Competition Enforcers focus on the Food Sector

by K&L Gates LLP
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The European competition authorities have become extremely proactive in investigating and punishing anti-competitive practices in the food sector in recent years. In the final week of June alone, substantial fines were imposed in relation to milk (€70 million), poultry meat (€39.9 million) and canned mushrooms (€32.2 million). At an EU-wide level, the European Commission specifically created a ‘Food Task Force’ in 2012 designed to scrutinise food markets and promote EU competition law enforcement in relation to food supply chains. It subsequently launched an extensive study on ‘Choice and Innovation in the Food Sector’ which is due to be published in early October 2014.

Competition Investigations in the Food Sector

The practical implications of this policy focus are clear: companies in a large and growing number of food markets have been investigated and heavily fined for anti-competitive practices. In recent years the European Commission (the “Commission”) has conducted investigations into various markets in the food sector, including retail food packaging, shrimp, beer, sugar, carbonated soft drinks and bananas.

Competition in the food sector has also become a priority on the agendas of the national competition authorities of the EU Member States. Investigations range from probes into companies growing potatoes in Germany, to pig slaughter houses in France, dairy processing companies in the UK and supermarkets in Italy.

Some Member States have taken a more active role in addressing anti-competitive conduct in the food sector. Germany, for example, seems to have taken the driving seat in this campaign. Its Federal Cartel Office has worked tirelessly in investigating a variety of specific sub-markets. For example, coffee roasters were fined for having fixed end-customer prices, while producers of ice-cream, frozen pizza and pet food were severely fined for having illegally shared sensitive information. Most recently, on 15 July 2014, the Federal Cartel Office announced that it had imposed fines totalling €338 million on a number of sausage manufacturers for price-fixing.

Policy

The competition regulators have not been alone in their focus on the food sector; other EU institutions have regularly voiced their concerns regarding competition in this sector. For example, in January 2012, the European Parliament passed a Resolution on the ‘Imbalances in the Food Supply Chain’ asking the Commission to tackle abusive and unfair trading practices in the sector.

The food sector has also been high on the agenda of different Directorates General (DGs) within the Commission. For example, DG Enterprise and Industry has established the High Level Forum for a Better Functioning Food Supply Chain to implement a roadmap of initiatives to improve the competitiveness of the agro-food industry in cooperation with the stakeholders. The Forum has produced Principles of Good Practice in vertical relations in the food supply chain, currently being implemented on a voluntary basis. In January 2013, DG Internal Markets and Services adopted the European Retail Action Plan and, as part of it, a Green Paper on unfair trading practices in the business-to-business food and non-food supply chain. On 15 July 2014, it adopted a communication encouraging Member States to improve safeguards for smaller food producers and retailers.

Finally, DG Competition’s study on ‘Choice and Innovation in the Food Sector’ is intended to provide the Commission with a basis for exploring and determining policy options. The resulting report will examine whether increased concentration or other factors like private label and socio-demographic characteristics have hampered choice and innovation in the European food supply chain.

Future Trends

It is clear that intense competition law enforcement in the food sector is set to continue and intensify. It is therefore essential that all players in the food sector educate and equip themselves to minimise their exposure to serious legal, financial and reputational risks.

Indeed, in May 2013 Competition Commissioner Joaquin Almunia commented:“As to the role of competition policy, let me repeat that we will continue to watch food and consumer-goods markets closely. In the current conditions, keeping these markets free from illegal and harmful anti-competitive practices is a litmus test for us.”

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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