Insights | October 29, 2018

Fresh milk battle between Arla and Valio brought to an end

Roschier represented Arla Oy in the Finnish Competition and Consumer Authority’s (FCCA) investigation and the subsequent court proceedings regarding the abuse of dominant market position by Valio Oy on the Finnish fresh milk market through predatory pricing and in the ensuing damages action.

In December 2012, the FCCA ordered Valio to cease the abusive conduct and proposed to the Finnish Market Court the imposition of a EUR 70 million fine on Valio. In June 2014 the Market Court dismissed an appeal brought by Valio against the FCCA’s decision and upheld the fine of EUR 70 million on Valio for having abused its dominant position by engaging in predatory pricing in the market for production and wholesale of fresh milk. Valio appealed the Market Court’s decision to the Finnish Supreme Administrative Court (SAC). However, in December 2016, the SAC dismissed Valio’s appeal and upheld the EUR 70 million fine imposed on Valio.

The SAC found that Valio had priced its fresh milks below average variable costs and hence Valio’s pricing constituted a prima facie abuse, since such pricing by a dominant company cannot be presumed to have any other economic objective than eliminating competitors. In such circumstances, it is for the dominant company to prove an objective justification for its pricing practices. Valio was not able to do so. Quite the opposite, the FCCA’s investigation had revealed that the pricing policy was a strategy planned and implemented by Valio’s top management with the aim to eliminate at least Valio’s largest competitor Arla from the market. Further, the evidence showed that Valio intended to raise prices back to their previous level once it had reached its goals.

According to the SAC, Valio’s conduct, which came to an end only when the FCCA handed down its cease and desist order, was the most serious abuse of dominance investigated in Finland to date. Therefore, the SAC considered the EUR 70 million fine justified. The fine imposed on Valio is the highest fine for competition law violations imposed on an individual company in Finland.

The infringement proceedings ended with the SAC’s final judgment in December 2016. However, the fresh milk battle was not over, as Arla and five smaller dairies brought actions for damages in the Helsinki District Court, claiming compensation for the losses they suffered due to Valio’s conduct. The total claim amount of all claimants was over EUR 100 million.

In September 2018, Arla and Valio reached an out of court settlement concerning Arla’s claim for damages, ending the fresh milk battle between Arla and Valio. Details concerning the settlement are confidential. The claims brought by the five smaller dairies are still pending before the Helsinki District Court.