|The Food Sector under increased
Competition Law scrutiny
||25 May 2012|
The Food Sector under increased Competition Law scrutiny - What it means for
The European national competition
authorities together with the EU Commission (in the context of European
Competition Network (ECN)) have published a comprehensive report on
competition law in the food sector in a move to intensify competition law
enforcement throughout the food supply chain.
Alongside publishing the report
on 24 May 2012, Competition Commissioner Joaquín Almúnia underlined the high
priority that the food sector has, and will continue to have, for the various
national competition authorities and the EU Commission. As many as 60 antitrust
cases are currently pending in this sector across the EU and further monitoring
activities are being carried out, most recently these include enquiries by the
European Commission itself.
The findings of the Report in a nutshell
- The report highlights the most significant enforcement actions as well as
market monitoring activities by the national competition authorities and the
European Commission from 2004 to 2011.
- The authorities together investigated more than 180 antitrust cases in the
food sector out of which approximately 120 investigations concluded with a
finding of infringement, 60 cases are still pending.
- In half of the cases, the competition authorities have detected horizontal
infringements between competitors including price fixing, market and customer
sharing and exchanges of confidential information. The cases relate to all
levels of the supply chain, from the primary production over processing to the
- Vertical anti-competitive agreements (i.e. between market players on
different levels of the supply chain) account for approx. 20 % of all cases,
prominent examples include issues concerning resale price maintenance and
exclusive purchasing agreements.
- Abusive conduct by dominant companies account for a further important part
of the cases, focusing on anti-competitive strategies such as tying, the refusal
to supply and unjustified contractual obligations.
- The competition authorities' investigations extended to all sub-sectors of
the food sector with a certain focus on cereals, dairy products, meat, poultry
and eggs, sugar and confectionary, alcoholic drinks, coffee and multi-products.
- In addition to these enforcement actions, the competition authorities
carried out 103 market activities monitoring on food related issues, of which 10
- Some of these monitoring actions have looked at the food supply chain and
agro-food sector as a whole whilst others have focused on specific product
markets such as milk and dairy, fruit and vegetables as well as cereals. The
largest number of monitoring activities related to the retail
- The various national competition authorities have identified a number of
critical issues where in future even more stringent enforcement actions may be
expected. Issues specifically highlighted concern for commercial relations
between suppliers and retailers, the high concentration in the retail sector and
atomistic structures of agricultural primary production.
- The report stresses that the European Commission and the national
competition authorities have cooperated closely on food issues and will continue
to take action to tackle inefficient market structures and anti-competitive
What does it mean for your business?
The ECN's recent report is a
clear warning sign. The competition authorities will continue to intensify
their scrutiny, and the risk of becoming involved in competition law
investigations has increased substantially for all market participants along
the supply chain.
The authorities tend to apply
stringent rules and in some cases have contested practices traditionally
applied throughout the industry. With regards to the relation between
suppliers and retailers, specific caution should be paid to practices
concerning suggested resale prices, to promotion activities and category
management. Companies should also be aware of the very substantial and
increasing risks of information exchange and should ensure competition law
compliant activities in business associations.
The report also sheds a light
on opportunities specifically for companies active in primary production.
The competition authorities advocate a consolidation of the agricultural
sector and recommend pro-competitive mechanisms such as entering into
cooperatives and other efficiency-enhancing forms of cooperation.
Experience shows that not all
market players in the food sector have sufficient awareness of the risks and
opportunities present under the competition rules. In the light of the
ongoing investigations and the expected increasing scrutiny of the sector,
it is crucial to ensure that the company's workforce is well aware of
competition law implications and the risk resulting from anti-competitive
behaviour. Management should be entirely up to date regarding the recent
developments and should consider the impact that competition law has on a
number of strategic options.
How we can help
Bird & Bird has a dedicated
international Food & Beverage group. Our lawyers genuinely understand the
dynamics, issues and opportunities prevalent in the Food and Beverage sector. We
are able to provide practical solutions and various benefits to our clients in
relation to all relevant legal issues. Compliance with EU and the different
national competition rules is essential for the Food and Beverage sector. To
ensure that their distribution structures, commercial agreements and supply and
pricing policies comply with competition and anti-corruption rules, we work
closely with our clients to help them prepare for, and steer them through,
competition investigations and defend them against cartel and abuse of dominance
claims. We also assist in mergers and acquisition transactions and advise on
contentious and non-contentious work.
Please click here to download our Food & Beverage brochure.
The content of this update is of general interest and is not
intended to apply to specific circumstances. The content should not,
therefore, be regarded as constituting legal advice and should not be relied
on as such. In relation to any particular problem which they may have,
readers are advised to seek specific advice. Further, the law may have
changed since first publication and the reader is cautioned accordingly.
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