Why co-operation is essential

MORE than 180 anti-trust cases, 1,300 merger decisions, and 100 monitoring actions have been investigated by competition authorities in the EU food industry in seven years.

The authorities have taken action against more than 50 cartels, including, for example, a food manufacturer setting a minimum price at which retailers had to sell its products.

The authorities carried out 21 anti-trust investigations in the EU dairy sector in seven years.

Several investigations searched for milk buyer cartels, with co-ops among those investigated.

The European Commission itself investigated several instances of collusion between milk buyers, including a Greek case where buyers exchanged price lists and co-ordinated discount policies.

Cartels were uncovered in Bulgaria and Lithuania where information on milk purchase quantities was exchanged and agreements made on milk prices.

All of the firms involved were fined.

The Danish-Swedish dairy cooperative Arla Foods was fined for paying a market contribution to a wholesale distributor in an attempt to end an agreement with one of its competitors.

As a result of their investigations, the competition authorities across Europe prohibited eight mergers which raised serious competition concerns, in the pastry, cheese, meat, beverages and confectionery sectors.

Sharp practices in business come as no great surprise. But news of how widespread they are raises concern about the weakest operators in the food sector — the farmers.

The European Commission and competition authorities in EU countries describe farm structure in some EU states as “atomistic” — a well chosen word.

As the basic unit of matter, you won’t find anything smaller than an atom — and the Commission and competition authorities — which together form the European Competition Network — say the fragmented and atomistic structure of farmers in some member states is one of the factors which might damage the functioning and competitiveness of the food sector.

The “atoms” at the end of the food chain had better watch out when “big business” get up to sharp practices.

Some member states had concluded that farmers are being squeezed too heavily by those above them in the supply chain, and could not even cover production costs. Competition authorities in some member states had advocated formation of farmer co-operatives to boost their power.

But the Commission and competition authorities seem to think that where farmers are concerned, it is increases in their input costs that pose the biggest threat of high food prices hitting EU consumers. So, in other words, manufacturers in the fertiliser and feed industries may be taking advantage of farmers rather than the companies farmers sell their produce to.

It was partly because production costs such as fertiliser and feed costs continued to increase in 2009, when dairy farmers were in crisis due to falling milk prices, that competition authorities started paying particular attention to the milk industry.

These authorities have now recommended restructuring and consolidation of farmers — which can be achieved primarily by creation of co-ops.

However, that will be up to farmers themselves.

If they are to do what big business strives to do — operate efficiently and sell at as high a price as possible — farmers must co-operate in both buying and selling.

In Ireland, there is much untapped potential for that to happen.

Dairy co-ops have shown the way forward.

Lack of co-operation is one of the disadvantages holding eastern European farmers back from dominating EU agriculture, because they have bad memories of socialism.

But Irish farmers should be exploiting co-operation to the maximum.

That includes co-ops themselves getting together wherever there is advantage to be gained.

Irish dairy co-ops are in danger of being left behind, now that EU co-ops are forging further ahead, with the Arla Foods plan to swallow Germany’s eighth-largest dairy, and Britain’s fourth-largest dairy, in two mergers that would make Arla the UK’s largest dairy company and the third largest in Germany.

All three are co-ops, and their shareholders will vote on the mergers on Jun 26.


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