The UK food industry has announced that it will seek permission to bypass some aspects of competition law in the event of a no-deal Brexit. The Food and Drink Federation (“FDF”) has explained that the new proposed date for a Brexit decision, 31 October 2019, presents real difficulty in terms of supply chain and pre-Christmas stockpiling, and that one way to resolve such issues is to set aside the application of some competition law rules to the food and drink sector. Despite continually asking the Government for reassurances regarding Brexit and potential supply chain issues, the industry has received no clarification on roles it could fulfil to minimise the disruption that it is anticipated a no-deal Brexit would cause.
Warehouse capacity is a huge issue for organisations in the food and drink sector, especially during the run up to the festive period. The previous Brexit date in March would have resulted in far less disruption than the current proposed date which is effectively two months before Christmas – the busiest time of the year for warehouses storing food and drink in the UK and EU.
Under competition law, there are restrictions on economic operators exchanging commercially sensitive information amongst one another. This is because such exchange can result in price or market sharing agreements or arrangements (cartels) and/or concerted practices, through reducing uncertainty in the market so as to facilitate collusion. The Competition Markets Authority (“CMA”) can fine companies up to 10% of turnover for breaking competition law rules. The Government has not yet given the industry permission to work together. The Chief Operating Officer of the FDF, Tim Rycroft, has explained that a no-deal Brexit will result in selective shortages of food. Lord Haskins (a House of Lords cross bencher) has gone as far as suggesting that the food shortage situation faced by the country in the event of a no-deal Brexit could resemble a wartime rationing scenario that we simply do not have time to effectively put in place given it is now less than three months until “D-Day”.
To avoid supply chains coming to a halt, the FDF is insisting that the Government assure the food and drink industry that competition law will not be applied when organisations are making strategic decisions and working together in relation to shipment prioritisation. The Government has the power to “bend the rules” in relation to competition law and has done so previously, once in 2001 in relation to dairy prices and in 2012 in relation to the fuel crisis.
Given companies can face crippling financial exposure in the form of CMA fines for anti-competitive behaviour, the food and drink industry is seeking “cast iron reassurances” from the Government before they take any action which may be considered anti-competitive to prevent food shortages.
Just this week, a Government spokesperson assured the public that “our top priority is supporting consumers and businesses in their preparations for Brexit. We are working closely with the food industry to support preparation as we leave the EU”. Until the food and drink industry receives black and white confirmation that competition law will not apply in the event of a no-deal Brexit, it appears the message here echoes the general sentiment surrounding Brexit – uncertainty is the only certainty.
This article was co-written by Megan Lukins.