Protecting consumers from the rising cost of food: the European Commission continues to scrutinise the food sector within the European Union

16.05.13

 

Role of competition policy in protecting consumers

Against the backdrop of the financial crisis, Mr. Almunia's speech highlighted the growing number of EU citizens which have experienced, and are experiencing, a fall in their standards of living. This has resulted in an increasing proportion of households' incomes being spent on food and other consumer goods, which is having a particular impact upon poorer consumers within the EU.

In this socio-economic context, Mr. Almunia stressed both the role competition law has to play in protecting consumer welfare within the EU, as well as the need to demonstrate to EU consumers that competition law is capable of generating real and tangible consumer benefits.

The recent activities of the Commission and national competition authorities (NCAs) underline the clear policy goal of ensuring competition within markets for food and other consumer goods. With this goal in mind, Mr. Almunia reiterated the Commission's commitment to the continued scrutiny of these markets.

Choice and innovation in the food sector

Following the launch of a Food Task Force by the Commission's Directorate-General of Competition (DG COMP), and the publication of the European Competition Network's report upon the activities of EU competition authorities in the food sector, the Commission announced in December 2012 the launch of a study on choice and innovation in the food sector.

Referring to this study, Mr. Almunia explained that he had asked for this to consider "the impact that modern supply chains have on choice and innovation in food products".

The results of the study are expected by the end of 2013, and will provide the Commission with a basis for exploring and determining policy options, particular with regard to potentially unfair and/or anti-competitive supply chain trading practices.

Issues arising in relation to competition in food and other consumer goods

In particular, Mr. Almunia took the opportunity to flag the following issues as those which "figure large" in the analysis of competition with regard to food and other consumer goods:

  1. Concentration - with only a limited number of manufacturers accounting for the majority of production of certain foods and consumer goods within specific Member States, the Commission is keen to understand whether such concentration is "positive or negative for competition and consumer welfare".
  2. Private label products - while there has been a noticeable increase in sales of private label products in a number of Member States in recent years, these products appear to have gained shares from "second tier" brands, with "first tier" brands effectively holding their shares. The Commission is therefore seeking to establish what this observed dynamic will mean for competition in the long-term.
  3. E-commerce - despite the innovation underlying the success of e-commerce in relation to many consumer products, the Commission intends to ascertain what actually holds back, or could hold back, competition through e-commerce. In this context, and reflecting the recent enforcement activities of a number of NCAs, Mr. Almunia was keen to stress that the Commission would intervene where it had "good evidence" that a company was erecting barriers against e-commerce to protect its brick-and-mortar operations.

What next for companies active in the EU food sector?

As the cost of food becomes an increasingly politicised issue, it is clear that ensuring effective competition in the food sector is a high priority for both the Commission, as well as NCAs.

Further, with competition authorities under public pressure to demonstrate their societal value in the age of austerity, breaches of competition law in the food sector may be expected to result in full scale investigations, with companies exposed to risks including financial penalties, as well as private actions for damages where third parties have suffered loss as a result of breaches.

Coupled with the OFT's focus upon vulnerable consumers, and combined with an increasing desire for criminal prosecutions to be brought within the UK in respect of competition law breaches, the continued scrutiny of the food sector means that companies would be well served to ensure that their current commercial operations continue to comply fully with the applicable competition laws.

 

Key Contact

Bernardine Adkins, partner, +44 (0)870 733 0649, bernardine_adkins@wragge.com

Samuel Beighton, associate, +44 (0) 207 864 9509, samuel_beighton@wragge.com

This analysis may contain information of general interest about current legal issues, but does not give legal advice.