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The food supply chain is high on the agendas of competition
regulators across the European Union (EU). The lead EU competition
regulator, the Brussels-based European Commission (EC), has a
dedicated "Food Task Force," while the European
Competition Network (ECN) (an informal grouping of the EC and the
27 EU member state national competition authorities) also has its
own Food Subgroup. Scrutiny of the area is not likely to decrease,
and companies active at any level of the chain should be aware of
the opportunities and threats that this brings.
The ECN's Food Subgroup published a 150-page report in May
2012 providing a comprehensive description of recent competition
enforcement in the food sector across the EU. The report shows that
competition authorities in the EU have intensified their focus on
the sector, particularly since the food price crisis broke out in
2007. The largest number of cases in the period 2004-2011 concerned
the processing/manufacturing and retail sectors. With respect to
specific food sectors, the largest number of cases concerned
cereals; then milk and dairy; followed by fruits/vegetables, meat,
poultry and eggs.
Half the total number of individual cases pursued by the
competition authorities from 2004-2011 focused on horizontal
agreements among competitors. The authorities sanctioned more than
50 cartels involved in price fixing, market and customer allocation
and the exchange of sensitive business information. The remaining
infringements included vertical restrictions, such as resale price
maintenance and abuses of dominant positions, such as exclusivity
obligations or imposing minimum purchasing quantities.
Authorities have also been engaged in extensive general market
monitoring, so as to analyze how food markets are working. A
recurring complaint concerns situations where an imbalance of
bargaining power exists between the parties in the supply chain.
Frustratingly for some of the parties involved, the competition
authorities have usually found that these practices fall outside
the remit of competition law. However, several EU countries have
sought to address this problem through other solutions, such as
laws on unfair trading practices or codes of good practice (for
example, the UK Grocery Supply Code of Practice).
It is clear that the food sector will remain a high priority for
EU competition authorities. They are currently investigating about
60 competition law cases and carrying out other general market
monitoring actions. It is even possible that the EC will launch a
sector inquiry. Previous sector inquiries, such as that into
pharmaceuticals, have led to enforcement action against particular
companies and a generally increased focus on those areas.
Companies active in the EU at any level of the food supply chain
should be aware of these developments and consider how to react.
The increased likelihood of regulatory scrutiny (and, perhaps, of
private court actions) is a threat, increasing the importance of
introducing or updating competition compliance programs. At the
same time, there are opportunities. If an anti-competitive practice
is impacting your business in the EU, now would be the time to
consider a complaint to a regulator. They are clearly looking for
cases.
McGuireWoods boasts some 45 competition lawyers in London,
Brussels and the United States. With a dedicated
food and beverage industry group, it stands ready to assist the
industry with competition concerns in the United States or the
European Union.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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