Commission denies rising food price is competition issue

24-May-2012 - Last updated on 25-May-2012 at 12:28 GMT

Related tags Supply and demand Price fixing

Rising food prices across Europe are not attributable to a failure of competition dynamics in the food industry, according to a report just issued by the European Competition Network (ECN).

The report claims more than 180 antitrust cases, 1,300 merger decisions and 100 monitoring actions have been investigated in the European food industry between 2004 and 2011.

In a statement issued in the wake of the document, the ECN said some investigations had found “unfavourable market developments, such as price increases, which can be explained by structural or cyclical factors not necessarily linked to the existence of restrictions of competition by market players”.

These factors included fluctuations on worldwide commodity markets, increases of input costs for agricultural products, global demand and supply developments, availability of stocks, energy and labour costs or seasonal production issues.

Largest number of antitrust cases

The largest number of antitrust cases covered in the ECN report related to the processing and manufacturing and retail levels. Within individual sectors, the largest number of cases concerned cereal-based products, retail sales of groceries and milk and dairy, followed by fruits and vegetables and meat, poultry and eggs.

Horizontal agreements between competitors proved to be the area investigated most frequently. Authorities had sanctioned more than 50 cartels involving price-fixing, market and customer allocation and the exchange of sensitive business information, said ECN. The remaining infringements included vertical restrictions, such as resale price maintenance, for example, a food manufacturer setting a minimum price at which a retailer has to sell its products, and abuses of dominant positions.

Among the mergers raising competition concerns, aside from the retail sector, which yielded the largest number of cases, were the dairy and meat sectors.

Eight mergers prohibited

Competition authorities had prohibited eight mergers raising serious competition concerns in the sectors of pastry, cheese, meat, beverages and confectionery, said ECN.

Market monitoring activities by competition authorities had identified structural or regulatory factors that might impact negatively on the functioning and competitiveness of the food sector. These included the fragmented and atomistic structure of farmers in some Member States, the existence of unnecessary intermediate steps in the supply chain or the existence of regulatory barriers to retail markets.

Some Member States had concluded that farmers were being squeezed too heavily by those above them in the supply chain and could not even cover production costs. Authorities had advocated the rationalisation of the rest of the supply chain to increase simplicity and the formation of farmer cooperatives to boost their power.

FDF welcomes report

Terry Jones, communications director at UK trade body the Food and Drink Federation welcomed the report. “It is clear that there are significant cost and market pressures in the food sector. The role of the competition authorities in ensuring that the market works effectively and that dominant players do not abuse their market position is an important one and we welcome the recognition of this," he told FoodNavigator.

“As an example, the UK government bill to put in place a Groceries Code Adjudicator to police the already established Code of practice will give suppliers the confidence to innovate and invest and ultimately protect choice and availability for the consumer.”