The Netherlands Authority for Consumers and Markets (the “ACM”) has ruled that arrangements concerning a new form of sustainably reared chicken, known as the ‘Chicken of Tomorrow’, which lead to other forms of chicken being removed from sale, do not qualify for exemption under the Dutch Competition Act, and are therefore guilty of restricting competition on the Dutch market.
The Chicken of Tomorrow
Sustainably produced poultry meat has enjoyed vastly increased sales in the Netherlands during the last five years due to schemes introduced by the Dutch Society for the Protection of Animals. The Chicken of Tomorrow is a recent initiative by a group of poultry producers and processors providing for higher animal welfare standards including additional space for the chickens and additional poultry litter as well as a longer lifetime of one to two days.
Anti-competitive agreements between market participants
Market participants at varying levels of the poultry meat supply chain – including supermarkets, farmers, and meat processors – entered into agreements providing that only chicken meat that achieves certain animal-welfare requirements, such as those put in place as a part of the Chicken of Tomorrow initiative, should be available to consumers. These agreements led to Dutch supermarkets de-listing regular chicken meat and removing it from their shelves.
In order to qualify for an exemption from the prohibition on cartels under the Dutch competition regime it is necessary that the benefits passed on to the consumers exceed the harm inflicted upon them under agreements. Harm in this specific case is the reduction in options available to consumers as well as higher prices for the goods in supermarkets and other retailers.
Following its review of the agreements and the requirements of Chicken of Tomorrow, the ACM found that the improvements offered by Chicken of Tomorrow were only limited: the birds only benefited from slightly more space and generally only lived a couple of days longer than conventional chickens. The ACM’s consumer research also found that these improvements came at a cost higher than consumers were generally willing to pay.
Therefore, the ACM concluded that agreements to remove regular chicken meat from supermarket shelves went too far and did not satisfy the efficiency arguments necessary for exemption.
The ACM’s decision in relation to the poultry market demonstrates that even where efficiencies and consumer benefits are recognised by competition regulators, these will not be tolerated where they limit the power of the consumer to choose the products that they wish to purchase or raise the prices of goods to a level that cannot be justified by the potential benefits to the consumer.
While it appears to be the case that the Dutch public have welcomed higher standards of animal welfare in relation to the produce that they consume, it is imperative that organisations throughout the food sector continue to ensure that their trading practices do not ultimately fall foul of competition law. As the recent ruling demonstrates, this is indeed the case even when pricing strategies and distribution agreements incorporate perceived benefits for the end consumer.
This latest decision by the ACM with regards to the food sector follows its decision to fine companies for their involvement in a cartel between flour producers to fix prices and production capacity. These decisions appear to signal that the ACM are following the European Commission’s lead in placing the food and drink sector under the spotlight in an attempt to prevent harm being done to consumers.