The food sector should expect to see a lot of cartel enforcement activity in 2014, according to the Director of Cartels at the European Commission, Eric Van Ginderachter. Between this and the new UK Competition and Markets Authority’s intention to step up its enforcement activities as of 1 April 2014, it is a good time to look at competition compliance in this area.
With many food markets considered to be national or even local in scope, the Commission previously appeared content to assist national competition authorities (NCAs) with their investigations into suspected antitrust infringements, only starting its own investigative activities where suspected infringements had a wider EU impact. However, the setting up of an EU Food Task Force within DG Competition in 2012 was perhaps more than just a hint of things to come. The European Competition Network (ECN), made up of the heads of the NCAs in the 28 Member States, along with the Commission, provides an excellent forum from which to understand the issues facing operators across the EU, as well as coordinating who takes the lead in relation to particular competition law investigations in the EU. The food retail market has been high on the agenda of several national authorities (UK, Germany, Austria, Italy, France and the Netherlands), whose regulators have run enquiries focusing on the fairness of contractual relations between suppliers and retailers, as well as market concentration with regards to food distribution.
What is coming down the track?
The Commission will evaluate the results of the independent report on competition in food retail markets by Ernst & Young, Arcadia International and Cambridge Econometrics. Depending on these results, the Commission may put forward proposals aimed at improving the functioning of European food markets.
To get a more accurate picture of antitrust activity, you need to look at what the NCAs are up to. Here you find a wealth and variety of cases across a very wide range of products, dealing with cartels and abuse of dominance, through to retail price maintenance and illegal exchange of information. Taking the pet food sector as an example, companies were fined in Poland for restricting distribution channels including online sales, in France for restricting competition in wholesale markets, in Czech and Latvia for RPM while in Belgium, investigations continue into allegations of illegal exchange of information.
Looking at it from the perspective of just one company, Colgate Palmolive’s recent SEC filing reveals the extent of its antitrust woes. It has been the subject of fines in France (detergents and pet food), Spain (shower gel), Italy (cosmetics) and is subject to on-going investigations in Belgium, France and Greece. Not to ignore parallel import fines in Switzerland and civil proceedings in Australia concerning allegations around the launch and pricing of ultra-concentrated laundry detergents.
Not so sweet...
In April 2013, officials from EU and national competition authorities raided the locations of sugar producers in a few EU member states over concerns that they were engaging in cartel activity. Competition Commissioner, Joaquín Almunia, confirmed that the surprise inspections were part of the Commission's broader effort to crack down on price-fixing in the food and retail industries. This was not the Commission’s first investigation of the sugar industry, having fined four sugar producers (including British Sugar and Tate & Lyle) the equivalent of €50.2 million back in 1998. At the same time as these dawn raids, Commissioner Almunia expressed his intention to watch the food and consumer-goods markets closely, on the basis that "Keeping these markets free from illegal and harmful anti-competitive practices is a litmus test for us." On 3 February 2014, the Commission announced the closure of its sugar investigation, just shortly before the German competition authority announced that it had settled its own investigation with fines of €280 million on three German producers.
Meanwhile, back in the UK, Napier Brown complained to the UK’s OFT that British Sugar has broken antitrust rules by halting supplies of sugar in contravention of a 1988 EU order (that fined British Sugar and obliged it to honour certain supply conditions). This formal complaint has been passed to the UK’s new antitrust authority the Competition and Markets Authority to deal with, when it takes over from the OFT on 1 April 2014.
The take away
If you find yourself in a room with your biggest rivals and you are there to discuss anything other than the latest football results, beat a loud and hasty retreat...
If you have any questions or would like more information please contact Bróna Heenan, Corporate & Commercial.This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.