No Collusion, Says Chilean Poultry Industry

ANALYSIS - The Chilean poultry industry denied the charges of collusion and defended their right to exchange information before the Chilean Competition Committee, writes Chris Wright, senior editor for ThePoultrySite.
calendar icon 13 January 2012
clock icon 4 minute read

In Chile, the three main broiler companies and the industry association, charged with collusion in controlling chicken prices, argued their case before the Chilean Competition Committee (TLDC), as required by the Public Prosecutors Office (FNE).

The three companies denied that they acted together to control the market and pointed out that the charges made by the FNE are based on incorrect assumptions, reports La Tercera in Chile.

Agrosuper (Super Pollo) said that its participation in each of its markets is based on an internal analysis of the market variables and the company’s strategic objectives. Commercial decisions are made based on chicken prices in the international markets, as well as on studies made of local and world markets. This international focus has allowed the Agrosuper to increase its exports by 100 per cent, which earned US$160 million in 2011.

Agrosuper emphasised that it had not participated in any agreements dealing with broiler hatching numbers or production of chicken parts. Furthermore, it said that every year there have been significant differences between what was suggested by the Chilean Poultry Producers Association (APA) and what was processed and sold by Agrosuper. This in itself raises doubts about the existence of a 'poultry cartel'.

Ariztía stated that Agrosuper dominates de poultry market, which means that Ariztía is a 'price follower'. The company says that it has maintained its market participation (29 per cent) only because it has reinvested almost 'all the excess cash flow during the last 30 years and that for many years it has not distributed dividends to its investors'.

Ariztía said that when it has had operating margins, they have been modest. "On the contrary, Ariztía incurred financial losses, which the FNE knew about but chose to ignore."

Don Pollo considers itself as a small producer, "with a marginal market share of barely 6.5 per cent, so it has no market power" and that, like Ariztía, it is a price follower.

The firm says the market is difficult for companies which are not key players. "The consistent reduction in direct operating margins and profits for Don Pollo resulted in significant losses in 2011."

Don Pollo argues that price variations were due to changes in input costs and prices in international markets, as opposed to price fixing.

The Chilean Poultry Producers Association (APA) insists that it carries out the proper activities of an industry association, "completely legitimately and in accordance to the law".

The FNE charged that market concentration agreements between the poultry companies came about due to APAs annual report on projected demand. APA said it never participated in any such agreements, and denies any knowledge of any accords among the poultry companies mentioned.

Furthermore, the adjustments made to the demand projections do not constitute "a mechanism to establish production or sales limitations nor to assign market quotas".

Along the same lines, APA points out that the reports and data they publish, "don't deal with sensitive, detailed or strategic information, and aren't a mechanism for monitoring agreements".

Further Reading

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