Competition law blamed for anti-fair trade practices

Competition Law is undermining UK business efforts to counter poverty in some of the world’s poorest countries, according to the Fairtrade Foundation.

New research from the Foundation published today shows businesses are near unanimous that competition law is a barrier to taking collective action to tackle low farm-gate prices and wages.

Fierce competition in the UK retail market, together with a perception that they risk breaking competition law, is preventing businesses from fixing low wages and incomes in their supply chains. Yet the people behind goods such as tea, cocoa and bananas, which are worth £34 billion to the UK economy suffer poor living conditions and an increasingly uncertain future.

Competition law protects consumers from harmful practices such as price-fixing, but it also restricts any collaboration between competitors in relation to prices paid to farmers or wages paid to workers within a supply chain.

The report, entitled Competition Law and Sustainability: A Study of Industry Attitudes Towards Multi-Stakeholder Collaboration in the UK Grocery Sector, further argues that collective action is required because businesses are afraid to act alone, due to the obstacle of first mover disadvantage.

It quotes Antonie Fountain, managing director of the VOICE Network, an association of NGOs and trade unions in the cocoa sector, as saying that the Network has been speaking for a number of years individually to the major chocolate companies, who say, "We want to talk about price but we can’t." They admit that they are afraid of antitrust laws, but not talking about price is hurting their sustainability initiatives.

The report makes the case that there is appetite for market collaboration. For example Nyika Brain, Waitrose Foundation and International Development Manager, Waitrose & Partners, said: "From raw materials, to ethical sourcing, to packaging, retailers are under increasing pressure from officially recognised bodies to work collaboratively." they simply want clarity from the CMA about what they can and can’t do.

Along with recommendations for the UK Government, as a major driver of the United Nations' sustainable development goals, it calls on the Competition & Markets Authority (CMA) to issue clear guidance to private sector companies to allow them to work together to improve the incomes of farmers and workers in developing countries.

Michael Gidney, CEO Fairtrade Foundation, commented: "Millions of the farmers and workers behind some of our favourite groceries – tea, cocoa, bananas – are at the sharp end of trade, struggling with volatile commodity prices and the worsening effects of climate change.

"We’re calling on the government to seize this appetite for collaboration from the sector and encourage the largest players in retail to address the most pressing issue affecting our supply chains – poverty prices.

"The alternative that Fairtrade offers consumers shows that companies can respond to public demands to do better and they don’t have to act alone. However, the UK will not be able to do its bit to end global poverty and achieve the sustainable development goals unless everyone works together. It is time for reform and for the Government and the CMA to step up and unblock these barriers." 

The report is being published ahead of Fairtrade Fortnight, which runs from 25 February to 10 March, and marks the start of a three year campaign for living incomes to become a reality for farmers and producers around the world.