Last month, the French Court of Appeal upheld an appeal against a fine imposed by the French competition authority for price fixing in the endive market.* The endive enjoys great popularity in France and is the country’s 4th most purchased vegetable.
As explained in our previous post, in 2012 the French competition watchdog fined 11 endive producers and several industry associations €3.6 million for price fixing. In overturning the fines, the Court of Appeal held that the companies fell within the exemptions for agricultural products under EU and French law. The court discussed the scope of the exemptions, noting that general competition law rules only apply to the agricultural sector to the extent they do not threaten the fulfilment of the objectives of the European Union’s Common Agricultural Policy (the CAP) (which includes the stability of agricultural markets, fair income for growers, and a commitment to environmental sustainability etc.). The court noted that, in practical terms, agricultural producers need to be allowed to organise themselves on the wholesale level and that the exemption extends to practices including exchanging price information and coordinating commercial terms. The court also held that there was no “complex and continuing agreement”, which is required to find a cartel under the EU and French law.
This is not the first time the French competition agency has taken action against anti-competitive conduct in the agricultural sector. In February 2013, the agency imposed a €5.67 million fine for price fixing in the pork production market. It also took action against suppliers in the bagged flour sector in March 2012, imposing fines against French and German entities totaling €242.4 million. In both cases, the French competition agency took action not only against suppliers of agricultural products, but also the industry associations who coordinated the anti-competitive arrangements. In the case of the flour cartel, industry associations were found to have coordinated the details of the arrangements over 6 years as part of 12 meetings between competitors in the sector. Both decisions are currently under appeal for reasons including a failure to have regard to the agriculture block exemptions.
The decision of the French court provides interesting insight into the potentially overzealous efforts of regulators to prosecute cartel conduct across all sectors, including agriculture. Moreover, the French competition agency’s behaviour in prosecuting industry bodies demonstrates its view that it is critical to target all members of a cartel, including parties who do not benefit directly from the conduct but may assist in coordinating anti-competitive conduct (traditionally enforcement has been focused on the suppliers or producers who have stood to benefit the most from anti-competitive arrangements).
In Australia, the ACCC recently commenced proceedings against an industry association as well as suppliers as part of its investigation into cartel conduct in the egg industry (see our post here). Chairman Rod Sims has repeatedly stated that the ACCC is focusing on the role played by industry intermediaries, and the ACCC has highlighted pitfalls and perils in being involved in industry associations in a 2011 guide for business as well as various case studies.
The egg cartel prosecution is also noteworthy as it represent one of the few occasions that the ACCC has pursued penalties against individuals involved in cartel conduct (rather than the corporations alone):
- A recent case where penalties were imposed on persons involved in cartel conduct were the proceedings against T.F. Woollam & Son Pty Ltd (Woollam), J.M. Kelly (Project Builders) Pty Ltd (Kelly) and Carmichael Builders Pty Ltd for engaging in ‘cover pricing’ in relation to the tenders for four construction projects. In that case, the Federal Court imposed penalties on the Managing director of Woollam ($50,000, company penalised $450,000) and the Construction Manager of Kelly ($30,000, company penalised $600,000).
- There remains a possibility that penalties may be imposed on a manager of Cement Australia, following a finding that he was knowingly concerned in one contravention of the CCA, with the issue of penalties still before the Court.
*For those like the writer who are gastronomically ignorant, an endive is a small leafy vegetable with a crisp texture and strong flavour. It apparently pairs well with meat and other rich ingredients