Major Sherry producers in illegal cartel

Nine major Sherry bodegas and the official trade associations have been fined for breaching competition rules.

Spain's National Competition Commission (CNC) fined the group a total of €6.7m after it obtained evidence of anti-competitive practices.

Between 2001 and 2006, several of Sherry's major wineries established a cartel to control the output and price of Sherry to be exported to foreign distributors of 'buyers own brand' in Germany, the Netherlands, and Great Britain. These are the three biggest markets by far for such wines, but the prices have been so low and the big-volume sherry market is in such a parlous state, that presumably if there had not been some sort of price fixing, the wine might have been virtually given away.

Even today, four years post cartel activity, Tesco are selling their own-label sherries such as Fino for barely £4 for a 75cl bottle, including duty at £2.25 and VAT at 17.5% leaving pathetically little for the wine itself. So own-label sherry offers wine lovers some of the best value in the world.

The CNC learned of the alleged misconduct because one of the members of the cartel decided to inform on the others.

Those fined are appealing, and the trade association is arguing that these penalties will penalise the thousands of families who depend on sherry, already 'in grave crisis', for their living.

The CNC described the cartel's actions as a very serious violation under competition law in Spain and in the EU as the companies' actions lessened competitive pressure between producers and created conditions for higher prices and poorer terms of purchase.

Comparing the EU competition regulations with the way that the pricing of Bordeaux first growths seems to work, provides plenty of food for thought. This fascinating issue also suggests a way of dealing with the increasing power of the handful of powerful retailers who have come to dominate distribution.