Competition Authority v Beef Industry Development Society Ltd and Another (Case C-209/07)

• Jurisdiction: Ireland
• Judge: Mr. Justice William M. McKechnie
• Judgment Date: 27 July 2006
• Neutral Citation: [2006] IEHC 294
• Court: High Court
• Docket Number: [No. 7764P/2003]
• Date: 27 July 2006

[2006] IEHC 294

THE HIGH COURT

[No. 7764P/2003]

COMPETITION AUTHORITY v BEEF INDUSTRY DEVELOPMENT SOCIETY LTD & BARRY BROTHERS (CARRIGMORE) MEATS LTD

BETWEEN

THE COMPETITION AUTHORITY

PLAINTIFF

AND

BEEF INDUSTRY DEVELOPMENT SOCIETY LIMITED AND BARRY BROTHERS (CARRIGMORE) MEATS LIMITED

DEFENDANTS

COMPETITION ACT 1991 PART 3

COMPETITION ACT 2002 PART 4

COMPETITION ACT 2002 S14(2)

COMPETITION ACT 2002 S4(1)

COMPETITION ACT 2002 S4(1)(B)

COMPETITION ACT 2002 S4(5)

EC TREATY ART 81(1)

EC TREATY ART 81(3)

EC TREATY ART 81

EC TREATY ART 82

EC REG 1/2003 ART 2

COMPETITION AUTHORITY v O'REGAN UNREP KEARNS 22.10.2004 2004/9/1848

EC REG 1/2003 ART 3

COMPETITION ACT 2002 S4

OJ 2001/C3/02

OJ 2004/C 101/08

SYNTHETIC FIBRES 2004 OJL 207 4.7.1984

STICHTING BAKSTEEN 1994 OJL 131 29.4.1994

WEDDEL NEW ZEALAND LTD COMMERCE CMSN OF NEW ZEALAND 2.2.1995

WEYL BEEF PRODUCTS BV & ORS v EC CMSN 2001/C 134/34

EC TREATY ART 85(1)

EC TREATY ART 92

EC TREATY ART 93

EC TREATY ART 87

EC TREATY ART 88

WHISH COMPETITION LAW 5ED

BELLAMY & CHILD COMMON MARKET LAW OF COMPETITION 5ED

FAULL & NIKPAY EC LAW OF COMPETITION

HOFNER & ELSER v MACROTRON 1991 ECR 1979 1993 4 CMLR 306

HEMAT v MEDICAL COUNCIL UNREP MCKECHNIE 11.4.2006

WOUTERS v ALGEMENE RAAD VAN DE NEDERLANDSE ORDE VAN ADVOCATEN 2002 ECR I-5777

EC TREATY ART 81(1)(D)

EC TREATY ART 81(1)(E)

EC TREATY ART 81(1)(B)

EC TREATY ART 81(1)(C)

EC TREATY ART 81(1)(A)

FERRIERE NORD v CMSN 1997 ECR 1-4411

SOCIETE TECHNIQUE MINIERE IN MASCHUINEN BANK ULM 1996 ECR 235

CONSTEN & GRUNDIG v CMSN 1996 ECR 299

BNIC CLAIR 1985 ECR 391

ANSEAU-NAVEWA 1983 ECR 3369

VOLKSWAGEN v CMSN 2000 ECR 11-2707

ITALIAN FLAT GLASS 1990 4 CMLR 535

TATE & LYLE v CMSN 2001 ECR 11-2035

EUROPEAN NIGHT SERVICES 1998 ECR 11-3141

METROPOLE TELEVISION (M6) v CMSN 2001 ECR 11-2459

VAN DEN BERGH FOODS v COMMISSION T-65/98 23.10.2003

DELIMITIS v HENNINGER BRAU 1991 ECR 1-935

VOLK v VERVAECKE 1969 ECR 295

2001 OJC 368/13

ENI MONTEDISON 1987 OJL 5/13/1989

Abstract:

Competition law - European law - Society exit agreement and levy rules - Market characteristics - Over capacity -

Restrictions by object and effect - Barriers to entry - Consumer Welfare - Indispensability - Elimination of competition

- Whether levy would result in significant price increase and/ or output reduction - Whether arrangement had

appreciable anti-competitive effects - Competition Act 1991 - Competition Act 2002, ss. 4(1)(5) & 14(2) -

Article 81 (1)(3) EC

Facts: Following the McKinsey Report and the Beef Task report, the first named defendant was established to implement

the report. It purported to ensure that the major industry players would seek to remove 25% of the existing slaughter

capacity by agreeing to pay those who would voluntarily leave compensation from a fund that would be financed by a

levy on 2 scales. In return for the payment, those leaving voluntarily would inter alia decommission their plants and

refrain from using their lands for processing. The second named defendant entered into an agreement with the first named

defendant society in 2002 and the validity of the agreement was affected by the proceedings. The plaintiff Competition

Authority alleged inter alia that the rules of the first named defendant were contrary to s. 4(1) of the Competition Act 2002

and Article 81 EC and that the exit agreement was anti-competitive and could not benefit from s.4(5) of the Competition

Authority Act 2002.

