On 14 November, the EU General Court ruled in related cases T-135/09 and T-140/09 that the European Commission had been too broad when setting out its mandate for the carrying out of dawn raids at the offices of companies in France and Italy. The Court viewed that the Commission was illegally “fishing” for evidence of possible further anti-competitive activity. In essence, this means that the Commission must confine itself to a specific, targeted sub category when authorising dawn raids.
The German Federal Cartel Office (FCO) announced yesterday that it has launched a sector inquiry into food retailers. The FCO will focus its study on foodstuffs and luxury foodstuffs without explicitly naming particular goods in its press release but broadly stating that the enquiry will only focus on “selected product groups”. According to the official statement from the FCO, which is only available in German, the authority seeks to improve its “understanding” of the relationship between retailers and suppliers. The FCO plans to have a close look into the market power of the large retailers. The assessment will also focus on “whether and to what degree the leading retailers enjoy a purchasing advantage over their competitors”.
The retailer market in Germany is very concentrated, with only four large retailers holding about 85 percent of the market. The FCO thus plans not only to shed light into the buyer power of the large retailers but will also focus on whether the “consolidation process” in the retail market has also led to a concentration in the procurement markets to the benefit of the largest retailers.
The sector enquiry should, according to the official statement from the FCO, support its analysis of the food purchasing market which is currently being investigated following dawn raids at the premises of more than 15 companies on the retail and the manufacturing level of branded products, mainly foodstuffs, on suspicion of co-ordinated retail price-fixing, in January 2010.
If the FCO will start an investigation into individual companies in the food retail market and how the sector enquiry will affect the investigation into branded goods, started in January 2010, remains unclear. The case draws parallels to the UK where the Office of Fair Trading launched several market investigations and market studies into the UK food retailer and manufacturer markets.
On 6 November 2010, the Italian Competition Authority launched an investigation into the role of large-scale retail distribution in Italy’s food sector. The investigation aims at assessing potential antitrust issues in this sector, and will focus on the agreements and strategic negotiations between suppliers and large-scale distributors, the role of centralised purchasing, the use of private-label brands, and their likely effects on the final prices of food products. This obviously also has an impact on large multinational food and beverage suppliers.
Companies involved will soon receive detailed questionnaires and requests for information, which need to be handled with care by antitrust attorneys in order to minimise the risk of a potential ad hoc investigation. In the past, the Authority’s sectoral investigations have proven to be the prelude to specific investigations against individual companies predicated on the basis of the information gathered during the sectoral investigation. It is therefore of utmost importance to have specialised assistance at this early stage of the investigation. It is also crucial for companies to engage outside counsel to conduct an effective audit and create a tailored compliance programme in order to be prepared for potential dawn raids and prepare an effective defence. In addition, the whole vertical relationship between suppliers and distributors may have to be reviewed in the light of the European Commission’s new vertical guidelines and experience from other Member States.
The food and beverage industry is under investigation in a number of jurisdictions, and a comprehensive strategy in dealing with these inquiries is therefore critical. McDermott Will & Emery is particularly well-placed to assist companies in this connection, not only by reason of its extensive experience in the sector in Italy, but also by reason of its experience in dealing with similar investigations in other EU Member States.
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