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FEED FORUM 2004Competition Law Implications for the Grain and Feed Sectors

Karen Gibbons

11 November 2004


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What is competition law all about?

Ensuring firms compete for business on the basis of their

ability to serve customers

Todays purpose:

Look to challenges and opportunities posed by competition law

ow you o ge an un ers an ng o e ssues Facilitate discussion


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The Challenges:

Legal Consequences of Breach of Competition Law

Imprisonment terms of up to five years for certain offences

Possible fines up to 4 million

Key provisions in agreements being unenforceable

v ac on nc u ng ac ons or amages y r par essuch as competitors

Civil action by the Competition Authority


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The Challenges:

Non-Legal Consequences of Breach of Competition Law

Management time and resources used in dealing with an

investigation

Negative publicity

Ongoing surveillance by the Authority


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Competition Law - Prohibitions

Anti-competitive agreements between businesses (Section 4

of the Competition Act, 2002 (CA 2002) and Article 81 of the

EC Treaty)

Abusive behaviour by businesses in dominant market

Treaty)


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Section 4/Article 81

Prohibits agreements between undertakings, decisions by

associations and concerted practices

Which have as their object or effect

Prevention, restriction or distortion of competition

In trade in goods services in the State or part of it/betweenMember States of EU


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Examples of prohibited practices under Section 4/Article 81

Agreeing prices

Estuary Fuels

Agreeing to limit production

Sharing markets

Home heating oil Collective boycotts/blockades

ITAA/Ryanair

Natural Dairies

Drogheda farmers


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Drogheda Farmers Case

Summary criminal prosecution by Authority

Initial convictions in District Court Circuit Court appeal

Convictions overturned

Lessons to be learned

Criminal convictions difficult to obtain

Contrast with Natural Dairies case

Agreement having object of distorting competition


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Abuse of a Dominant Position

Dominance ability to act independently of suppliers,

competitors and consumers

Both a purchaser and a supplier can be dominant

Indicators of dominance

Your market share Your competitors market share

Barriers to market entry/exit

Mobility/contestability of market


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Examples of Abuse

Discriminatory prices

Predatory behaviour Tying

Irish League of Credit Unions

Blemings v- MPP Refusal to deal

Chanelle Veterinary Products Ltd v Pfizer (Ireland) Ltd


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Definition of markets

Product market

Substitutability

Geographic market

Identification of players

What is their market share?

Analysis of behaviour


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The Competition Authority

Investigation of Breaches

Dealing with complaints

200 complaints received in 2003

5 full investigations

Enforcement powers Summon witnesses (69 in 2003)

Dawn raid searches (21 warrants in 2003)


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Civil Proceedings

Cases by Authority:

Beef Industry Development Society

Licensed Vintners Association


Private cases: Chanelle v- Pfizer

Donovan v- ESB


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Criminal Proceedings

Advise Director of Public Prosecutions

Home heating oil

Prosecute more minor offences


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Reach Settlements

Settlements reached in 2003:

Newspapers Irish Independent & Irish Times

Statoil

Glassmatix Estimation Systems


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Investigation of Mergers

Merger = 2 or more undertakings, previously independent of

one another, merge

Notification may be advisable

self-assessed on basis of criteria

Notification and clearance gives immunity from section 4&5 Authority may investigate

Monaghan Middlebrook Mushrooms Limited/Carbury

Mushrooms


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Challenges and Opportunities

Competition Law Compliance


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Opportunities:

Competition Law A Sword

Competition Law can come to your aid where:

Parties are colluding to put you out of business by e.g. refusingto supply you

Parties seek to bundle goods together, e.g. only supply one

product on the condition that one or more other products arealso purchased

Excessive prices are being demanded by a large player on the

supply market


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Opportunities:

Competition Law A Shield

Competition Law can act as your defence where:

Parties try to pressurise you to agree or fix prices, terms andconditions, costs or marketing plans

Parties seek an exchange of confidential information relating to

your business with you Parties seek to agree to share markets or customers with you

Parties attempt to control the price at which your goods are

sold.Recommended

means just what it says, nothing more. Collective boycott or blockade


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Opportunities:

What can you do?

Complain to Competition Authority

Complain to EC Commission

Litigate

Seek in unction

Seek damages


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Trade Association Membership

Membership of a trade association can raise suspicion

because it involves co-operation between competitors

Section 4 of Competition Act, 2002 covers decisions by

associations of undertakings

nc u es: Constitution or rules of a trade association

Recommendations including non-binding recommendations


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Trade Associations as focus of an investigation:

Beef Industry Development Society

Irish Veterinary Union


Soft Drinks Beer Bottlers Assocation

Licensed Vintners Association


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Permissible Trade Association Activities

Codes of conduct e.g. customer complaints procedure

Lobbying providing general information on the industry as a

whole

Standard terms and conditions of sale/purchase only where

use s vo un ary Certification Systems


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What must a trade association avoid doing?

Exchanging confidential information on pricing, market

opportunities, customers etc.

Boycotts - agreeing not to deal or trade with a particular

business


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Dos and Donts of competition law for individual

companies Do:

Limit interaction with competitors

Be aware of the topics that you should not discuss withcompetitors and how to behave if others raise these subjects

void use of words such as dominance

destroying a competitorsqueezing out a competitor, eliminating a competitor

Seek legal advice when you are uncertain about whether

something might be anti-competitive Keep all correspondence/other communication from external

legal advisors in a separate file clearly marked to show itscontents


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Do not Allow a competitor to talk to you about anything anti-

competitive

Refuse to supply customers without first seeking legal advice ifyou are a major producer

you are a major producer Engage in collective action with other producers


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Challenges:

Coping with a Dawn Raid


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Coping with a Dawn Raid

What are Dawn Raids?

Unannounced visits by inspectors of the Irish Competition

Authority or the European Commission


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Dawn Raid Powers

Unannounced visit to business (factory or office) and private

home

Gardai present

Power to seize original documents and access all data

nc u ng compu er recor s

Power to ask questions


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Dawn Raid Be Prepared

Staff awareness

Inspect warrant

What are you required to give them?

Legal privilege

Answering questions


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Challenges & Opportunities

Use Competition Law as a sword and a shield

Be Competition Compliant

Be prepared


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Karen Gibbons

Matheson Ormsby Prentice30 Herbert StreetDublin 2

T: +353 1 6199000F: + 353 1 6199010E: [email protected]

W: www.mop.ie

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