Held by McKechnie J., in refusing the reliefs sought, that the first named defendant had openly presented its rationalisations plans to the plaintiff and had transparently communicated with the plaintiff in this regard. While 90% of Irish beef was exported, the export market for Irish beef comprised a series of individual EU markets. It was beyond question that there was overcapacity in the industry, itself a structural and long term business and not short term or cyclical. No provision of the arrangement fixed prices or shared customers and the arrangements could not be said to have limited output, shared markets or prohibited investment. The arrangements were not on the balance of probability so objectionable as to restrict competition by object. The evidence adduced was not sufficiently conclusive to a reasonable degree of probability that capacity shortage would occur in the event of the rationalisation plan proceeding. It had not been established that the levy would result in a significant price increase and/ or output reduction and was not restrictive in that regard. Imports represented 25% of domestic consumption which was indicative of the absence of barriers or prohibitive barriers to entry. The Competition Authority had failed to demonstrate by credible evidence that the objectionable features of the arrangements were liable to have appreciable anti-competitive effects. While it was strictly unnecessary to consider Article 81(3) EC, cost savings would actually result from the arrangement and that there had been a market failure and that ownership changes occurred only through the cheap cost of entry, thereby

satisfying the requirements of Article 81(3) EC.

Reporter: E.F.

1 JUDGMENT of Mr. Justice William M. McKechnie delivered on the 27th day of July, 2006 .

Background to the Proceedings:

2 1. The plaintiff in these proceedings, which were commenced by way of plenary summons dated 30th June, 2003, is a statutory body established pursuant to Part 3 of the Competition Act, 1991and continued pursuant to Part 4 of the Competition Act, 2002. That body is entrusted with the duties and responsibilities conferred on it by the last mentioned Statute. As such, under s. 14(2), of the 2002 Act, it instituted the within proceedings.

3 2. The first named defendant ("BIDS" or "the Society") was registered on 2nd May, 2002 as an Industrial and Provident Society under the Registry of Friendly Societies. Membership as of 2nd February, 2004 and of 3rd June, 2005 comprised ten companies, all with limited liability, and all individually and in their own right carrying on the business of slaughtering and deboning cattle. These companies are as follows:

4 (i) Anglo Irish Beef Processors Limited - 14 Castle Street, Ardee, Co. Louth

5 (ii) Barry Brothers, Conna, Co. Cork (iii) Dawn Meats - Grannagh, Waterford (iv) Donegal Meat Processors - Drumnashear, Carrigans, Co. Donegal (v) Exel Meats - Kilbeggan, Co. Westmeath

6 (vi) Fair Oaks Foods - Royal Oak Road, Bagnelstown, Co. Carlow (vii) Kepak Group, Clonea, Co. Meath

7 (viii) Kildare Training Company Limited - Kildare Town, Co. Kildare (ix) Liffey Meats, Ballyjamesduff, Co. Cavan

8 (x) Slaney Foods Group - P.O. Box No. 8, Ryland, Enniscorthy, Co. Wexford.

9 3. The second named defendant, Barry Brothers of Conna, Co. Cork, which is a member of BIDS, entered into an agreement with the first named defendant on the 19th day of September, 2002. This company took no active part in these proceedings and the validity of its contract with BIDS is entirely dependent on the outcome of this action.

10 4. In simple terms, following inter alia, the publication of a report in September 1998, known as the "McKinsey report", and a report in June 1999, called the "Beef Task report", the Society was established with the objective of implementing the recommendations and conclusions of these reports and in particular to achieve the rationalisation of the Irish Beef Industry.

11 This task was to be approached in the manner as follows:-

12 (a) the major players in the industry would seek, by way of a coordinated plan, to remove 25% of the existing slaughter capacity by agreeing to pay those who would voluntarily leave "(the goers)" compensation from a fund which would be established by those remaining in the industry "(the stayers)".

13 (b) This fund would effectively be financed by the imposition of a levy of €2 on each animal killed up to that operator's traditional kill (as expressed in percentage terms) and thereafter a levy of €11 on each further animal slaughtered.

14 (c) In return for these payments the goers would:

15 • decommission their plants and agree to restrictions on the sale/future use of their equipment;

16 • refrain from using the associated lands for processing for a period of five years; and-

17 • sign a two year non-compete clause with regard to processing on the island of Ireland.

18 This is a very brief summary of the proposals with the entirety of the Society's current plans under this rationalisation programme, being set out at para. 31 of this judgment.

19 5. Immediately after its establishment, and following a series of meetings between its members, the Society on the 13th day of May, 2002 and on the 4th of December, 2002 met and notified the Competition Authority of its intentions, and made submissions to it in the context of both domestic and European competition law rules. These submissions were made on 20th December, 2002, the 25th March, 2003, and the 28th May, 2003, with an oral presentation being given on the 15th day of April, 2003. Before, during and after these events there was much correspondence between the plaintiff and Messrs. Arthur Cox Solicitors on behalf of BIDS. Ultimately the authority, by letters dated the 5th and 26th June, 2003, communicated its views to the first named defendant on what has become known as "The BIDS arrangements".

20 6. The position adopted by the Competition Authority and so notified was as follows:-

21 (1) the rules of the Society, which reflect the desire to rationalise the beef industry, are in themselves, by reason of this and in that way, contrary to s. 4(1) of the Competition Act, 2002;

22 (2) the minutes of the rationalisation sub-committee meetings, reflecting a series of decisions to remove capacity and to...