The European Competition Network (ECN), consisting of the competition authorities of the 27 EU Member States, has published a detailed report setting out the enforcement activities of competition authorities in the food sector. The report indicates that the sector will remain a high priority for European competition authorities for the foreseeable future.

The publication of the report follows requests by the European Parliament for an explanation of the activities of the competition authorities in the food sector, and also the creation by the ECN of a food task force to look closely at issues in the sector.

A sector under intense scrutiny

The report provides an overview of enforcement actions taken by European competition authorities between 2004 and 2011 and it clearly confirms that the sector has been the subject of significant enforcement activity.  In total, competition authorities have undertaken more than 180 competition investigations where an infringement finding has been made, have reviewed over 1300 mergers and have undertaken more than 100 market monitoring actions such as sector inquiries, market reports, studies or surveys. These statistics do not include the competition investigations which were opened but subsequently closed without an infringement finding.

Importantly, however, the report provides a useful indicator of the areas in which the authorities have found issues of concern and where future enforcement activity may take place.

Cartels remain a concern in the sector

Of the 180 competition investigations, 60 investigations are ongoing.  These cases concern all levels of the supply chain, including retail activities, with processing and manufacturing accounting for 44% of all competition investigation cases.  Coordination between competitors with respect to price fixing, market or customer sharing and the exchange of commercially sensitive information accounts for approximately half of all competition investigation cases, with the remaining cases being evenly split between vertical supply chain issues (such as resale price maintenance) and abuse of dominance allegations (including exclusivity, minimum purchasing obligations, tying and refusals to supply). Spain and Greece have conducted the most competition investigations with 35 investigations since 2006 between them. The UK, on the other hand, has completed only one investigation being in the milk and cheese sector in 2011, a case which is currently on appeal.

The food supply chain has presented challenges to all competition authorities

The report illustrates that the competition authorities have responded to repeated allegations over the last decade that the food supply chain is not working effectively. Authorities are increasingly using a variety of tools to improve their knowledge of the food sector and to take action to resolve structural supply issues.  Of the 27 national authorities, all but two have used some form of ‘market monitoring’ tool (such as sector inquiries and market studies) to investigate the food sector. Some countries have been much more active than others: Spain has reviewed food markets on 12 occasions; Poland has conducted 13 reviews, and France has conducted 16 reviews since 2004. Some have looked at the sector as a whole; others have focused on a product sector, such as milk and dairy.  However, despite the diversity of actions taken, the report identifies that the issues on which the national competition authorities have concentrated their efforts present significant similarities.

Some national competition authorities have identified structural shortcomings, particularly concerning the structure of the agricultural sector, which may have a negative impact on the functioning of food markets.

Of particular focus to many authorities has been the position and activities of the retail sector.  Many authorities have found that the retail grocery sector has been the subject of consolidation. This, combined with certain structural factors such as planning and development restrictions, has hampered the entry of new players.

A large number of national authorities have identified that certain commercial practices linked to imbalances of bargaining power are considered unfair by many in the food supply chain.  However, a common difficulty across the EU is that national authorities have found that many practices do not clearly fall within the scope of competition rules and they have been unable to take competition enforcement action.  Other measures have therefore been used, such as the introduction of laws against unfair trading practices and codes of conduct to regulate relations between parties in the supply chain. The introduction of GSCOP in the UK and the proposed creation of the Groceries Adjudicator are examples of these.

Competition law compliance is key

With the European Commission’s High Level Forum on the food supply chain due to report later this year and the recent calls by the European Parliament for the European Commission to introduce ‘robust’ Community legislation to make fairer the relationships between producers, suppliers and distributors of food products, it is clear that there is likely to be continued intervention in the sector.  However, the ECN report demonstrates that authorities are vigorously pursuing competition law infringements, particularly cartel infringements, in the sector.  As a result, it is recommended that companies at all levels in the food supply chain ensure that they implement and enforce effective competition compliance programmes to avoid the risk of competition law breaches.