The effects of competition law on farming businesses
30 November 2011
Any farming business needs to be aware of the effects of competition law. Guidance issued by the Office of Fair Trading in November 2011 clarifies the law for farming businesses in particular by explaining:
- how the prohibitions on anti-competitive agreements and on the abuse of market power or dominant positions can affect farming businesses;
- the benefits of co-operation between farmers, with agreements to form co-operatives or to share machinery or research and development usually being viewed as pro competitive;
- how to structure and manage specific agreements (such as agreements to share overheads, create buying groups and set up co-operatives) in a way that it avoids problems with competition law for individuals;
- that agreements designed to fix prices or share markets or customers (which have those effects) are likely to breach competition law and may result in fines and, for the most serious cartel offences, potential criminal liability;
- that where a party to a collaboration agreement transfers some or all of its business to another party in the collaboration, this may require a merger reference to the OFT if the transaction creates or enhances a share of supply of 25%, or if the target company has a turnover in excess of £70 million.
Those in, or intending to be in, agreements subject to these rules would be well advised to consult the OFT publication.