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Anti-Competitive Activity Alleged in Chile's Poultry Industry

15 December 2011, at 9:06am

ANALYSIS - It is alleged that Chile's national poultry association and the three companies that account for almost the whole domestic chicken market have been colluding over chicken output and prices for more than a decade – allegations denied by the companies involved, writes Jackie Linden, senior editor of ThePoultrySite.

Two weeks ago, Chile's National Economic Prosecutor's Office (FNE) filed a lawsuit against three of the country's biggest poultry producers – Ariztía, Agrosuper and Don Pollo – along with the poultry producers' association of Chile for collusion in controlling the market, according to Santiago Times.

Subsequently, the same source reported that Agrosuper publicly denied the charges. Chile's president called for the full rigor of the law to be applied, and a leading Socialist senator is pressing the government to make an example to the poultry companies' executives.

In an interview with La Tercera, general manager of Agrosuper, José Guzmán, said of the charges: "I know there has been no agreement to limit supply."

The FNE filed the lawsuit with the Chilean Free Competition Defense Court against the three companies – which together have a 92 per cent share of the local poultry market – and APA for fixing production levels and prices over the last decade. FNE is seeking the maximum penalty, a US$110 million fine and the dissolution of the APA.

La Tercera has reported that the poultry companies will claim that the APA never set production quotas, that they caused no harm to competitors or consumers, and that Chile continues to have an open poultry market.

In an interview with the publication, Mr Guzmán called the accusations "categorically and completely false, misleading and wrong. It is regrettable that this situation has occurred, because I know directly that there is no agreement nor has there ever been a limitation on production. It is all completely untrue."

Chile's President comes out in favour of free market

President Piñera has made clear the government's commitment to protecting consumers from such collusion as well as protecting the free market, reports Santiago Times. In order to protect both, he has created a collusion commission to come up with preventative measures against future threats to free trade.

One role of the new commission will be to evaluate harsher penalties, such as possible jail sentences for executives, rather than merely assessing a fine.

"We are seeking tougher sanctions, so that employers will think very hard, think not only seven times, not seventy times but seven times seventy times before engaging in practices that undermine competition," President Piñra told El Mercurio.

Santiago Times continues that the president's public posture has been criticised by some, including Socialist Party President, Osvaldo Andrade.

He said: "I call on the Government to act promptly, and not to make distinctions among offenders. Everyone involved deserves blame and punishment, including familiar faces."

Mr Andrade called for these harsher penalties on the poultry companies because of the impacts of the alleged price fixing on the poorest Chileans. Chicken is among the cheapest form of protein and the average Chilean consumes 60 pounds a year, according to a report released by the Office of Agricultural Policy (PASO).

Chile's government says there is no conflict of interest in ongoing collusion case, reports Santiago Times, after it was confirmed that President Piñera's third son is set to marry the granddaughter of Manuel Ariztía, the founder of the Ariztía poultry company, later this month.

Last week, Santiago Times reported that Juan Carlos Domínguez announced his resignation as deputy director of Chile's Institute of Agriculture and Livestock Development (INDAP) due to an ongoing case alleging collusion in the poultry market. Before joining the government, Mr Domínguez worked for Agrosuper.

Criminal investigation under consideration

In an opinion piece in Santiago Times earlier this week, Fundaciòn Sol economists, Gonzalo Durán and Marco Kremerman say that collusion over chicken production is just the latest scandal led by Chile's insular business community.

They report national prosecutor, Sabas Chahuán, as saying that Santiago prosecutors are gathering information to determine whether or not to open a criminal investigation.

Chicken is the most important meat consumed in Chile, they add, eaten in most homes that cannot afford the luxury of buying beef. A family of four consumes 10kg of chicken each month. This amounts to 18,000 pesos (US$35), or nearly 10 per cent of the national minimum wage, a wage now paid to one million Chileans.