 January 1985 it was noted:

"Volume of sugar imported across border in November/December estimated at 700 tonnes with an acceleration in January.

Sales to Wholesalers in border area over the last two months as follows: (...)

Mr A.J. Hogan [General Manager Marketing of Irish Sugar] suggested we remove [...]/tonne rebates currently given in Northern Ireland. This would have a double benefit in increased Northern prices plus reducing rebate required in South. This action to be taken while attempting to get B.S.C. [British Sugar] and Tate & Lyle to follow but our price to be increased in any case.

Mr Keleghan's [Sales Director of SDL] view was that there were only two alternatives.

(a) National rebates in the South. He suggested [...]/tonne on a National basis with [...] in border areas for February/March. Estimated cost £[....].

(b) Remove present [....] border area rebate as this was impossible to maintain on a selective basis and restrict supplies of McKinney sugar to the Northern Ireland wholesalers who are currently supplying the Southern trader.

After discussion it was decided to implement the latter alternative. In the meantime efforts are to be continued to get B.S.C. and Tate & Lyle to increase prices.[33]"

56. At the board meeting of McKinney of 6 February 1985 Mr P. Wood (Director of McKinney) recorded that:

"Tate & Lyle were gaining some additional sales because of restriction of supplies of McKinney sugar in the border area."[34]

* Selective rebates (discriminatory pricing) including border rebates

57. In a note titled "SDL review of current (April 1986) competitive problems on domestic sugars and recommendations on pricing/promotional strategy", it is indicated that:

"Since the last packet sugar price increase in October 1984 (...) a substantial differential has existed between home market prices and the price of competitive imported product, the latter including re-imported McKinney packets and bagged sugar. (...) The activities of Round Tower Foods Limited which is currently packing and selling an estimated 40 tonnes of packet sugar per week (...) are a continuing cause of concern and, at this stage, are but one feature of the actual/potential competition picture which threatens the price and market share dominance of "Siucra" packet sugars in the Republic of Ireland market.[35]"

In the same note some strategic options were set out:

"(i) take no action; (ii) reduce market selling prices to all customers by IEP [...] per tonne, thereby equalising the selling prices North and South; This action should totally eliminate all import/competitive problems but would be both unnecessary and impossible from a financial point of view; (iii) reduce selling prices by[....], which should be sufficient to confine cross-border imports to border areas and keep the level of packing by Round Tower Foods Limited to at or below the current level, but would not deal with the demands of multiples, etc., for equal pricing North and South; (iv) Operate a selective co-ordinated programme to take account of the most vulnerable areas, with the objective of maintaining shelf prices at the current level. This is the recommended strategy and SDL believe that, given the excellent relationships which exist in the market place coupled with the recognized branding advantage of Siucra products, it should be adopted for the balance of 1985/86 and for 1986/87. SDL consider that this is the most preferable least cost option, whilst at the same time recognizing that it cannot be guaranteed to withstand increased pressures from Round Tower Foods Limited/ importers. If the latter situation occurs serious consideration will have to be given to the more expensive options listed.[36]"

The recommended strategy is then further detailed:

"(i) continue with [....] per parcel [15 x 1 kg  bags] promotion in Donegal area and extend promotion in Monaghan/Dundalk area [border area]; (...) ; (iv) Particular problems have arisen with A.D.M. because of the nature of that grouping. The cost of tempory rebate arrangements entered into with A.D.M. are set out in Apppendix E4. and it is expected that additional expenditure of [....] p.a. will arise with this customer.[37]"

58. Competing sugar packer Round Tower Foods was active as a parallel importer of sugar from Northern Ireland during this period, which it sold under its Gold Seal label. An undated handwritten note which was found in the office of Mr Keleghan states the following:

"Recommendations and implications re Gold Seal Sugars: 1R continue as we are, i.e. rebating as the necessity arises. Presently we rebate to:[....]. Through [...]we rebate to many independent outlets the largest being [...] Imp. [implication].This method is exceedingly dangerous both legally and commercially. Legally on the basis of selective pricing. Commercially on the same basis except that the selectivity is in favour of our smaller customers i.e.[....]... ex area manager [...] is a user of less than [...]p.a. and has a nett price of ... whilst[...],[...]who purchase from [....]to [....]t.p.a. or more than [.....]tonnes collectively....[38]"

59. In the minutes of a joint meeting of Irish Sugar and SDL of 5 June 1986 the following is reported:

"Mr C.M. Lyons [Managing Director of SDL] said that, in the light of the very low Northern Ireland prices already discussed, it was essential to maintain the IEP [...] per parcel Border promotional allowance. It was agreed to continue this promotion for the reason stated."[39]

60. In a note to Mr Keleghan of 26 June 1986, Mr Lyons wrote the following:

"1.[...]

