EU Competition Regulators Focus on Food Supply Chain

July 19, 2012

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.

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