The long running case by the Irish Competition Authority against an Irish beef industry association (the Beef Industry Development Society (BIDS)) has finally concluded after an out of court settlement was reached. The case involved an agreement by members of BIDS to leave the beef processing industry in return for payment. The settlement follows a ruling by the Court of Justice of the European Union (CJ) that an agreement of this kind is illegal and a subsequent judgment of the Irish Supreme Court that the BIDS agreement had infringed Article 101(1) TFEU.
The case commenced in 2003 after the BIDS restructuring scheme was introduced. The main objective of the scheme was to reduce the total capacity of the processing industry by 25% within one year, following a market study, commissioned in part by the Irish Government. Under the scheme, some of the BIDS members agreed to leave the processing industry, to decommission their processing plants and to respect a two year non-compete clause. In return, they were to be compensated by the remaining members of BIDS.
The Irish Competition Authority brought a civil action in the High Court on the basis that it believed the scheme infringed Article 101 TFEU. Having lost in the High Court, the Competition Authority appealed to the Irish Supreme Court and in March 2007, the Supreme Court made a reference to the CJ pursuant to Article 267 TFEU (ex Article 234 EC).
In November 2008, the CJ clarified that an agreement such as the BIDS agreement had as its object the restriction of competition and was thus incompatible with Article 101(1) TFEU. The CJ ruling confirmed that agreements between competitors to restrict capacity or production are hardcore restrictions of competition. The CJ did not however expressly exclude that a reduction of overcapacity could result in some economies of scale - but it was for BIDS to prove in the national courts (under Article 101(3) TFEU) that these positive effects outweighed the negative effects.
Following the CJ's ruling, the Irish Supreme Court remitted the case to the Irish High Court to allow BIDS the opportunity to argue its case on efficiency grounds under Article 101(3) TFEU. However, before any decision was given, BIDS withdrew its claim effectively bringing the long running case to an end.
The case highlights the difficulties under the competition rules with restructuring an industry, difficulties which are not necessarily resolved by the involvement of government.
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