Competition rules to be relaxed for supermarkets

The UK Government will shortly be adopting legislation that will relax the application of the UK competition rules to certain types of agreements in the groceries sector, in order to ensure a smooth and efficient supply of food and essential grocery products to the most isolated and vulnerable consumers.

Information sharing and other types of cooperation agreements between competitors (such as price fixing, market sharing and or controlling production and investment) are typically among the most serious types of infringement under competition law, but a certain level of cooperation may now be necessary in order to secure supplies and deliveries.

Under the Competition Act 1998 (Schedule 3 paragraph 7) the Government can exempt certain specified agreements from the Chapter I prohibition on anti-competitive agreements if there are exceptional and compelling reasons of public policy to do so.  This power was used in 2012 when panic buying of petrol led to fuel shortages, and an order was published permitting communications between fuel companies to allocate supplies.

The latest order will provide for a specific and temporary exemption and businesses will need to be careful not to exceed its scope.  The CMA has made it clear that it " will not tolerate unscrupulous businesses exploiting the crisis as a ‘cover’ for non-essential collusion. This includes exchanging information on longer-term pricing or business strategies, where this is not necessary to meet the needs of the current situation".  We will update our blog post once the order is available, but the Government has indicated that it will include the following measures:

• allowing retailers to share data on stock levels
• cooperation on keeping stores open
• sharing distribution depots and delivery vans
• pooling staff to help meet demand

These measures will provide the industry with greater flexibility to work together and address some of the challenges raised by the current crisis.  They are part of a wider package of measures which also include a relaxation of the rules around permitted hours for drivers and extending hours during which deliveries can be made to stores.

A similar mechanism does not exist under EU competition law, but an exemption under Article 101(3) TFEU may be available where the parties can demonstrate that their agreement improves the production or distribution of goods and allows consumers a fair share of the resulting benefits.  The Commission is liaising with the retail sector in order to establish the types of agreements and information exchanges for which they may require exemptions and further guidance.  The Commission can issue informal guidance in order to assist the parties with their analysis and provide greater certainty.

Contacts