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General Mills exposes illegal yogurt price-fixing in France

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Collusion on price-fixing goods is illegal. (AP Photo)

Frantic text messages between French CEOs about cottage cheese prices. Clandestine smoke breaks in a Left Bank apartment to collude on yogurt strategy.

A ruling Thursday by France's competition authority makes for rich reading, detailing a web of secret meetings, hand-written charts and phone exchanges over six years to fix prices on many of the yogurt-related goods on French supermarket shelves.

Eleven companies were hit with 192 million euros ($203 million) in fines for the cartel, including Yoplait and Lactalis and makers of most of the store-brand yogurt sold around France.

Lactalis did not contest the accusations, but said it would appeal the decision, arguing in a statement that the fines "overestimate in an obvious way the gravity of the facts, and their impact on the economy." The company said it is committed to obeying the law.

The cartel was uncovered thanks to a special procedure that allows companies to report their own price-fixing activity to regulators in exchange for reduced punishment. Yoplait, majority owned by U.S.-based General Mills Inc., was the first company to report the activity, and was given no fines.

Company bosses sketched out secret deals in hotel rooms and on special phone lines created to avoid detection. Sometimes they'd meet at Au Chien Qui Fume, an iconic Paris cafe, one boss is quoted in the investigation documents as saying. His counterparts then "came to my apartment a few times to continue the conversation and smoke a cigarette," he added.

A Yoplait executive used a special cell phone dedicated to the cartel, paid for by Yoplait but not officially linked to him in any way. An executive with dairy maker Senagral used a special cell phone taken out in his girlfriend's name.

Senagral, which specializes in store-brand dairy products, received the biggest fine, 46 million euros. The regulator said it had 316 million euros in sales of price-fixed yogurts in 2011, more than any of the other companies.

The ruling describes how the companies were facing rising milk and packaging costs, and hints at some desperation. One executive lamented in a text message a "totally crazy price" at one supermarket, saying he needed a higher price or else "I'll sink!!!"

Another text message protested a low price seen on a supermarket advertisement: "vanilla-flavored cottage cheese 8 x 100 grams at 1.19 euros?! Big problem for announcing rises!"

Amal Taleb, lawyer for consumer group UFC Que Choisir, hailed the investigation but said it's too bad that French consumers, who are big buyers of yogurt, won't benefit. The fines go to the public treasury.

"The consumer is the main victim," she told The Associated Press, but added that it's virtually impossible to calculate how much money consumers lost.

"Did you save your yogurt receipts from 2011? Me neither," she said. But overall she said it was a "very good thing" that regulators are cracking down on price-fixing.

The ruling found that the companies agreed on how and when to raise prices from 2006 to 2012, and divided up volumes.

The last big ruling by the competition authority targeted makers of toothpaste, shampoo and cleaning products. The regulator fined 13 consumer-products makers about 950 million euros for price-fixing, including U.S.-based Colgate-Palmolive, Procter & Gamble, and Sara Lee and Anglo-Dutch firm Unilever.