Germany’s Price-Fixing Sausagefest

Germany’s Price-Fixing Sausagefest

The conspirators met at the Hotel Atlantic Kempinski, a turn-of-the-century building on Hamburg’s elegant Alster Lake. There, where the lobby is chandeliered and the bathrooms marbled, representatives of Germany’s most important meat manufacturers gathered to illegally fix sausage prices. It may be the most lucrative Wurstkartell in history.

Now, the sausage-makers have been caught. On Tuesday, German antitrust authorities fined 21 producers nearly $460 million for colluding to fix prices for Germany’s favorite meat products. Some of Europe’s biggest names in meat, including poultry producer Wiesenhof and Nestlé subsidiary Herta, were charged. Thirty-three individuals connected to the price fixing were also penalized. If this seems like a big penalty, it’s a big industry: German slaughterhouses turned out 8.1 million metric tons of meat last year and had revenues of nearly $16 billion. And Germany produces more pork — the main ingredient in most sausages — than any other European nation. In an official statement on Tuesday, Germany’s Federal Cartel Authority (BKA) claimed that the fine is commensurate with the "high number of firms involved, the duration of the cartel, and the billions in sales achieved at market." Those implicated will have two weeks to appeal.

According to the BKA, collusion in the sausage industry has been taking place for about a decade. Deals were made on the telephone or in rooms at the Hotel Atlantic. While exact figures were not agreed upon, producers set ranges of possible prices — higher, of course, than the market rate. The ring was uncovered through an anonymous tip.

This isn’t the first time German food producers have been caught colluding. In February of this year, German antitrust authorities revealed that they had fined three German sugar producers $380 million for several years of market manipulation. And by April, German antitrust authorities had hit 11 breweries — including international brands like Krombacher and Bitburger — with fines of about $460 million, also for a price-fixing scheme. Those fines targeted breweries responsible for more than half of total beer sales in Germany, Andreas Mundt, president of the Bonn-based BKA,

told Reuters.

It’s possible that market pressures drove German breweries to collude. Per capita beer consumption in Germany has dropped about 24 percent since 1994, and brewery output has declined about 10 percent since 2006. But it seems unlikely that desperation brought members of the Wurstkartell to the negotiating table. The German meat industry’s recent performance suggests otherwise: Yearly revenues total about $16 billion, and total production increased slightly in 2013. Nor does the choice of hotel point toward cash-strapped budgets: Parts of the 1997 James Bond movie Tomorrow Never Dies were filmed at the Hotel Atlantic.

But even if corporate sausage executives are living it up, traditional food producers are struggling in Germany. Production isn’t only down at German breweries. Local bakeries — formerly the providers of a staple in the German diet — are shutting down across the country, as fewer young Germans learn the trade and consumers turn to supermarkets for cheaper prices on bread.

Sausage, beer, sugar, bread: This is the pantheon of the German palate, profaned.