A thread about @RedTractorFood, competition law & why I think there may be a problem.

Disclaimer: I knew nothing about competition law a week ago. Think of this as a 1st year law student's first essay draft.

Firstly, what are the laws that deal with competition? They are Chapter I and II of the Competition Act 1998, and, until recently at least, Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU).

These laws prohibit two main types of anti-competitive behaviour:

- anti-competitive agreements (under the Chapter I & Article 101); and

- abuse of a dominant market position (under the Chapter II & Article 102).

Read more here:

https://www.pinsentmasons.com/out-law/guides/competition-law---the-basics.

For simplicity I'll concentrate on the Competition Act and ditch the TFEU stuff because they're very similar.

So how is @RedTractorFood affected? I think (NB disclaimer) that it is a trade association, which is called an Association of Undertakings (AoU) in the legislation.

Now the law has quite a bit to say about how AoUs can behave. The full read is here, but I'll pull out bits that grabbed my attention for those with better things to do:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/284404/oft408.pdf.

There are important exemptions in the legislation, and a lot in the agricultural sector, which allow practices that would otherwise be prohibited if they meet certain criteria. These are pretty much the same as the EU rules below.

My guess is that RT thinks it enjoys exempted status under these rules. The exemptions cover a lot of activities where farmers join together to improve their business. I think there is an interesting question on this point.

That is, did RT at the beginning satisfy the conditions above, and does it now?

In the current debate here are some claims that have been made:

- RT places additional costs upon farmers but does not deliver rewards to outweigh those costs.

- RT has added rules which constitute mission creep.
- Farmers do not want to be a part of RT, but feel they have no option but to be a member.
- RT does not allow its members to produce non-assured grain.
- farmers are giving up because of compliance burdens.

It is clear that these claims, if true, place at least some doubt on whether these conditions continue to be met.

Another factor that is very relevant to competition law is the degree of dominance an undertaking has in the market.

It's obvious that @RedTractorFood is hugely dominant in the market. And not only in just one market. They are the dominant player in all farming sectors, some of which buy and sell from each other. Horizontally & vertically integrated to a degree.

The more dominant an association is the more likely any anti-competitive behaviour will distort the market or suppress healthy competition.

Being dominant in a market is not wrong in itself, but abusing that position is prohibited under Chapter II.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/284422/oft402.pdf

When Red Tractor sets its standards, this dominance is more likely to result in some of the following problems.

The next key question is whether Red Tractor's conduct might count as an abuse of a dominant position?

Consider the Red Tractor method: RT places additional costs on farmers to create a brand that has some marginal utility to buyers. And it has offered it to them for free.

Later I'll tell you a story that helps to explain why I think this is problematic.