COVID-19: UK COMPETITION LAW EXEMPTION FOR DAIRY INDUSTRY

  • United Kingdom
  • 05/22/2020
  • Morgan Lewis

The UK Parliament on May 2 adopted the Dairy Produce Order, which temporarily relaxes the application of UK competition law to certain types of cooperation between either dairy produce suppliers or logistic service providers to address issues in the supply chain caused by the ongoing coronavirus (COVID-19) pandemic, such as decreased demand from the hospitality sector and reduced collections from retailers.

Businesses are likely to have many questions as regards the types, nature, and scope of collaboration that would be tolerated. It is important that businesses ensure that their arrangements intended to address the COVID-19 pandemic are competition law compliant, and that they are appropriately documented such that they can be properly defended to the European Commission, national authorities, and/or in private litigation if necessary.

The Order

Under the Dairy Produce Order (Order), certain types of cooperation between dairy produce suppliers1 or logistic service providers, respectively, are excluded from the Chapter I prohibition under the UK Competition Act 1998.[2] To qualify for an exemption, the collaboration must be limited to one of the activities specified in the Order; it must be entered into for a specific purpose, such as maximizing efficiencies in the processing, transport, or storage of dairy produce, and/or limiting the waste of fresh milk due to a decrease in demand; and it must be notified to the Secretary of State.

For dairy produce suppliers, permitted types of collaboration include the following:

- Collecting and sharing information on surplus milk quantities, stock levels, aggregate customer demand, and availability of milk processing

- Sharing or coordinating measures relating to labor and facilities

- Coordinating on the temporary reduction of milk production

For logistics service providers, permitted types of collaboration include the following:

- Sharing information on labor availability

- Sharing labor or facilities or coordinating deployment of labor

- Sharing information on delivery vehicle capacity and the size, type, or destination of delivery vehicles.

The Order came into effect on May 2, 2020, and is currently set to expire after three months.

Measures to support the dairy industry have also been adopted by the European Commission. For further information, see our LawFlash, COVID-19: EU Relaxes Competition Rules for Cooperation in the Dairy, Potato, and Flower Sectors.

Competition Law Compliance Remains Important and Breaches Will Not Be Tolerated
The dairy industry has previously been subject to UK antitrust scrutiny. In 2011, the UK antitrust authority issued an infringement decision and imposed fines against a number of market participants further to an investigation in the dairy sector.

Even though the Order relaxes the application of UK competition law in the short term for certain types of collaboration in the dairy sector, other types of collaboration continue to be prohibited, and the dairy sector is not exempt from antitrust scrutiny. For example, the Order explicitly states that market operators are prohibited from sharing information regarding costs and pricing.

The Order also explicitly sets out that any coordinated effort to reduce milk production must not be aimed at excluding one or more dairy product suppliers from the market. The UK’s Competition and Markets Authority has stressed that it will not tolerate breaches of competition law on the back of the crisis, and that it remains vigilant. See in this regard our LawFlash, COVID-19: UK Antitrust Authority Issues Guidance on Business Cooperation During Pandemic.