I spoke yesterday with Joe Lane who rang regarding the position on the [...] per parcel for July. (...) I advised him to extend the same situation for July. He went through the individual customers he had taken back and these amounted to [...] customers out of a total of [...] that he has given it to. The other [...] are loyal ones who have always remained with him but who were under pressure in the areas involved.[40]"

61. At a meeting of the Board of McKinney on 19 September 1986 it was reported that:

"whilst the drop in packet sugar sales was of concern, it had to be born in mind that approximately [...] tonnes of the reduction was attributable to reduced cross-border sales of McKinney sugars".[41]

62. In a note called "Points of discussion"[42] the following description was given of the problems concerning cross-border sales:

" 2. BSC and Tate & Lyle cut their prices (we have not followed) by a further £12/13 in small Border Cash & Carry's (none of whom would reach 300 tonnes of sugar per year) who were only too pleased to stock their product as McKinneys was price marked and could not be used for Cross Border Traffic.

We have a serious problem therefore with prices too low in these Cash & Carry's and Cross Border Merchants purchasing and dumping in the South which is now costing C.S.E.T. [Irish Sugar] approximately [...] per annum to discount in the Border area in the South as well as losing[...] retail packet market share in Northern Ireland. The problem is potentially far more serious as the amount of discounting is growing and it could trigger a National discount which could cost up to [...] million..."[43]

63. In the minutes of an SE (Irish Sugar)/SDL/JCC Committee meeting of 7 January 1987 the following is stated:

"Mr Keleghan reported that the [...] per parcel rebate had been reduced to [...] per parcel in all areas except in Donegal. It was agreed that the Donegal rebate be reduced to [...] from December 1st, 1986.[44] "

64. In the minutes of a joint Irish Sugar/SDL meeting of 12 January 1987 the following is indicated with regard to cross-border sales:

"Mr C.M. Lyons said that the reduction of the cross-Border rebate from [...]to[...]per parcel had worked out well without any major problems and the reduction had not resulted in any increase in the small amount of B.S.C. and T&L sugar being imported. Mr M. Leyden confirmed a similar reaction in the Western area.[45]"

65. At a meeting of the Board of McKinney of 21 January 1987, Mr Keleghan pointed out that the substantial drop in sales to James Finlay Ltd:

"reflected both reduced cross-border sales and also the loss of a major UK contract by this customer".[46]

66. The minutes of the Board meeting of SDH of 18 November 1987 record that:

"Border rebates had been removed in July 1987 but might have to be reintroduced in early 1988. Round Tower appeared to have adopted a more rational policy in recent times....[47]"

67. The minutes of the meeting of the Board of SDH of 29 March 1988 note that:

"the recent £20.00 increase in Northern Ireland packet sugar prices, coupled with the strengthening of sterling against the Irish Punt, had reduced cross-border imports significantly....[48]"

68. The minutes of the meeting of the Board of SDH of 28 June 1988 indicate that:

"increases in the pricing of BSC and Tate & Lyle sugars had helped to stabilise that market and reduce the amounts of sugar coming across Border".[49]

69. In the minutes of a Irish Sugar/SDL management meeting held on 27 June 1990 it is indicated that:

"Mr T.G. Keleghan said there was a potential threat to the home market from cross-Border imports from the North. He said that if this threat materialised it was important to react speedily with appropriate counter measures. These would include price marking on McKinney sugar and appropriate promotional activity on the home market...."[50]

II. Pricing Behaviour that discriminates against particular categories of customer

(i) Sugar Export Rebates

70. Irish Sugar's prices for industrial sugar vary according to both normal commercial criteria, such as the amount purchased and the credit terms, and also a range of other factors. Of these by far the most important, and valuable, is a sugar export rebate, which is given to customers exporting their final product, such as confectionery or soft drinks. These rebates, which Irish Sugar also refers to as "Peripheral Factor Allowances" or "PFAs", are paid according to the tonnage of sugar finally exported, and the evidence[51] shows that a number of customers report their export volumes in arrears in order to claim a rebate - for example, jam makers Chivers claimed [...] for the period July to October 1994, of which IEP [...] was in respect of exports to "Britain and Europe". Irish Sugar states that some customers, such as confectionery manufacturers [...] and [...] (Irish Sugar's largest customers), have the rebate incorporated into their net price for all sugar purchases, although [...] subsidiary [...] is amongst the companies that provides Irish Sugar with periodic reports of the tonnage of "export sugar" used. Although the export rebate system is similar to that within the common sugar regime for exports outside the Community, most of the exports for which rebates are granted are to other Member States. Irish Sugar claims that the rebate system originated as a result of government encouragement to support exporters during the 1970s. The system has therefore been in place for a considerable period of time, and sugar export rebates were discussed at meetings between representatives of Irish Sugar and SDL prior to February 1990[52].

