The possibility of a no-deal Brexit, and therefore the potential for food and drink supplies to be disrupted, has led to calls for the government to provide “cast-iron guarantees” that businesses in the food supply chain will be permitted to work together to discuss and tackle shortages, in order to decide where to prioritise shipments, in a way that may give rise to questions of compliance with competition law.
The Competition Act 1998 (the Act) prohibits anti-competitive agreements, in particular, agreements between competitors that fix prices, allocate customers/markets, rig bids and share competitively sensitive information. Companies found to have breached competition law can be fined by the Competition and Markets Authority (CMA) up to 10% of group global turnover, the agreements are void and unenforceable, and individuals involved can also face penalties, including prison and fines and director disqualification.
The Food and Drink Federation (FDF) has called on the CMA to issue a “letter of comfort” to the industry that coordination necessary to ensure maintenance of supply and distribution of food and drink, in the event of a no-deal, would be considered legal. However, the CMA no longer has the power to grant individual exemptions to the prohibition on anti-competitive agreements, and businesses must self-assess whether their agreements fall within the prohibition and, if so, whether they meet the exemption criteria (essentially, that the benefits of the agreement outweigh the anti-competitive effects and will not eliminate competition in the market). Under existing guidelines and practice, generally “hardcore” infringements, such as market allocation between competitors, will not qualify for exemption. Indeed Andrew Tyrie, the Chairman of the CMA (and former Chairman of the Treasury Select Committee from 2010 – 2017), confirmed that: “This is a matter for government as the secretary of state can exempt certain agreements from competition law in the public interest. The CMA stands ready to advise government as necessary in its preparations for a no-deal exit.”
Under the Act, the government can pass a statutory instrument, in the form of an Order, relaxing the prohibition if there “are exceptional and compelling reasons of public policy”.
The government has used this power four times before, most recently in 2012, when panic buying of petrol led to fuel shortages. In response, the SoS issued The Competition Act 1998 (Public Policy Exclusion) Order 2012, which permitted communication between fuel companies to allocate supplies. This involved the development of a voluntary protocol between industry associations and companies in the UK downstream oil sector, the purpose of which was to improve the distribution of oil fuels during a disruption, in particular, to enable the sharing of accurate information between industry parties relating to any disruption of operations, availability of fuel stocks and fuel tanker movements, and to enable joint planning and coordinated supply action between the parties by sharing and redeploying assets.
Such a statutory instrument can be implemented quickly and with limited, if any, parliamentary scrutiny.
As yet the government has given no public indication that such an Order is in the pipeline or that it is minded to temporarily suspend the application of competition law in this way. Indeed, in the current political climate, a public announcement that food and drink supplies are likely to need “managing” in a way that requires legislation is arguably tantamount to confirming that food shortages are to be expected and, thus, to lead to immediate panic buying in a way that would potentially compound the issue this is designed to control.