Dusseldorf Secret phone calls, confidential chats, conspiratorial meetings: The duty-free shop operator Gebr. Heinemann has been convicted of illegal collusion with a competitor. A court in Tel Aviv has ordered the family business from Hamburg to pay damages to an injured partner.
The focus is on Gunnar Heinemann, who was the company’s managing director at the time the agreements were made. With hundreds of airport shops between Oslo and Sydney, Gebr. Heinemann is one of the market leaders in airport shopping.
The dispute revolves around a license to operate duty-free shops at Ben Gurion Airport in Tel Aviv. The duty-free license there is considered particularly profitable; before Corona, annual sales were around $350 million. In 2013, the contract with longtime operator James Richardson expired and the Israeli airport authority re-tendered the license. Gebr. Heinemann applied together with a potential partner, Alfa Duty Free.
The two companies had agreed to work together in Tel Aviv in order to jointly apply for the license. The joint venture was to be borne 60 percent by Alfa and 40 percent by Gebr. Heinemann. But the plan failed. In the end, German-Israeli cooperation never came about. Instead, competitor James Richardson prevailed. His offer was just above that of Heinemann-Alfa.
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That was no coincidence. Alfa realized that the competition had not been done properly. The Israelis felt betrayed by their competitors. The reaction: a lawsuit against Gebr. Heinemann before the international arbitral tribunal ICC. On November 19, 2021, the ICC rendered its verdict.
Gebr. Heinemann coordinated with the competitor
The arbitral award, which is available to the Handelsblatt, leaves no doubt that there was an illegal deal to the detriment of Alfa: “The arbitral tribunal finds that Heinemann almost certainly violated the agreement by exchanging confidential information with James Richardson and coordinated their bids for the tender,” the decision reads.
The duty-free shop operator Gebr. Heinemann has been convicted of illegal collusion at the airport.
(Photo: AFP)
The motive of the two cartel brothers: Heinemann should leave the field to James Richardson in Israel, who had been running the shops there for many years. In return, Heinemann should get a chance in Sydney without having to compete with Richardson. When the next call for tenders came up in Tel Aviv in 2017, the two supposed competitors teamed up – Alfa was finally left out.
The allegations hit Gebr. Heinemann at a difficult time. After years of growth, the company looks back on the two toughest years in its history. Due to the restrictions of the pandemic, there was less travel – and hardly any customers who could buy anything at airports.
In 2020, for example, sales were only 33 percent of the pre-crisis level, when the company still had sales of 3.6 billion euros. During the pandemic, the company separated from a third of its employees worldwide, currently there are still 6700.
>> Read also: Gebr. Heinemann is selling more duty-free goods again
For this year, Gebr. Heinemann hopes to reach 75 percent of the pre-crisis revenues again. Sales picked up in the second quarter in particular. At the moment, however, the company is missing the affluent and free-spending customers from Asia, who hardly travel due to strict Covid regulations. The family business expects to return to pre-crisis levels in 2024.
Harsh allegations against former boss Gunnar Heinemann
The allegations against Gunnar Heinemann, who was managing director at the time of the agreements and is now a member of the board of directors of the family company, are particularly harsh. Today the company is managed by his son Max Heinemann and a manager who does not belong to the family.
There is compelling circumstantial evidence that Gunnar Heinemann and a representative of James Richardson discussed the tender in Tel Aviv in 2013 and formed “a conspiracy,” the decision said. Heinemann is said to have made false statements in a sworn witness statement. Documents were systematically and maliciously hidden and evidence falsified in the arbitration proceedings.
The allegations against Gunnar Heinemann, who was managing director at the time of the agreements and is now a member of the board of directors of the family company, are particularly harsh.
(Photo: Gebr. Heinemann)
The referees also noted how the agreements went. James Richardson’s executive revealed to Gebr. Heinemann that they would bid for $169 million. Hamburg is said to have then agreed that their joint bid with Alfa would be lower. At around $167 million, it was actually $2 million below Richardson’s, who eventually won the contract.
At the arbitration hearing, Gunnar Heinemann and the Richardson representative even acknowledged that their meeting also discussed the risks of “overbidding” or “crazy bids” for family businesses like Gebr. Heinemann and James Richardson.
Family business “disappointed” by arbitration award
Gebr. Heinemann resisted the decision, but without success. A few weeks ago, the Tel Aviv District Court upheld the arbitration award. The arbitral tribunal had estimated the possible damages that the Hamburgers would have to pay to Alfa at around 23 million US dollars, without possible interest. The court has yet to decide how much the payment will actually be.
On the other hand, there is no question that Heinemann had colluded illegally with James Richardson – behind Alfa’s back.
A spokeswoman for Gebr. Heinemann said the company was happy to be able to close the chapter, even though it believed the arbitral award was wrong. One was “disappointed” with the decision of the court in Tel Aviv that the ICC judgment manifested itself.
Of course, the financial obligations are met, which are significantly lower than required by Alfa Duty Free. “We are still convinced that our shareholders, members of management and employees have complied with applicable law and contractual agreements at all times,” said the spokeswoman.
The company did not answer whether Gebr. Heinemann set aside money for the fine. The Hamburg cash register is burdened as a result of the crisis: According to the Federal Gazette, there is a historic loss of 328 million euros in the books in 2020. In the past year, according to an interview, it must have been a “red zero”.
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