UK Government adopts Competition Act Exclusion Order for the dairy sector

A new Competition Act Exclusion Order, the Competition Act 1998 (Dairy Produce) (Coronavirus) (Public Policy Exclusion ) Order 2020 (the Dairy Exclusion Order) came into force on 1 May 2020.  Under the Competition Act 1998 (Schedule 3 paragraph 7) the Government can exempt certain specified agreements from the Chapter I prohibition if there are exceptional and compelling reasons of public policy to do so. Since the COVID-19 pandemic this process has now been used for certain types of agreements relating to the groceries sector, healthcare services, ferry services for the Isle of Wight and now the dairy sector (see here for our blog post on the previous Orders).

The aim of the Dairy Exclusion Order is to address the impact of COVID-19 on the demand for dairy produce in the UK.  Reduced demand, mainly as a result of the almost complete closure of the hospitality sector, and a reduction in processing capacity have led to an over-supply of raw milk and some cooperation between dairy produce suppliers and between logistics service providers may be necessary in order to support the industry.  As with the previous Exclusion Orders, the Dairy Exclusion Order is very specific and expressly lists the types of agreement that will be permitted.  The sharing between dairy producers or between logistics service providers of any information relating to costs or pricing will not benefit from the Order.

Agreements that are intended to benefit from the Dairy Exclusion Order must be notified to the Secretary of State, who will keep and publish a register of agreements.

Agreements between dairy produce suppliers

The Order identifies two categories of ‘qualifying activities’ and under each category the specific activities for which the Chapter I prohibition will be excluded, are listed:

Activities which have the purpose of maximising the processing, transport and storage efficiency and capacity of dairy products and to prevent or mitigate the need for the disposal of milk resulting from a disruption in demand caused by a reason relating to coronavirus

• Collecting and sharing information on surplus milk quantities, stock levels and aggregate customer demand for milk
• Collecting and sharing information on the availability of milk processing, storage and drying capacity
• Sharing of labour or coordination of the deployment of labour from other industries into the dairy produce supplier workforce
• Coordination and sharing of facilities or coordination of the deployment of new facilities in the dairy produce supply chain
• Coordination on the processing and storage of surplus milk
• Sharing information on services provided by logistics service providers

Activities which have the purpose to prevent or mitigate the need for the disposal of surplus milk or to limit the environmental impact of any disposal of surplus milk resulting from a disruption in demand caused by a reason relating to coronavirus

• Coordination regarding the temporary reduction of milk production (provided it does not involve coordination with the object of excluding one or more suppliers from the market)
• Sharing of information on best practices in relation to surplus milk disposal and its environmental impact

Agreements between logistics service providers

For agreements between logistics service providers the following activities are identified as qualifying activities under the Order:

Activities which have the purpose of maximising the processing, transport and storage efficiency and the storage capacity of dairy produce and preventing or mitigating the need for disposal of milk resulting from a disruption in demand caused by a reason relating to coronavirus

• Sharing of information on labour availability
• Sharing of labour or facilities or coordination of the deployment of labour
• Sharing of information on delivery vehicle capacity and the size, type or destination of delivery vehicles

Timing

The Order came into force on 1 May 2020, but also provides that the Chapter I prohibition is deemed never to have applied (in relation to such agreements as benefit from the Order) from 1 April 2020 until 1 May 2020.

The Order expires three months after its entry into force.  If at any time - more than 28 days before its expiry - the Secretary of State considers that there is no longer a significant disruption, or a threat of significant disruption to the demand for dairy produce in the UK (caused by a reason relating to coronavirus), the Secretary of State must publish a notice to that effect specifying the date on which the dairy produce demand disruption period is to end.  The date specified in the notice must not be less than 28 days after the date of publication of the notice.

Contacts