Chiquita Banana Case
a. How did the Common Market Organization for Bananas (“CMOB”) affect Chiquita?
Six firms dominated the banana industry in the early 1990’s, three from Europe and three from the United States. In 1994, the three United States producers, Chiquita, Dole, and Del Monte, accounted for approximately 72.4% of world banana sales. Chiquita accounted for 48% of worldwide banana sales and 66.4% of banana sales of the three U.S. producers.
Prior to 1994, Europe accounted for nearly 40% of world banana imports by volume, of which roughly 60% came from Latin America, the primary location of Chiquita Brand International’s banana production. However, in 1993, a common banana import policy, council Regulation (EEC) 404/93, became effective four months prior to the official integration of the European Union. Title IV of the regulation induced changes in banana import policy. Banana imports were divided into four categories: Latin American and non-ACP sources, called “third country imports;” “traditional” ACP imports; “non-traditional” ACP imports (ACP imports above “traditional” quota amounts); and EC imports. “Third country” imports, the category in which Chiquita fell, were restricted to a two million metric ton (m.t.) quota with a 100 ECU/m.t. duty. Imports in excess of the quota were subject to an 850 ECU/m.t. duty. The 850 ECU/m.t. duty was roughly 250% a.v., while the 100 ECU/m.t. duty was roughly 30% a.v. “Traditional” and “non-traditional” imports were duty free, unless above the two million ton quota, which is well above the capacity of the smaller producers in this category. In addition to the quota and higher duties, “third country” and “non-traditional” importers (U.S. multinationals) were subject to a licensing provision limiting them to 66.5% of “third country” quota. 66.5% equates to 1.3 million m.t. of bananas annually at a duty of 100 ECU/ m.t.
At a 48% of the world’s market share, Chiquita would have accounted for 1.82 million m.t of Europe’s 3.8 million
Six firms dominated the banana industry in the early 1990’s, three from Europe and three from the United States. In 1994, the three United States producers, Chiquita, Dole, and Del Monte, accounted for approximately 72.4% of world banana sales. Chiquita accounted for 48% of worldwide banana sales and 66.4% of banana sales of the three U.S. producers.
Prior to 1994, Europe accounted for nearly 40% of world banana imports by volume, of which roughly 60% came from Latin America, the primary location of Chiquita Brand International’s banana production. However, in 1993, a common banana import policy, council Regulation (EEC) 404/93, became effective four months prior to the official integration of the European Union. Title IV of the regulation induced changes in banana import policy. Banana imports were divided into four categories: Latin American and non-ACP sources, called “third country imports;” “traditional” ACP imports; “non-traditional” ACP imports (ACP imports above “traditional” quota amounts); and EC imports. “Third country” imports, the category in which Chiquita fell, were restricted to a two million metric ton (m.t.) quota with a 100 ECU/m.t. duty. Imports in excess of the quota were subject to an 850 ECU/m.t. duty. The 850 ECU/m.t. duty was roughly 250% a.v., while the 100 ECU/m.t. duty was roughly 30% a.v. “Traditional” and “non-traditional” imports were duty free, unless above the two million ton quota, which is well above the capacity of the smaller producers in this category. In addition to the quota and higher duties, “third country” and “non-traditional” importers (U.S. multinationals) were subject to a licensing provision limiting them to 66.5% of “third country” quota. 66.5% equates to 1.3 million m.t. of bananas annually at a duty of 100 ECU/ m.t.
At a 48% of the world’s market share, Chiquita would have accounted for 1.82 million m.t of Europe’s 3.8 million