LGA: Retailers risk breaking competition law over Reducing the Strength schemes

17 December, 2014

The Local Government Association has indicated that retailers signing up to Reducing the Strength schemes could be breaking competition law.

It warned that retailers could face significant penalties, including fines, if they enter into “restrictive practices” under the schemes, and added that councils could be breaking EU law by encouraging retailers to sign up.  

The LGA has published new guidance for councils that want to set up a scheme that seeks to persuade retailers to strip shelves of beer and cider above a certain abv.

It admitted there are “certain competition law risks to retailers arising from some aspects of Reducing the Strength schemes” but said councils might be able to manage the risk.

It said: “Competition law only applies to ‘undertakings’, broadly defined as firms that are engaged in commercial activity.

“It is highly unlikely that a council, in the context of introducing a Reducing the Strength scheme, will be deemed to be an ‘undertaking’ within the meaning of the law.

“Therefore, the activities of councils and their staff themselves are unlikely to be caught by competition law specifically.

“Local retailers, however, clearly are undertakings within the meaning of competition law. They must, therefore, ensure that they are not engaging in anticompetitive behaviour, otherwise they could face significant penalties, including significant fines.

“Specifically, this means that they must not engage in restrictive agreements or concerted practices, within the meaning of competition law.

“Since many of the retailers that councils would like to involve in local schemes may be smaller businesses that do not have detailed knowledge of competition law, councils have a duty of care to ensure that they are not asking them to breach the law and/or do not put them in a position where they might inadvertently do so.

“Moreover, it is possible that if a local authority encouraged or facilitated breaches of competition law, this could, in certain circumstances, possibly lead to a breach of EU law.”

The LGA warned that the greatest risk occurs when a council is starting a scheme, and urged it to speak to retailers individually rather than as a group, so as to avoid the discussion straying towards “sensitive commercial matters”.

Several times when OLN has asked retailers about how they were encouraged to sign up for a Reducing the Strength scheme, they have told us a council officer told them that all the neighbouring retailers had signed up and they should get involved.

However the LGA guidance said: “Councils should also avoid encouraging people to sign up by naming (or mentioning in bilateral discussions with retailers) other businesses which are participating or plan to participate – retailers should be convinced to join by the public policy message only.

“These actions should help to protect retailers from falling foul of competition law.”

More guidance on competition law is available here:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/386696/Local_Authority_Initiatives_and_Competition_Law.pdf




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