WRITTEN QUESTION E-0682/02

by Christopher Heaton-Harris (PPE-DE),Roger Helmer (PPE-DE) and Neil Parish (PPE-DE) to the Commission

(11 March 2002)

Subject: Milk cooperatives

Can the Commission please explain why a milk cooperative in the UK, which controlled no more than 37 % of the market, was broken up while a milk cooperative in Denmark is permitted to operate while controlling 85 % of the Danish and Swedish market?

Was the decision to break up the UK's cooperative influenced by DG Competition?

Who set the current UK limit of 24,9 % of market control for dairy products?

Does the Commission believe that dairy farmers in the UK are entering competition at the same level as their European competitors?

When will the milk quota scheme end and what, if anything, will replace it?

Answer given by Mr Monti on behalf of the Commission

(12 April 2002)

Both the issues highlighted in the question concern the decisions of national competition authorities, each applying the national competition legislation of that Member State.

The two decisions addressed different issues:

- the British decision was not taken in response to the structure of the cooperative itself. Rather, it addressed behaviour judged to operate against the public interest, and resulted in action being taken to remedy this;

- the Danish decision, on the other hand, was the examination of a merger, and imposed commitments upon the merged entity with regard to its future behaviour.

A report by the British Monopolies and Mergers Commission (MMC) in July 1999 concluded that Milk Marque Limited (Milk Marque) was in breach of the 1973 Fair Trading Act in exploiting a monopoly position in such a way as operated against the public interest. The MMC's investigation attributed a 49,6 % share of the supply of milk in Great Britain in 1997/1998 to Milk Marque. Following its investigation, the MMC recommended that Milk Marque should be broken up. This recommendation was rejected by the then Secretary of State for Trade and Industry, who instead sought a reform of Milk Marque's sales procedures and a wider debate about the future of Milk Marque(1). In the event, however, Milk Marque decided to voluntarily split during the following period, while it was the subject of interim measures with regard to its behaviour.

In April 1999, the Danish competition authority cleared the merger between MD Foods and Kløver Mælk, subject to a variety of structural and behavioural remedies (with respect to customers and competitors). The Danish authority decided that these remedies addressed all the competition concerns that arose from the merger.

Staff from the MMC did meet and correspond with Directorate General (DG) Competition officials in the course of their investigation. On the one hand, that contact involved discussion of the technicalities of the interrelationship between the 1973 Fair Trading Act and Community Law, as described at paragraphs 2 333-2 336 of the MMC report(2). On the other hand, staff from DG Competition and the MMC discussed the possible competition concerns arising from Milk Marque's behaviour.

A 25 % market share is a threshold for investigation under the 1973 Fair Trading Act in the United Kingdom. This threshold applies to the analysis of mergers and monopolies in all sectors of the economy (not just the dairy sector) combined shares below this level are not usually the subject of investigation under this legislation (there are some exceptions). The Bristish Competition Act 1998 applies different market-share thresholds in the analysis of anti-competitive agreements and conduct.

The Commission has not, in the recent past, had call to investigate any competition issues in relation to the competition, such as it exists, between dairy farmers in different Member States. The two decisions, each taken by a national competition authority applying its own national competition legislation, addressed in the earlier part of this response were taken with regard to the specific conditions of competition in the relevant domestic markets, and to the particular competition issues that were raised.

The milk quotas, which are published in the annex to Council Regulation (EEC) No 3950/92 of 28 December 1992, establishing an additional levy in the milk and milk products sector(3), last modified by Commission Regulation (EC) No 603/2001 of 28 March 2001 adapting the total quantities referred to in Article 3 of Council Regulation (EEC) No 3950/92 establing an additional levy in the milk and milk products sector(4), have been fixed until 2007/2008. However, Article 3 of Council Regulation (EC) No 1256/1999 of 17 May 1999 amending Regulation (EEC) No 3950/92(5) reads as follows: The Council undertakes to conduct a mid-term review in 2003, on the basis of a Commission report, with the aim of allowing the present quota arrangements to run out after 2006.

No decision has yet been taken by the Commission, either with regard to the appropriate interpretation of this text (the abolition of the quotas or the abolition of the current regime), or on the contents of the report and in particular on what would replace the quotas were they to be abolished. The current intention is to present this report at the end of June 2002

(1) See Department of Trade and Industry press release P/99/587 of 6 July 1999.

(2) Monopolies and Mergers Commission report of July 1999 Milk a report on the supply in Great Britain of raw cows' milk.

(3) OJ L 405, 31.12.1992.

(4) OJ L 89, 29.3.2001.

(5) OJ L 160, 26.6.1999.