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November 24, 2008

 

EU court objects beef industry rationalisation plan

 
 

The EU's top court has declared a rationalisation plan developed by beef processors to reduce capacity in the Irish beef industry to be in breach of EU competition law.

 

The European Court of Justice (ECJ) issued a ruling last week in favour of a challenge taken by the Competition Authority against a compensation scheme developed by Ireland's leading beef producers to buy out smaller rivals.

 

The ECJ found a rationalisation plan devised by the Beef Industry Development Society (BIDS) in 2002 to reduce the number of beef processors operating in the Republic runs contrary to EU competition legislation.

 

The BIDS which consists of the country's ten largest beef processors including AIBP, Dawn Meats and Kepak was formed after a 1998 study commissioned by the government and the industry found significant over-capacity in the sector.

 

The report recommended that the number of processors should be reduced from 20 to between 4 and 6 to reduce capacity by 25 percent or 420,000 animals a year.

 

Under the rationalisation scheme, processors staying in the industry would pay compensation through a buy-out scheme to those who closed their business.

 

In return, beef processors quitting the industry would close their plants and not sell their equipment to anybody other than other operators staying in the industry.

 

The ECJ judgement on the long-running legal case taken by the Competition Authority against the BIDS and processor, Barry Brothers in Conna, Co Cork, was one of the first times the court has been asked to interpret the scope of EU competition law.

 

As a result of the ruling, the case will now go back for final determination to the Supreme Court which will be obliged to apply the interpretation of EU law provided by the ECJ.

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