Europe opens antitrust investigation on 3 ethanol producers

On Dec. 7, the European Commission announced it is opening a formal antitrust investigation to determine whether or not three ethanol producers have manipulated ethanol benchmarks published by a price reporting agency, which is a breach of European Union antitrust rules. The three companies being investigated include Spain-based Agengoa S.A., Belgium-based Alcogroup SA, and Sweden-based Lantmännen ek för, along with their relevant subsidiaries.

The commission’s investigation began with unannounced inspections carried out in May 2013. Additional inspections were carried out in October 2014 and March 2015. In a separate investigation, the commission is also assessing whether producers or traders of bioethanol have fixed prices or shared markets and customers, in violation of Article 101 TFEU. 

According to the commission, it has concerns that these companies may have colluded to manipulate ethanol benchmarks published by price reporting agency Platts, for example by agreeing between them to submit or support bids in order to influence benchmarks upwards, driving up ethanol prices. The commission noted that such practices harm competition and undermine EU energy objects by increasing prices for renewable energy. This could lead to a reduction in the use of biofuels, negatively impacting consumers and the environment.

In a statement, the commission explained that prices assessed and published by agencies like Platts serve as benchmarks for trade in the physical markets and in the financial derivative markets for number of commodities in Europe and around the world. In 2013, the commission proposed a regulation to enhance the governance, integrity and reliability of benchmarks used in financial instruments and contracts. That regulation is in the final stage of adoption by the European Council and European Parliament.

The EurOberv’er 2015 Biofuels Barometer report, published in July, lists Abengoa as Europe’s top ethanol producer, with 1.281 billion liters (338.40 million gallons) of total capacity. The company has three ethanol plants in Spain, one in Netherlands, and one in France. Alcogroup’s website indicates the company operates a 170,000 cubic meter (28.27 million gallon) ethanol plant at the port of Ghent, Belgium. According to its website, Lantmännen operates two ethanol plants in Sweden, with a combined capacity of 210,000 cubic meters of ethanol.

Abengoa has been making news in the ethanol sector for reasons beyond the antitrust investigation. In late November, the company announced that it is filing for preliminary creditor protection after an agreement with Gonvarri Corporación Financiera, a company belonging to Gonvarri Steel Industries, was terminated. Under that agreement, Gonvarri was expected to make a €250 million ($265.9 million) investment in Abengoa. In early December, Abengoa reportedly laid off staff at its Hugoton, Kansas, cellulosic ethanol plant and other offices and facilities worldwide. The company reportedly cited financial difficulties as the reason for its actions.