71. In a letter dated 24 February 1994 to the Office of Consumer Affairs Mr Heaphy of Irish Sugar explained that the export rebate "has been of the order of [...] to [...] for each tonne of sugar utilised in the manufacture of the export product"[53]. In a letter to the Commission Irish Sugar have stated that average export rebate figures are only available in the company's records from 1987, and have shown calculations of the total value of rebates over the total tonnage which produce an average rebate of around IEP [...] a tonne between 1987 and 1995, although how this average relates to individual customers is uncertain[54]. In fact the evidence shows that export rebates can reach up to over IEP [...] per tonne, that customers exporting the same volumes receive different sizes of rebate per tonne and that the size of the rebate can vary over time without any corresponding variation in volumes purchased or exported, or without any correlation to changes in currency rates. Irish Sugar have stated that;

"...where PFAs have been granted to a company over a period of time the PFA becomes effectively built in to the company's purchase price and, consequently, the company will demand to receive the same level of rebate".[55]

72. Rebates can also vary according to the Member State to which exports are made: for example, confectioner McKinney receives a [...] rebate on sugar ultimately destined for the United Kingdom and a [...] rebate for exports to other countries. These are then averaged with purchases destined for the "domestic" market to give an overall rebate of [...] a tonne on all sugar bought by this customer. Drinks manufacturer Clintock, on the other hand, receives a [...] rebate on all purchases because "a very high percentage is exported" - no figures are provided to show exactly what proportion or to where. Irish Sugar have explained in meetings with the Commission that rebates are granted on an ad-hoc basis with individual customers and that they are notified to the company receiving them. For example, in a letter dated 7 October 1993 to BSN Groupe, Mr Heaphy of SDL proposes a reduction of [...] a tonne in the price of sugar supplies to BSN subsidiary Irish Biscuits (as part of the annual price negotiations with BSN), then adds "we operate an export rebate arrangement with Irish Biscuits and subject to further discussions with Irish Biscuits we are proposing a rebate of [...] a tonne"[56]. There are no set rates or thresholds for export rebates, and no general publicity is given to the system.

(ii) Discrimination against competing sugar packers

73. By the early 1990s, ASI had stopped supplying the retail sugar market, and the percentage of non-Irish Sugar products was small and virtually static (Round Tower held a steady [...] of the market, using mainly Irish Sugar sugar). However, in mid-1993 four packers, of which the most important were Gem Pack and Burcom, launched 1 kg  retail packets, taking advantage of the large price difference between industrial and retail sugar. Gem Pack bought sugar only from Irish Sugar. Burcom used, over time, both imported (from ASI) and Irish Sugar sugar. ASI also decided to launch its own retail packet in 1993, using imported French sugar.

* Price charged for industrial sugar

74. In addition to export rebates, Irish Sugar also grants a variety of less valuable (between IEP [...] a tonne) non-volume related rebates. These are generally aimed at "domestic" customers, although four companies receive them in addition to export rebates. There are rebates for starter companies, companies that are located far from their market and companies that are, or were, expected to grow quickly. In fact, as Irish Sugar's own industrial bulk sugar price list as at 30 June 1994 shows, virtually all customers receive some form of discount except competing sugar packers.

Table 6

* Gross Price already incorporates sugar export rebate

** Purchase bagged Sugar (normally carries a premium).

(S) sugar packers

Sources: Irish Sugar responses of 10 August 1994 and 10 March 1995 to requests for information by the Commission. Both are to be found in Annex 8 to the Statement of Objections of 25 March 1996.

75. Irish Sugar documents show that in 1990 Gem Pack was granted a PFA, or export rebate of [...] a tonne. Irish Sugar has not explained the reason for this, but have argued that Gem Pack received an [...] a tonne rebate to help it compete against imports of sugar sachets in the period up to 1993, when it was not competing with Irish Sugar in the 1 kg retail sugar sector. This rebate for sugar sachets ended when Gem Pack started competing with Irish Sugar in 1 kg packets. Irish Sugar have stated[57] that Gem Pack was subsequently offered an [...] a tonne rebate in October 1995 which was backdated to 1994. Irish Sugar has also argued[58] that the sugar packer Burcom also received a rebate on its price for sugar in 1994, although this was not shown in their response of August 1994, because, at a price of IEP [...] , it was "charged as if it had purchased [...] tonnes"[59] when "in its first year of trading (May 1993-4) Burcom purchased[...] tonnes"[60]. In this respect, it should be noted that Burcom was still being charged IEP [...] on 30 June 1994, after the end of this first year of trading and despite its rapid growth. In the year ending December 1994 Burcom purchased nearly[...] tonnes of sugar. Furthermore chewing gum maker Topps Ireland Ltd, which bought only [...] tonnes of sugar in 1994, paid a gross price only [...] a tonne higher than Burcom's.

