The beef industry’s plan for consolidation has been a long saga. In 2002 Irish Beef Processors bandied together to form the Beef Industry Development Society (BIDS), in a bid to curb overproduction by processors. Some beef processors undertook to leave the industry.
Oversupply meant that none of the processors were operating at full capacity, since there was no market for all the processed beef that they could have been producing. A 1998 study concluded that the 22 players needed to be reduced to between four and six in order to make the industry profitable.
The recommendation was that smaller plants be decommissioned, and compensation be provided by a €2 per head of cattle levy on those remaining.
However the BIDS scheme was challenged by the Irish Competition Authority. The matter bounced from the Irish Supreme Court, which dismissed the ICA’s complaint, to the Irish Supreme Court. The Supreme Court, in turn, passed it up to the European Court of Justice (ECJ).
The ECJ today issued a preliminary ruling that the scheme “amounts to a restriction of competition by object, and is therefore not compatible with EC Treaty rules prohibiting agreements and restrictive business practices.”
It said that an assessment of the plan’s actual effects is not needed in order to hold it incompatible with article 81 of the EC Treaty.
While the ruling did not expressedly exclude that an overcapacity reduction could lead to economies of scale by those processors that stay in the industry, under Article 81 (3) it to prove that the positive effects outweigh the negative effects.
European Commission reception
The European Commission has welcomed the ECJ ruling, saying it “confirms that agreements between competitors to restrict capacity or production are hardcore restrictions of competition, which very often harm consumers”.
Spokespersons from Enterprise Ireland and Meat Industry Ireland could not immediately be reached for comment on the direct implications of the ECJ decision for the beef industry.