With a view to a possible impending gas emergency, the Bundeskartellamt has suspended competition rules for an entire industry for the first time.

According to a statement from the authority, the four sugar companies that produce in Germany, Nordzucker, Südzucker, Pfeifer & Langen and Cosun Beet, can work together more closely than they have for a long time in the event of a gas supply emergency.

In concrete terms, they are allowed to make production capacities available to each other in order to ensure the processing of the sugar beets.

Bernd Freytag

Business correspondent Rhein-Neckar-Saar based in Mainz.

  • Follow I follow

Jonas Jansen

Business correspondent in Düsseldorf.

  • Follow I follow

According to its own statement, the competition authority currently perceives an increased need for discussion from companies.

Other exceptions could follow.

At the annual press conference just over a week ago, the President of the Cartel Office, Andreas Mundt, said that cartel law was flexible enough to “temporarily tolerate” cooperation between companies due to the crisis.

According to him, for the competitive evaluation of the cooperation in the sugar industry, it was now central that it is a one-off and temporary cooperation in the event of a gas emergency.

It only applies during the so-called sugar beet campaign, from the beginning of September with the first harvest until the billing in June 2023. The flow of information between the companies is limited to the essentials by accompanying measures.

Companies fear major damage

The majority of the remaining 18 sugar factories in Germany are currently still fired with natural gas.

According to the Cartel Office, if the gas failed to materialize, there would be “serious consequences” because the beet harvest could be spoiled.

This, in turn, also threatens consumers, "since excessive price peaks in the basic product sugar affect the entire value chain," as Mundt said.

However, a few rules apply to the companies: free production capacities may only be made available to a competitor if the competitor has already supplied all of its free production facilities with the sugar beets that are left over due to a factory shutdown.

However, the sugar manufacturers only have to do this "if it is economically possible due to the transport costs", as the Cartel Office writes.

This is exactly where the crux lies: Sugar production is a very regional business, the beets are delivered by farmers from the region.

Otherwise, beets are not transported from one plant to another within the company either, because it is usually not worth it.

After the end of the European sugar market regime, the sugar industry closed a number of plants, accelerating the ongoing consolidation.

The distances between the factories thus became even greater.

Protection mechanism against cartel formation

In the production of sugar, "process steam" is required above all, which is why it is considered energy-intensive.

First, the beets are cleaned and crushed in order to extract raw juice from them.

Subsequent purification, evaporation and crystallization then produces sugar.

The market is currently dominated by the three big ones – Nordzucker, Südzucker, Pfeifer & Langen;

the Dutch Cosun Beet operates only one plant in Anklam.

Years ago, the trio had to pay an antitrust fine of 280 million euros for territorial agreements.

All three are therefore still confronted with claims for damages from food companies worth millions.

According to their own statements, the cartel watchdogs have taken into account in their temporary permission for cooperation that the companies have already “made considerable efforts to convert sugar factories from natural gas to other fuels such as heating oil and coal in particular”.

However, the time until harvest was too short because the factories had previously been converted from coal and oil to gas.

Technically, the Cartel Office wants to prevent an "excessive exchange of information" within the industry by having an independent economic consultant ask companies about the processing costs.

The processing is then to be billed on the basis of the production costs, whereby neither the calculation nor the data used are to be passed on to the companies.

Due to the different procurement, the very volatile costs of the fuels and the additional costs due to the longer running times of the individual sugar factories, the specific costs of production cannot be traced either, according to the Cartel Office.

The Sugar Industry Association welcomed the decision.

When asked, the sugar companies were very cautious.

Apparently they still assume that they will be able to maintain their own energy supply for their production.