76. Like export rebates, other rebates are arranged on an entirely ad-hoc basis and notified verbally. Thus companies facing similar conditions may receive entirely different rebates. For example, Gleeson, a soft drinks manufacturer, receives a [...] a tonne rebate because of its distance from the Dublin market, despite the fact that it is located nearer to Dublin than other customers. Batchelor's received a [...] a tonne "promotional rebate" in 1994 despite the fact that its purchase volumes had "declined significantly", according to Irish Sugar. Even Topps received a [...] rebate on top of its low gross price because when the company was set up a few years ago sales were "expected to be substantial". There appears to be a distinct lag between sales performance and any adjustment in rebates, and rebates for "start-up" and "fast growing" companies appear to be confined to those not in the sugar business.

77. As with export rebates, not only are the amounts per tonne for these "domestic" rebates variable, but the method in which they are granted, that is whether on or off-invoice, on all purchases or retrospectively (as a lump sum) if certain purchase volumes are met, also varies from customer to customer.

* Target rebates and selective pricing

78. In Spring 1994 (March-May), alongside a World Cup promotion which involved ordinary quantity discounts, Irish Sugar also offered the major food wholesalers in Ireland target-based discounts on its Siucra 1 kg brand.

79. Irish Sugar has stated that wholesalers were offered an additional [...] discount on all purchases if they achieved an [...] increase on previous average weekly purchases. The reference period used to calculate the increase was the 26 weeks from April to September 1993. Documents taken at the company reveal that several wholesale groups got a higher target related discount, and two customers have confirmed this in response to requests for information. National Wholesalers Grocers Alliance Ltd ("NWGA"), which accounts for around [...] of the wholesale market, received a[...] target rebate and the Musgraves group received a [...] target rebate. Irish Sugar has argued[61] that these companies have given incorrect information to the Commission with regard to the percentage that was received as a target rebate. However, Irish Sugar's own records[62] clearly show for Musgrave "Target [...]which matches with Musgraves' own statement of the target rebate that it received. Irish Sugar does not deny that all the wholesalers involved were offered some form of target rebate.

80. A handwritten internal "Operations Report" notes, with respect to retail sugar, that

"promotional activity in April and May contributed to stock build ups and, therefore, to lower sales levels in June and probably July as well.[63]"

81. Irish Sugar launched a further round of target rebates on Siucra for two weeks in October, again linked to weekly averages during the period April to September 1993. Wholesale groups received a discount of [...] per tonne (around 3% on the average wholesale price) if they achieved an 8% increase in sales over this weekly average. Invoices for Siucra 1 kg sales during this period show that many customers bought significantly in excess of the target.

82. Target rebates have also been offered on a selective basis. In December 1994 Irish Sugar offered the major retail chain [...] a target rebate for 1995. An internal note of 15 December 1994 headed [...] 1995 Proposal" shows a "growth incentive" of a [...] discount on Siucra purchases in 1995, conditional on "an increase of [...] tonnes in Siucra volumes". Since Siucra 1 kg sugar comprised a very major part of total 1994/5 Siucra brand sales to[...][64], it followed that an increase in Siucra purchases would largely involve Siucra 1 kg purchases. At the time Irish Sugar was competing with Burcom for sales of 1 kg own label [...] sugar to[...] . The June 1994 Greencore Corporate Plan notes that in April 1994 [...] relaunched[...], "supplied [...] by Burcom and[...] by ourselves", and that "[...] are determined to establish[...] ...[....] are giving equal shelf space to [...] and Siucra". Any increases in Siucra volumes purchased by [...] were likely to lead to a reduction in 1 kg [...] purchases, which was the product for which Burcom was competing as supplier.

83. Irish Sugar has argued that Burcom ceased trading on 14 December 1994 and that the internal note therefore post-dates Burcoms closing down and that "At the time Burcom was not competing on the market in general or for [...] account in particular"[65]. However, the target rebate to [....] is also noted in the extract from Irish Sugar's Register of Supplementary Terms, which Irish Sugar has stressed is a complete record of its terms in order to comply with the Irish Groceries Acts[66]. The extract[67] clearly shows that the "Branded Siucra [...] Growth incentive Siucra[...] was entered in the Register on the 8 December 1994, and was therefore determined on or before that date. Furthermore, Irish Sugar's own internal profit and loss forecasts made after the launch of the Castle brand in late 1994, envisaged Burcom's purchases of bulk sugar doubling from [...] tonnes in 1993/4 to [...] in 1994/5[68].

84. Irish Sugar have stated that in February 1995 the wholesale group[...] was offered both a target rebate and a non-target-related rebate for purchases of Irish Sugar's products for the period from March 1995 to February 1996. [...] bought approximately [...] million worth of Irish Sugar products in the preceding year. Its stated terms, which have been confirmed by[...] , were a [...] non-conditional rebate on the value of purchases and a further [...] rebate conditional on a [...] percent increase in purchases over the year.