Agreements to reduce capacity in the Irish Beef processing industry are prohibited
Outcome of the Court Action
In 2003 the Competition Authority (the Authority) began legal proceedings against the Beef Industry Development Society (BIDS). This arose as a response to an agreement between competitors, who formed BIDS, to reduce capacity in the Irish beef processing industry.
The case concluded In 2011 when BIDS, before the High Court made its ruling, withdrew its claim for exemption under competition law, and agreed to pay a substantial contribution to the Authority’s costs in the case. As a result, the BIDS agreement remains prohibited, as it has the object of preventing, restricting or distorting competition.
Outline of case
This case centred on an agreement between competitors to reduce capacity in the Irish beef processing industry. The agreement involved the major players in the industry agreeing to pay those players who would voluntarily leave the industry. In return for that payment, the players leaving would agree to decommission their plants, refrain from using the associated lands for processing for a period of five years and sign a two-year non-compete clause with regard to processing anywhere in Ireland.
We took the view that the scheme was incompatible with both Irish and European Competition law and took legal action in 2003. The case then proceeded through a number of stages.
- In 2006, the High Court held that the agreement had neither the object nor the effect of preventing, restricting or distorting competition and therefore did not breach European Competition Law. On foot of this ruling we made an appeal to the Supreme Court.
- In 2007, the Supreme Court sought a preliminary ruling from the European Court of Justice (ECJ) on the question of whether an agreement like the BIDS agreement, where the competitors in that industry agreed between themselves to restructure the entire industry, had the object of restricting competition.
- In 2008, the ECJ found that the BIDS agreement had as its object the restriction of competition and is incompatible with European Competition law.
- In 2009, the Irish Supreme Court then held that the BIDS agreement had infringed European law. The Supreme Court remitted the case to the High Court to decide whether the conditions for exemption set out in European law were satisfied. The onus was on BIDS to prove that all four conditions under European law were satisfied, namely, the agreement:
- Must contribute to improving the production or distribution of goods (or services) or to promoting technical or economic progress.
- Must allow consumers a fair share of the resulting benefit.
- Must not impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives.
- Must not afford undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.
- During the High Court proceedings in 2010, the European Commission decided to intervene in the case and submitted written observations in accordance with European Council regulations. Under a specific regulation, the European Commission may submit written observations to courts of the Member States where the coherent application of European law requires doing so. This is only the fourth time that the European Commission has intervened in this way before a national court.
- In January 2011, before the High Court had the opportunity to reach any decision on the application of the exemption to the BIDS agreement, BIDS withdrew its claim for exemption under European Competition law and agreed to pay a substantial contribution to our costs in the case.
As a result, the BIDS agreement remains prohibited, as it has the object of preventing, restricting or distorting competition.
