Are Estonia’s bakeries an illegal cartel?

Estonians may have to pay more for their bread in the near future. Photo by Cal Parisian.

TALLINN — The Estonian Association of Bakeries’ statement last Friday that an increase of bread prices is inevitable is being answered with a criminal investigation of cartel agreement by authorities.

The state prosecutor’s office announced Monday that a criminal investigation was initiated to investigate the alleged anti-competitive pricing agreements by bakeries in the Baltic state. The investigation was initiated after association warned that the prices of bread and pastry products will most likely increase — something hardly unique to Estonia after Russia’s grain export ban put in after it was struck with wildfires sent grain prices jumping worldwide.

The association claimed that despite of an increase of production costs derived from the rise of fuel and electricity excise and value-added taxes, bread price have not changed for quite awhile and that if flour prices will rise as expected because of the situation in Russia, then the bakeries cannot avoid increasing prices.

The investigation is administered by the prosecutor’s office and conducted by the Estonian Competition Authority. The prosecutor’s office said that the investigation will find out whether “the members of  the Estonian Association of Bakeries have made agreements which verifies price and other trading terms for third parties.”

When asked by Baltic Reports, the prosecutor’s office declined to share additional information on the case.

Bakeries are calling the investigation preposterous.

Arnold Kimber, CEO of the Estonian Association of Bakeries told Baltic Reports that the accusations on cartel agreement are groundless. He asserted that politicians should know that “they cannot increase the the taxes and expect that nothing will change.”

“It all depends on the price of flour, if it will rise then bread prices will rise as well,” Kimber said.

The Minister of Economy Juhan Parts does not agree with a price hike and told Äripäev that the price stability is a key ingredient in Estonian economic development.

“Taking the easiest was and tune up the prices in my opinion is also not reasonable for the company in economic sense,” Parts said.

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