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Lactalis fined in Italy over dairy code breaches

Lactalis has been fined for “unfair” trading practices in Italy following a complaint lodged by the country’s main farmers’ association Coldiretti.

The France-headquartered dairy group has been hit with a €74,145 ($80,446) fine by the Central Inspectorate of Quality Protection and Fraud Repression (ICQRF), part of Italy’s Ministry of Agriculture.

It was imposed on local Lactalis subsidiary company Italatte on 22 February following a summons by ICQRF earlier in the month. Coldiretti had alleged the business engaged in “unfair practices” with the price paid to farmers for their milk supply.

Lactalis said it “will appeal any sanctions that will be imposed”, via Italatte.

The company said in a statement that, in 2023, “the proposed contractual changes have allowed farmers to earn €40m, more than 10% more than what initially stipulated with a price in line with the market”.

However, ICQRF said in its statement: “The Lactalis company had been accused of having unilaterally modified the contract with the farmers supplying milk, decreasing the recognised prices.

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By GlobalData

“It was also accused of having introduced a new index linked to the prices of European milk, which was not agreed upon and penalised Italian producers.”

When Coldiretti brought the case last year, Lactalis said the association’s claims were “unjust”. The company added it had contracts with about 2,000 farmers in Italy with “whom we have built long-lasting ties”.

In an update, Giovanni Pomella, the CEO of Lactalis in Italy, responded: “The theme of a milk-price definition model that is sustainable for the entire supply chain today represents a priority that must be addressed with the active involvement of all economic and institutional operators.

“In this sense, we hope to continue in the line of correct and collaborative dialogue with all the players in the sector by opening a table of comparison for a milk-saving campaign that allows the entire supply chain to be protected.”

Meanwhile, Coldiretti president Ettore Prandini said in a statement: “We were the only organisation to denounce the multinational Lactalis because it did not respect the contracts made with the farmers, modifying them unilaterally.

“And we ask that Lactalis now also pay the difference to the damaged farmers.”

Coldiretti claims Lactalis violated a government rule of 2021, which “provides that the prices paid to farmers and breeders never fall[s] below production costs”.

Prandini added: “We ask [for] compliance with the law against unfair practices, and above all that the prices paid must not fall below the production costs in all supply chains. Many agricultural companies are afraid of retaliation in reporting any crimes imposed by large industrial groups and distribution chains.”

He said Coldiretti is open to discussions with Lactalis, which, Prandini added, “had unilaterally modified the agreements and had not paid the price agreed to farmers”.

Coldiretti suggested last year that privately-owned Lactalis, which has increased its presence in Italy through acquisitions, controlled around one-third of the country’s dairy market.

In its statement, the French company said, noting €248m of investments in Italy over the last five years: “Lactalis represents the first buyer of the Italian milk supply chain, with a collection annual of approximately 1.3bn litres, equal to approximately 11% of the overall value of national production.

“It is also the most important player in the national dairy sector, with 14.5% of the entire turnover of the sector. Lactalis has also always supported its suppliers with financing projects for investments in efficiency and sustainability.”

Lactalis’ M&A activity in Italy included Invernizzi in 2003, Galbani in 2016, took almost full control of Parmalat in 2018 and acquired Nuova Castelli in 2019. Lactalis also owns the Locatelli and Cadermartori brands.

Lactalis has been in hot water before, most recently in Australia. A court ruled against the company in 2022 in a case brought by Australia’s competition authority for breaches of the country’s dairy code of conduct, including the early termination of agreements.

In 2021, the group also fell foul of safety rules and environmental governance in its home market of France.

More recently, in its home market, Lactalis came under investigation earlier this month for potential tax fraud in a case dating back to 2018.

The local Le Monde publication reported the Paris home of Lactalis CEO Emmanuel Besnier was raided by a French police department in connection with the probe. The dairy company’s headquarters in the town of Laval in the Pays de la Loire region and an office in the capital were also visited by police, according to Le Monde.

“The searches were conducted smoothly and in an orderly manner and are part of a procedure that relates to events from several years ago that have already been examined by the authorities,” Lactalis said in response.

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