warehouse fork lift driver

Under current competition law, it is illegal for retailers and suppliers to discuss supply and price of goods with each other

The food and drink industry is seeking a temporary relaxation of competition law to aid no-deal Brexit planning, but experts predict the government is unlikely to comply.

It emerged today that the Food and Drink Federation has been lobbying the government for a formal assurance from the government that retailers and suppliers can work together in the public interest to plan and alleviate problems that might arise from a no-deal.

Under current competition law, it is illegal for retailers and suppliers to discuss supply and price of goods with each other. Any breaches of these rules can lead to fines from the Competition and Markets Authority running into the millions of pounds.

The FDF is seeking a “letter of comfort” from the watchdog to ensure this would not be the case in relation to critical Brexit planning.

“Competition law is important, but in the event of no-deal disruption, if the government wants the food supply chain to work together to tackle likely shortages – to decide where to prioritise shipments – they will have to provide cast-iron written reassurances that competition law will not be strictly applied to those discussions. Without such assurances, any such collaboration would risk incurring large fines from the CMA,” said FDF chief operating officer Tim Rycroft.

“We asked for these reassurances at the end of last year and, despite support from Defra, we’re still waiting. Hopefully, now that Michael Gove is in charge of all no-deal planning, we can make progress.”

However, competition lawyers today suggested it was unlikely any such changes would be put in place.

“The CMA and its predecessor, the OFT, are not known for readily relenting and allowing the relaxation of competition laws,” said Caroline Hobson, a competition partner at law firm CMS. “The food sector will need to set out clearly the parameters of what they want to do and achieve. Most importantly, the sector will need to present exceptional and compelling arguments to convince the CMA that co-operation is absolutely essential for the public interest, and not merely a nice-to-have.”

Mark Jones, partner at Gordons, agreed.

“I think there is little prospect of the government relaxing competition laws to help retailers manage the supply chain. While the FDF may be pushing for the relaxation, it would be a surprise if retailers or suppliers had a huge appetite to co-ordinate supplies in the wake of Brexit,” he said.

“The ‘big four’ control almost 70% of the market and if any of them have a supply chain advantage post-Brexit, it offers them an opportunity to gain market share. I cannot see them wanting to help their competitors. They will want to help their own customers.

“As to suppliers, if they can sell the stock they have, they will, and they may well be able to make a better profit if supply is tight. If they cannot sell or use their raw materials, there is nothing stopping them picking up the phone to their competitors and selling raw materials now. Relaxing rules on anti-competitive behaviour is, in my view, unlikely to help shortages and I cannot see the government going for it.”

The FDF also revealed its latest quarterly business confidence survey found that 25% of its members were more prepared for a no-deal than in March/April, while 18% were less prepared and 57% said they are as prepared now as they were at the time of the original Brexit date.

However the survey, carried out between 21 June and 8 July, also found that business confidence had fallen by 38 percentage points since the FDF began tracking it in Q1 2018.

Almost half of businesses (47%) reported increased stockpiling costs as a key impact on their business in the last quarter, while 39% of respondents reported a decline in the availability of warehousing as a key impact.

All of the top five risks identified by FDF members were Brexit related. They were: the risk of a ‘no-deal Brexit’, exchange rate volatility, cost of ingredients, UK import tariff uncertainty, and border/customs issues.