COVID-19: competition law to be relaxed for dairy industry

On 25 March 2020, the Competition and Markets Authority (CMA) published further guidance on cooperation between businesses during the COVID-19 pandemic, and its enforcement priorities in light of the current crisis. In summary, the CMA will not take enforcement action where businesses take temporary measures to coordinate action to ensure the supply of important goods and services, provided that such measures:

  1. are appropriate and necessary to avoid a shortage or to ensure security of supply;
  2. are in the public interest;
  3. contribute to the benefit or wellbeing of consumers;
  4. deal with critical issues that arise as a result of the pandemic; and
  5. last no longer than necessary to deal with these issues.

On 17 April 2020, the Department for Business, Energy and Industrial Strategy (BEIS) and the Department for Environment, Food and Rural Affairs (Defra) announced that elements of competition law will be suspended temporarily to support the dairy industry during the coronavirus disease outbreak (COVID-19).

As a result of the COVID-19 outbreak there have been changes in the dairy supply chain, including decreased demand from the hospitality sector and reduced collection by retailers who have had to close. Legislation will be laid before Parliament to allow the dairy industry to adapt to work together to address current market challenges, so avoiding waste and maintaining productive capacity to meet future demand.

The Competition Act provides that where the Secretary of State is satisfied that there are “exceptional and compelling reasons in the public interest” why prohibition ought not to apply to an agreement or an arrangement of a particular description they may be excluded from enforcement action.

The competition rules have already been relaxed to allow retailers, suppliers and logistic services to work together. While this has already allowed the dairy industry to redirect some of their supplies to retailers, this further specific change for the dairy industry will enable further collaboration between dairy farmers and producers so they can avoid their surplus milk going to waste and harming the environment. This could include sharing labour and facilities, co-operating temporarily to reduce production or identifying where there is hidden capacity in the supply chain for processing milk into other dairy products such as cheese and butter.

Dairy UK and the Agriculture and Horticulture Development Board (AHDB) will now lead work to bring the industry together to identify spare processing capacity, how to stimulate demand and how production could be temporarily reduced.

Frank Smith & Co Solicitors: 01242 801748 and www.franksmithandco.com

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