Mercadona and Lactalis win legal battles that put Spain’s “below‑cost milk” fines in doubt

Supermarket giant Mercadona and dairy group Lactalis have both convinced Spain’s National Court to overturn fines for allegedly buying milk below production cost, a string of rulings that now leaves the Government’s enforcement of food‑chain law on fragile legal ground.

Food‑chain watchdog’s sanctions knocked down in court

In recent years, the Agency for Food Information and Control (AICA) has imposed fines on several large buyers for supposed breaches of Spain’s Food Chain Law, which prohibits purchasing from farmers at prices below their effective costs. The rules were designed to protect the weakest links in the chain, especially livestock farmers who often have little negotiating power.

Mercadona and Lactalis were among the big names hit with sanctions under this framework. However, both companies have succeeded in having key fines annulled by the National Court’s contentious‑administrative chamber, which has repeatedly found that the procedures used by AICA left the sanctioned firms in a position of legal defenselessness.

Mercadona overturns its penalty over milk bought from Covap

Mercadona had been fined 66,000 euros for allegedly buying cow’s milk below cost from Covap, a major dairy cooperative and the company behind the Hacendado brand’s milk in Galicia through Naturleite. AICA considered that the price agreed with the cooperative did not cover Covap’s effective production costs, which would amount to a prohibited destruction of value in the food chain.

In March last year, the National Court sided with Mercadona and annulled the sanction. Judges concluded that the way the administration handled confidential information about the supplier’s costs prevented the supermarket group from fully exercising its right of defence. Without genuine access to the figures on which the accusation was based, the court held, the company could not properly challenge the claim that it was paying below cost.

Lactalis racks up several wins against AICA

Lactalis, the French dairy multinational that owns brands such as Puleva, Président, Ram, El Ventero, Gran Capitán and also operates joint ventures with Nestlé, has followed a similar path. Its Spanish purchasing arm, Lactalis Compras y Suministros, was fined 100,000 euros for supposedly buying raw cow’s milk from a farm in Lleida at a price that did not cover the farm’s effective costs.

That fine was also thrown out by the National Court in March, again on the grounds that the procedure had left the company defenceless. The supplier’s cost structure had been declared confidential, so Lactalis was sanctioned based on data it was not allowed to see in detail. According to the court, the company could not even know after the fact whether the price it had paid was above or below the producer’s actual costs.

More recently, the National Court annulled another 100,000‑euro penalty against Lactalis for allegedly paying below cost to a farm in Murcia. In that case, a court‑appointed expert highlighted contradictions in AICA’s analysis and again underlined that the company had no realistic way to determine whether it was infringing the rule at the time the contracts were signed.

Supreme Court to decide how far confidentiality can go

Concerned by the wave of annulled fines, the State Attorney’s Office has now taken the battle to Spain’s Supreme Court. In late December and January, the high court agreed to admit several appeals in cassation lodged on behalf of the Ministry of Agriculture and AICA, with the goal of rescuing the sanctions regime.

At the heart of the dispute is a basic tension between two principles: the confidentiality of farmers’ cost data and the right of buyers to defend themselves in sanctioning procedures. The State’s lawyers warn that, if the current case‑law stands, the system “empties of content” the confidentiality that was supposed to protect producers, because any time those figures are kept secret the courts see indefensión on the side of the sanctioned company.

The Supreme Court has framed the key question in almost the same terms. It will decide whether, to guarantee effective defence rights in proceedings over alleged destruction of value in the food chain, the buyer accused of paying below cost must have access to the supplier’s cost documents even when those have been classified as confidential. The answer will determine how the Food Chain Law can be enforced in practice.

A small fine for big players, a big test for the law

In pure financial terms, the fines at stake are modest for companies of this size. Mercadona, controlled by Juan Roig, reported sales of more than 35 billion euros in 2024. Lactalis’s Spanish business, with almost 1,000 million litres of milk collected and a dominant presence in Galicia, posted turnover of around 1.7 billion euros in the same period.

What worries the Government is not the amount, but the precedent. If courts continue to annul sanctions every time companies appeal on the grounds of indefensión, the core tool that was supposed to stop purchases at prices below cost could be left largely toothless. That would weaken one of the flagship measures of the Food Chain Law, originally promoted to protect farmers after the end of the EU milk quota system.

Farmers, industry and supermarkets watching closely

The outcome matters far beyond Mercadona and Lactalis. Farmers’ organisations have long complained that large buyers and supermarkets use their bargaining power to push prices to unsustainable levels, while dairy companies argue that they are themselves squeezed between farmers, retailers and international market conditions.

Mercadona plays a central role in the balance of power. As Spain’s leading supermarket chain, its purchase prices often set a reference for the rest of the market. At the same time, it is a key client for major suppliers such as Covap and cheese producer Entrepinares, whose dependence on the chain’s volumes gives the retailer significant influence over the shape of the Spanish dairy sector.

Lactalis, for its part, is the biggest single buyer of milk in Spain and the dominant player in Galicia, the country’s main milk‑producing region. Any change in the rules governing what it can pay and how the state polices those prices has a direct impact on hundreds of farms and on the stability of the rural economy.

What comes next

While the Supreme Court deliberates, more cases continue to pile up in lower courts. Each new annulment adds pressure on the Government to either adjust the way AICA investigates and documents its cases or to rethink how the ban on below‑cost purchasing is designed in the first place.

For now, the legal battles mean that, in practice, the Food Chain Law’s marquee promise to stop milk being bought below cost is on hold. For consumers, prices on supermarket shelves will not change overnight because of these rulings, but for farmers and industry the stakes are clear: the courts are about to decide whether Spain can enforce its food‑chain rules without forcing producers to lay bare their most sensitive cost data.