Food for Thought – Coronavirus and the food industry – the Competition Act 1998

In response to the coronavirus outbreak and the subsequent increase in demand for groceries, the Government has relaxed competition laws applying to agreements in the food sector to facilitate an effective, coordinated response by retailers and suppliers.

Chapter I of the Competition Act 1998 (‘the Chapter I Prohibition’) prohibits commercial agreements that have as their object or effect the restriction, distortion or prevention of competition within the UK and that have an effect on trade in the UK. The Competition Act 1998 (Groceries) (Coronavirus) (Public Policy Exclusion) Order 2020 (‘the Order’) came into force on 27 March and excludes certain agreements from this prohibition.

The Chapter I Prohibition will no longer apply to an agreement:

1. between two or more grocery-chain suppliers (meaning a retailer or a supplier) or between two or more logistics service suppliers (meaning a business providing a service to a groceries-chain supplier in relation to delivery, storage or maintenance)

2. in relation to a qualifying activity during the groceries supply disruption period (which commenced on 1 March 2020).

Where an agreement is between grocery-chain suppliers, qualifying activities include coordination on limiting purchases by consumers of particular groceries, sharing of labour or facilities or coordination of the deployment of labour from other industries into the groceries-chain supplier workforce and sharing information on the day to day stock position and shortages of groceries within any part of the UK.

Where an agreement is between logistics service suppliers, qualifying activities include sharing information on labour availability, sharing information on storage capacity and sharing information on delivery vehicle capacity and the size, type or destination of delivery vehicles.

Any qualifying activity must be for the purpose of preventing or mitigating disruption to the supply of groceries to consumers in any part of the UK caused by a reason relating to coronavirus and must not involve the sharing between suppliers of any information regarding costs and pricing.

3. which is notified to the Secretary of State; and

The Secretary of State must receive a notice in writing within 14 days of the commencement date of the agreement (or within 14 days of 27 March 2020 where the agreement was entered into before the coming into force of the Order), specifying the parties to the agreement, the nature of the agreement, the date the agreement was made and the groceries to which it relates.

4. where the following two conditions are met:

the purpose of the agreement is to prevent or mitigate disruption to the supply of groceries to consumers in any part of the UK caused by a reason relating to coronavirus; and
the agreement does not have as its object or effect the prevention, restriction or distortion of competition within the UK, except in relation to the qualifying activities set out above, in a market for the provision of groceries to consumers in any part of the UK affected by a disruption caused by a reason relating to coronavirus.

The Chapter I Prohibition will not apply to those agreements made before the commencement of the Order in the period beginning on 1 March 2020 and ending on 26 March 2020.

Once the Secretary of State considers that there is no longer a significant disruption or a threat of significant disruption to the supply of groceries to consumers in the UK caused by a reason relating to coronavirus, a notice will be published specifying the date on which the groceries supply disruption period is to end. The end date may not be less than 28 days after the day on which the notice is published. It is important that any agreements that seek protection from the Chapter I Prohibition under the Order are terminated in advance of the end date of the groceries supply disruption period to avoid the parties to the agreement incurring any liability under the Competition Act 1998.

For further information about the latest developments in the Food Industry please contact Ed Savory or any other member of the Birketts’ Food Team.