Competition law

Something to move up the Boardroom agenda?

Adam Collinson, Partner 14 September 2012

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?

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

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

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

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

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

National food-retail – a matter of perennial interest? (2)

• Recent (2010/2011) national investigations in:

• Exercise of market power -v- “unfair trading practices” stemming from unequal bargaining power

– Germany– Spain– Belgium– Bulgaria– Czech Republic– Denmark

– Finland– Hungary– Italy– Latvia– Portugal

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

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

Resale price maintenance 2012

• Meat processors (Poland)• Food retail (Austria)• Beer (Germany)• Pet food* (France) €35.3 million• Vegetable oil (Bulgaria)• Dairy products (Portugal) €341,100• Bakery/pastry products (Romania)

* also involved territorial sales restrictions

Market investigations/sector inquiries 2012

• Food retail (Paris)• Milk (Germany)• Food retail (Germany)• Primary food production (Finland)

Abuse of dominance investigations 2012

• Tasty Foods (Pepsico) (Greek salted snacks market)

• Coca-Cola Hellenic Bottling (Greece)

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

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

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

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

• A good time for companies to take stock, re-assess their risks and ensure their compliance measures are robust

Any Questions?