Business

Major Spanish Cooperative Under Fire for Importing and Exporting Practices

Dcoop faces a €2.8 million fine from the Spanish authorities as well as scrutiny from the rest of the sector for what are seen as anti-competitive market practices.

Jul. 17, 2018
By Daniel Dawson

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Spain’s largest olive oil coop­er­a­tive con­tin­ues to come under fire for its import­ing prac­tices in the after­math of a €2.81 mil­lion ($3.29 mil­lion) fine levied by the Spanish tax author­i­ties.

A mes­sage is sent to the con­sumer that it is a prod­uct that does not have that value and that qual­ity for which we are com­mit­ted.- Cristóbal Cano, Union of Small Farmers and Ranchers (UPA)

The fine orig­i­nates from out­stand­ing import tar­iffs that Qorteba International failed to pay on olive oil it had imported from Tunisia and Morocco. The com­pany had orig­i­nally sought an exemp­tion for paying these tar­iffs, but their request was denied.

Fifty per­cent of Qorteba is indi­rectly owned by Dcoop, which has said it will take respon­si­bil­ity for the fines and expenses incurred by lit­i­gat­ing them.

Once the imported oil arrived in Spain, Dcoop blended it with oil from its member com­pa­nies, then repack­aged the blend as Spanish olive oil before it was exported to the United States under the Pompeian brand.

In doc­u­ments reviewed by El Economista, which orig­i­nally broke the story, the Spanish Customs Agency wrote that it had detected “a prob­lem in the analy­sis of some oils.”

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Indeed, inspec­tors graded the oil being imported from North Africa as “lam­pante” before it was blended with “low qual­ity” Spanish olive oil that had been obtained in second extrac­tions from olives used in the pro­duc­tion of extra virgin olive oil.

This blend was then sold as virgin olive oil in the United States at prices 40 per­cent lower than other Spanish and Italian olive oil and up to 100 per­cent lower than olive oils from California.

In a state­ment, Dcoop rejected the claim that it was being fined for “import­ing olive oil from Tunisia that does not meet the required qual­ity stan­dards and then sell­ing it in the United States as if it were Spanish oil.”

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Through a spokesper­son, Dcoop also down­played the impor­tance of the issue, deny­ing that they were trying to sub­vert the market by sell­ing adul­ter­ated olive oil.

“At [the cooperative’s] last gen­eral meet­ing, the issue did not even come up,” the spokesper­son said. “We are not inter­ested in low­er­ing the price, that goes against the spirit of a coop­er­a­tive.”

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Dcoop’s direc­tor, Antonio Luque, went one step fur­ther. He denied that the oil was adul­ter­ated at all and cast asper­sions on the sen­sory tast­ing meth­ods used in the deter­mi­na­tion.

“The same inspec­tor has come to estab­lish dif­fer­ent qual­i­ties in the oil of the same batch,” he told El Economista.

Luque added that other promi­nent mem­bers of the sector, includ­ing the National Association of Industrial Packers and Edible Oil Refiners (ANIERAC) and the Spanish Association of the Olive Oil Exporting Industry and Commerce (ASOLIVA), had also ques­tioned the abil­ity of tast­ing panels to con­sis­tently iden­tify olive oil grades.

However, this argu­ment has left many promi­nent mem­bers of the sector uncon­vinced that the prac­tices of Luque and Dcoop are harm­ing the Spanish olive oil sector.

Cristóbal Cano, the sec­re­tary gen­eral of the Union of Small Farmers and Ranchers (UPA) con­demned Dcoop, label­ing their prac­tices as “very dan­ger­ous” and wor­ried that episodes such as this one might “triv­i­al­ize” the value of Spanish olive oil.

“In addi­tion, a mes­sage is sent to the con­sumer that it is a prod­uct that does not have that value and that qual­ity for which we are com­mit­ted,” he said. “Gaining short-term market shares and low prices is but little bread for today and assures you hunger for tomor­row, we must bet on qual­ity at a rea­son­able price because we have seen in recent years how the market responds.”

Juan Luis Ávila, the head of COAG Jaén, also con­demned Dcoop for their actions, argu­ing that under­min­ing the price of com­pet­ing Spanish olive oil would hurt the whole sector by cut­ting profit mar­gins for farm­ers and lead­ing to increas­ingly unfair busi­ness prac­tices.

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“Cooperatives must have as an absolute pri­or­ity that the farmer receives a fair pay­ment that hap­pens to take into account com­pe­ti­tion in the market,” he said. “But coop­er­a­tives must also respect com­pet­ing olive grow­ers by ensur­ing there is a sen­si­ble price of origin [from olive oils made in Spain] and that this price at least covers their pro­duc­tion costs too.”

Other crit­ics of Dcoop fear that episodes such as this one will incur the ire of U.S. President Donald Trump, who has already imposed tar­iffs on Spanish olives. They worry, though they have no evi­dence to back these con­cerns, that tar­iffs on Spanish olive oil could be coming as a result of these kinds of sto­ries.

Cano addressed these con­cerns indi­rectly, stat­ing that Dcoop must own up to what it has done and that the whole sector must work together moving for­ward in order to pro­tect their over­rid­ing inter­ests.

“In the end, these fines affect the part­ners and the entire sector,” Cano said. “There must be those who demand respon­si­bil­ity from their lead­ers and ask them­selves whether these prac­tices really advo­cate for the gen­eral inter­est of the sector or seek par­tic­u­lar inter­ests that have noth­ing to do with its future on the whole.”