In one of the last sessions convened before the expiry of three Competition Council members' mandates, the Competition Agency terminated the proceedings against undertakings operating in the dairy products market on the grounds that there were no longer any legal grounds for further conduct.
The decision follows the agency's procedural trend of terminating proceedings if it deems it unlikely that an infringement will be found. The proceedings in the case at hand were initiated on May 9 2013, with the purpose of determining whether the largest firms in the relevant milk processing market and the milk production associations had entered into an agreement to fix milk supply prices within Croatia.
In this particular case, there were fierce negotiations over milk supply prices between the relevant processors and the producers (represented by their associations).
Such negotiations are generally prohibited – Article 8(1) of the Competition Act prohibits all agreements between two or more independent undertakings, decisions by associations of undertakings and concerted practices which have as their object or effect the distortion of competition on the relevant market, particularly those which directly or indirectly fix purchase or selling prices or any other trading conditions (mirroring Article 101(1) of the Treaty on the Functioning of the European Union).
Based on data collected during the proceedings, the agency established that at meetings held at the Ministry of Agriculture during 2012, the representatives of the milk processors and the producers had concluded an agreement on the method of calculating the supply price of milk, and continued to convene thereafter in order to discuss milk prices.
In principle, such behaviour would constitute a violation of competition law by the producers and processors since both sides included competitors, which were involved in fixing prices. However, pursuant to the agency's stance, which was clear in this decision, the entire case falls within the area of agriculture and the food industry, where agricultural policy rules and regulations prevail and an active role is exercised by the relevant ministry. Thus, the public authority, even in cases where a particular market has been liberalised, is still authorised to take actions and engage as a mediator between opposing interest groups in order to enable them to find common ground and a feasible solution.
Consequently and, to a certain extent surprisingly, the agency took the position that the negotiations (and the agreement) on fixing milk supply prices, held in the premises or with the mediation of the ministry, did not constitute a prohibited agreement under the Competition Act.
However, the agency had concerns that milk processors, independently of the ministry, were continuing to negotiate and exchange information on milk supply prices; according to the decision, such action is implicitly referred as a potential infringement of the Competition Act. Therefore, based on such suspicions, the agency conducted its first-ever dawn raid on May 16 2013 in order to determine whether, in addition to the described state-facilitated agreement, there was an additional agreement between undertakings which might have been under their sole control. The agency found no additional evidence, either in the dawn raid or by other methods, and thus concluded the proceedings. At that point, the agency had not made an assessment of the acquis communautaire (the EU body of law) (ie, of the possible application of settled EU case law) with regard to the negotiations that took place under the umbrella of the ministry, and thus it did not take into account other possible outcomes.(1)
Some interesting conclusions can be derived from this decision. The agency has proved the following:
It is equipped and staffed to conduct a dawn raid even though certain hiccups still can be noticed – for example, the dawn raid:
- was not carried out at the beginning of the proceeding, but only after other noteworthy investigative actions; and
- was carried out on a single undertaking and not on all or most of the parties which allegedly had entered into the prohibited agreement;
- Price-regulated markets(2) continue to pose a problem for the functioning of the agency, as applied reasoning has expanded the definition of 'regulated markets' to those in which the public authority participates in the formation of prices without adopting a law or other regulation, and even to those in which a negotiation framework is enabled, which clearly shows the purpose of aligning prices or other price terms.
For further information on this topic please contact Gabriele Wahl Cesarec or Mislav Bradvica at Wahl Cesarec & Partners in cooperation with schoenherr by telephone (+385 1 4813 244), fax (+385 1 4813 073) or email (g[email protected] or [email protected]).
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"suffice it to note that, according to settled case-law, the fact that conduct on the part of undertakings was known, authorised or even encouraged by national authorities has no bearing, in any event, on the applicability of Article 81 EC."
(2) On several occasions the agency has previously dealt in detail with price-regulated markets – for example, in a proceeding against 15 driving schools from the Rijeka area, Decision of July 30 2009, Case UP/I 030-02/2008-01/68.