This case centred on an agreement between competitors to reduce capacity in the Irish beef processing industry. The agreement involved the major players in the industry agreeing to pay those players who would voluntarily leave the industry. In return for that payment, the players leaving would agree to decommission their plants, refrain from using the associated lands for processing for a period of five years and sign a two-year non-compete clause with regard to processing anywhere in Ireland.
We took the view that the scheme was incompatible with both section 4(1) of the Competition Act 2002 and Article 101(1) of the Treaty on the Functioning of the European Union (TFEU) and took legal action in 2003. The case has gone through a number of stages since then.
§ In July 2006, the High Court held that the agreement had neither the object nor the effect of preventing, restricting or distorting competition and therefore did not breach Article 101 TFEU.
§ We appealed this judgment to the Supreme Court.
§ In March 2007, the Supreme Court sought a preliminary ruling from the European Court of Justice (ECJ) on the question of whether an agreement like the BIDS agreement, where the competitors in that industry agreed between themselves to restructure the entire industry, had the object of restricting competition.
§ On 20 November 2008, the ECJ found that the BIDS agreement had as its object the restriction of competition and is incompatible with Article 101(1) TFEU.
§ On 3 November 2009, the Irish Supreme Court held that the BIDS agreement had infringed Article 101(1) TFEU. The Supreme Court remitted the case to the High Court to decide whether the conditions for exemption set out in Article 101(3) TFEU are satisfied.
The Supreme Court remitted the case to the High Court for determination of the application of the exemption under Article 101(3) TFEU to the BIDS agreement. The onus was on BIDS to prove that all four conditions under Article 101(3) TFEU were satisfied. To avail of the exemption, the agreement must satisfy each of the following conditions:
1. Must contribute to improving the production or distribution of goods (or services) or to promoting technical or economic progress.
2. Must allow consumers a fair share of the resulting benefit.
3. Must not impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives.
4. Must not afford undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.
During the High Court proceedings in 2010, the Commission decided to intervene in the case and submitted written observations pursuant to Council Regulation (EC) No 1/2003. Under Article 15(3) of that Regulation, the Commission may submit written observations to courts of the Member States where the coherent application of Articles 101 or 102 TFEU requires doing so.
This is only the fourth time that the Commission has intervened in this way before a national court.
In January 2011, before the High Court had the opportunity to reach any decision on the application of Article 101(3) to the BIDS agreement, BIDS withdrew its claim for exemption under Article 101(3) and agreed to pay a substantial contribution to our costs in the case.
The Authority has published a guidance note on agreements to reduce capacity, based on the BIDS case. This document is available here.