Competition Issues in the Agri-Food Sector

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Competition Issues in the Agri-Food Sector

• Monday 10th April 2006
• Declan Purcell
• Director, Advocacy Division
• The Competition Authority

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The Competition Authority

• Enforcement of EU and Irish Law
• Article 81/Section 4 on agreements, especially
  cartels
• Article 82/Section 5 on abuse of dominance
• Mergers
• Substantial lessening of competition in the
  relevant market
• Promotion of Competition
• Tackling State restrictions on competition
• Compliance with competition law

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Work in Agriculture Food

• Consolidation in food processing sector
• Animal Medicines
• Food Retailing the Groceries Order
• Agricultural inputs, farmers as consumers
• Animal Medicines
• Veterinary Services
• Fuel, other professions, banking, insurance,
  telecoms

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Issue 1 - Consolidation

• Arguments for consolidation
• Scale
• Efficiency
• Competition Policy and consolidation
• Uses an effects-based approach
• Protects consumers from adverse market effects
• Strongly supports competition and new entry

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Consolidation - cases

• Beef Processing
• BIDS Case (and others) challenged
• Dawn-Galtee Merger cleared
• Monaghan Mushrooms (Merger) Case cleared

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Consolidation Summary

• Key Issue Market-led rationalisation
• vs
• Forced or orchestrated action
• Key Test
• When efficiencies and effects on competition
  are added up, will prices to consumers rise

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Issue 2 - Animal Medicines

• August 2005 proposals controversial, concerns
  expressed on both supply and demand side
• Ministers October 2005 announcement welcome
• Minister to await the outcome of EU exemption
  negotiations before deciding finally re who can
  write prescriptions
• In the meantime, vets to issue separate invoices
  for (a) prescribing, (b) dispensing
• Licensed merchants can supply some prescribed
  medicines from January 2007
• Prescription life extended from 1 to 6 months

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But still some concerns

• The proposed regime is still over-restrictive
• Concerns about confining the writing of
  prescriptions to vets. Shouldnt concentrate
  monopoly power like this in one group of hands
• EU Directive doesnt require this in fact,
  specifically leaves it open to MS to allow others
  to prescribe
• Not really an answer to rely on some future,
  uncertain, unproven EU exemption regime

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Other concerns

• Requiring vets to prescribe 2 or 3 brands not the
  answer
• even requiring two or three brands is potentially
  anti-competitive
• why not ingredient-based ?
• or more generics ?
• Animal v. human medicines
• humans more liberal prescribing rules planned
• animals - more restrictive prescribing rules
  planned

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Issue 3 Food Retailing and Distribution

• Farm prices low and stable
• But prices to consumers higher than they need to
  be
• So what (or where) is the problem ?
• In the food distribution sector ?
• In food retailing ?

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The Groceries Order

• Competition Authority focused on one aspect of
  the problem the Groceries Order
• Introduced 1987
• Prohibited the selling, or advertising for sale,
  of grocery goods below net invoice price
• in other words, prohibited the passing on
  discounts to consumers

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The Groceries Order

• Applied to -
• Grocery goods for human consumption
• Intoxicating liquor not for consumption on the
  premises
• Household necessaries other than foodstuffs
• Did not apply to
• Fresh fruit and vegetables
• Fresh and frozen meat,
• Fresh and frozen fish

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Grocery prices

• Ireland is one of the most expensive places to
  buy food in the Eurozone.
• The cost of food in Ireland has risen while
  prices in other retail sectors have fallen.
• Higher rate of increase in the price of items
  covered by the Order.
• Farm gate prices are not to blame, they have
  remained relatively stable.
• Bottom line Groceries Order cost average
• householder up to 500 a year.

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Groceries Order now gone

• Repealed by the Competition (Amendment) Act 2006
• But some prohibitions remain.
• ..any attempt to force resale price
  maintenance.
• discriminatory treatment of suppliers..
• .having to pay for advertising / display..
• ....hello money
• All subject to a Competition Test in each case.

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Stakeholders can be pro-active

• Respect and use competition law
• Work within competition rules to attain
  efficiencies
• Use competition law to raise objections, e.g.
  mergers and dominant firms
• Continue to support competition and culture of
  regulatory reform
• Use Competition Authority to assist new
  consumer focus

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Competition Issues in the Agri-Food Sector

• Monday 10th April 2006
• Declan Purcell
• Director, Advocacy Division
• The Competition Authority