Greece Fines Subsidiaries of U.S. Giants for Breaching Profit Cap

Greece on Wednesday announced fines totaling 1.67 million euros ($1.81 million) on the local branches of two U.S.-based healthcare and consumer products giants for alleged breaches of a profit cap imposed amid Greece’s cost-of-living crisis.

The Development Ministry said Johnson & Johnson Hellas was fined 1 million euros and Colgate-Palmolive Hellas 672,000 euros. It didn’t provide further details on the alleged breaches.

The fines were imposed under a law adopted in July that caps gross profits for a broad range of key consumer goods and services — mostly in the food and health sectors — until the end of 2023. The law stipulates that the gross profit per unit cannot exceed that from before Dec. 31, 2021.

Development Minister Costas Skrekas said Wednesday that fighting high prices was “a top government priority,” and promised constant market checks to ensure the profit cap is implemented.

On Nov. 2, the ministry fined the Greek branches of Procter & Gamble and Unilever 1 million euros each for allegedly breaching the gross profit cap.

Unilever has formally contested Greece’s imposed €1 million fine, objecting to the method employed for its computation. Disputing the verdict’s provisional nature, the company has expressed intentions to appeal to the Council of State.

Unilever argued that most production costs didn’t affect consumers, impacting profits negatively. However, the ministry swiftly dismissed the company’s objection within three hours of their five-day response time.

According to Greek media, other multinationals may appeal to the Council of State, indicating dissatisfaction with operations in Greece. There have also reportedly been warnings about a potential withdrawal of investment from the country.

Profit cap imposed in Greece to fight inflation

Greece has recovered from the financial crisis and is once again deemed creditworthy. But soaring inflation is putting ordinary households under immense pressure.

The inflation rate in Greece for September 2023 eased to 1.6 percent (on an annual basis) the slowest increase since July 2021, although cost hikes for food items, ominously, continued to rise at near double-digit rates.

According to the Greek statistical agency (ELSTAT) the figure for the latter stood at 9.4 percent, still high, although the increase is the lowest, month-to-month, in a year and a half.

In the all-important food sector, the inflation rate for vegetables stood at 17.7 percent last month; 16.1 percent for cooking oils; 13.9 percent for fruits, similar to water-soft drinks-juices, 13.9 percent.

One of the main products affected by the recent rapid increase in price was olive oil. The increase has turned it into a luxury item, with wholesale prices at around €8.40 per liter. This surge is due to decreased production in various Mediterranean countries, particularly in Spain, Greece, and Italy.

Reasons behind the rise reportedly include high VAT, adverse weather conditions, high production costs, and profiteering. Greek authorities were criticized for failing to anticipate the production decline, unlike Turkey, which restricted exports.

To help consumers, Greek authorities have drawn up a list of 51 basic items such as rice, milk, yogurt, spaghetti, pulses, flour, toilet paper and soap. This list is sent to every large Greek supermarket by the economic ministry, obliging stores to clearly mark out the most affordable of these products so consumers can find them.