2. Outline
• a reflection on recent policy and case law trends
in the sector
• what is the ECN and how is the work of its
members relevant?
• what are the implications for food and drink
companies?
• UK competition law developments in train
3. Recent policy initiatives (1)
• European Commission antitrust “task force” for
food sector
– two year “mission” from January 2012
– established as a result of continued calls for
scrutiny of retail markets
– complements rather than replaces national
competition authority investigations
4. Recent policy initiatives (2)
• food and retail sector as a specific focus for the
ECN
– ECN stands for European Competition Network
– nature of food markets tends to be
local/national rather than Europe wide
– so enforcement activity predominantly
national rather than at pan European level
– special food sub-group
5. Report of the ECN food sub-group (1)
• published May 2012 in response to:
– European Parliament calls for explanations of
action taken to address volatility of
commodity markets
– concerns about rising food prices
– perceptions of a malfunctioning food supply
chain
6. Report of the ECN food sub-group (2)
• statistics from 2004 to 2011:
– 180 antitrust investigations; 1300 mergers;
100 sector enquiries (“robust” enforcement)
• anti competitive activity across the supply chain:
– price fixing; market sharing; unlawful
information exchange; resale price
maintenance; exclusionary conduct
7. National food-retail – a matter of
perennial interest? (1)
• power struggle between large retail and food
suppliers a recurring political issue
• repeated calls from European Parliament for
inquiry into the retail sector
• 2008 resolution requiring DG Comp to
investigate the impact of the supermarkets
• 2010 saw establishment of the High Level Forum
for a Better Functioning Food Supply Chain
8. National food-retail – a matter of
perennial interest? (2)
• recent (2010/2011) national investigations in:
– Germany – Finland
– Spain – Hungary
– Belgium – Italy
– Bulgaria – Latvia
– Czech Republic – Portugal
– Denmark – Iceland
– Croatia
• exercise of market power -v- “unfair trading
practices” stemming from unequal bargaining
power
9. Cartel investigations 2012 (1)
• fruit and vegetables (Hungary)
• bread (Spain)
• cotton (Spain)
• beer (Austria) €1.1 million
• flour (France) €242.4 million
• milk (Cyprus)
• bell peppers/shallots (Netherlands) €23 million
10. Cartel investigations 2012 (2)
• beer (Spain)
• CO2 for soft drinks (Spain)
• purchase of raw milk (Spain)
• confectionery (discounts/rebates to retailers)
(Germany) €2.4 million
• poultry (Greece)
• watermelon* (Hungary)
* also involves investigation of territorial sales restrictions
14. Implications (1)
• the more competition authorities look, the more
they find …
• … so they will keep on looking
• communication across the ECN has the potential
to trigger a domino effect across Europe
15. Implications (2)
• companies could be sitting on time bombs …
• … which could explode in the event of
investigation
• how confident are companies that their own
businesses are competition law compliant?
• how confident are directors that they don’t face
the risk of disqualification?
• new OFT guidance on penalties – a timely
reminder of the OFT’s deterrence objective
16. Implications (3)
• consolidation opportunities continue to arise in
the current economic climate
• in an M&A context need to be alive to successor
liability principle
– buy the shares
– buy the liability
• extra care needed in terms of due diligence and
contractual protection
• immediate compliance review required post
completion
17. UK competition law developments in train (1)
• new OFT Guidance on penalties
– maximum starting point for fines increased to 30%
of relevant turnover
– up to 100% uplift for each bout of recidivism
– inclusion of a specific proportionality check
– relevant for cases where SO still to be issued
• OFT investigation procedures in competition cases
– move to collective decision making
– ability to make representations on key elements of
draft penalty calculations
18. UK competition law developments in train (2)
• Enterprise and Regulatory Reform Bill highlights:
– formation of the Competition and Markets
Authority (a merged OFT and Competition
Commission)
– CMA to have enhanced powers to require
individuals to answer questions as part of an
antitrust investigation
– dishonesty requirement under criminal cartel
offence to be removed
19. Conclusions
• the food sector has been a fertile source of
competition law infringements
• there are pressure points up and down the supply
chain which may tempt companies to collude
• the authorities show no signs of turning out the
spotlight
• competition law still seen as a priority for ensuring
better functioning of the economy and driving
performance
• a good time for companies to take stock, re-assess
their risks and ensure their compliance measures are
robust
New OFT penalty guidanceIntroduced following strident criticism in the CAT in the context of the construction cartel appealsProportionality in the context of the undertaking’s size and financial position, the nature of the infringement, the role of the company in the infringement and the impact of the infringement on competition – the proportionality cross check comes immediately following the point where the OFT is required to see whether any adjustment is required to the fine (having taken into account duration and any aggravating and mitigating factors) for the purposes of specific deterrence – ie the need to deter the companies the subject of the decision from engaging in future anti-competitive activity as distinct from general deterrence which is the need to deter companies generally from engaging in anti-competitive activity and which is most effectively dealt with at Step 1 where the type of activity / seriousness of the infringement is the driving force. An example of where an increase for specific deterrence may be appropriate would include a situation where the gains made by the company concerned from the anti-competitive activity are estimated to have exceeded the proposed penalty.New OFT investigation proceduresStill to be published but consultation complete and announced that decision making will now be made by Committee which will not involve the Senior Responsible Officer (who makes all the significant decisions during the course of the investigation) – in other words there will be separation of the investigation team and the decision makers.Also flagged as a likely introduction is the proposed sharing of key elements of the penalty calculations so that representations in relation to those calculations can be made and taken into account in the setting of the penalty. Anticipated that this will assist in reducing the number of appeals made to the CAT purely in relation to the amount of the penalty.
Questioning powers (para 31 draft Bill)CMA will be able to issue notice to an individual (copy to the connected undertaking) requiring him to answer questionsCould be there and then or at a time and place specifiedNotice must indicate subject matter and purpose of investigationResponses will not generally be able to be used against the individualResponses will not generally be able to be used against the individual’s current or former employer in the context of prosecution for a criminal offence but will be able to be used in the context of civil proceedingsFine of up to £30,000 and daily fines of up to £15,000 for failure to comply with requirementRemoval of dishonesty requirement (para 39 draft Bill)“Prior publication” defenceRequires prior publication of names of companies, details of products or services, and description of nature of arrangements (and why they might be considered as cartel arrangements)Follows technical debate as to whether dishonesty requirement impeded prosecutionsPart of drive to ensure greater accountability for competition law compliance placed on individuals (cf revised guidance on director disqualification published June 2011)
