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.