Antitrust: Commission welcomes Court ruling in Irish beef case

The European Commission welcomes the preliminary ruling of the European Court of Justice (ECJ) in the Irish beef case (Case C-209/07). The ECJ concluded that the scheme of the Beef Industry Development Society under which some beef processors undertook to leave the processing industry amounts to a restriction of competition by object and is therefore not compatible with EC Treaty rules prohibiting agreements and restrictive business practices (Article 81(1)). The ECJ ruling is important because it confirms that agreements between competitors to restrict capacity or production are hardcore restrictions of competition which very often harm consumers.
In 2002 the Irish beef processors formed the Beef Industry Development Society (BIDS) whose present members produce about 93% of the beef sold in Ireland. The main objective of the BIDS scheme is to reduce the total capacity of the processing industry by 25% within one year, following a market study commissioned by the Irish Government and industry representatives which found that the high overcapacity in the processing industry would lead to a decline in profitability. To achieve it objective, the BIDS found an arrangement under which some of its members were to leave the processing industry, to decommission their processing plants and to respect a two year non compete clause. In return, they were to be compensated by the remaining members of the BIDS.

The Irish Competition Authority challenged the BIDS scheme and made an application to the Irish High Court, who dismissed its application. The Irish Competition Authority appealed this decision to the Irish Supreme Court which referred a question of interpretation of Article 81(1) of the EC Treaty to the ECJ.

The ECJ found that a reduction of capacity under the circumstances of this case has as its object a restriction of competition and an assessment of its actual effects is not necessary to hold it incompatible with Article 81(1) of the EC Treaty. In its ruling, the ECJ did not expressly exclude that a reduction of overcapacity could result in economies of scale among processors which stay in the industry. However, it was for the defendant to prove under Article 81(3) of the EC Treaty that these positive effects outweigh the negative effects associated with reductions of capacity.

Published on: 2008-11-20

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