The European Commission has adopted new Guidelines on how specific agricultural derogations from EU antitrust rules apply to the sale of certain agricultural products. The Guidelines will help explain to farmers how, if certain conditions are fulfilled, they can jointly sell olive oil, beef and veal, and arable crops in compliance with EU competition rules. The European markets for these three products are worth more than €80 billion annually. An explanatory factsheet is available here.
Margrethe Vestager, Commissioner in charge of competition policy, said: "These Guidelines are a manual explaining to farmers how to organise themselves in order to be able to jointly sell olive oil, beef and veal, and arable crops, while still fully respecting EU competition rules. The objective is to ensure that European farmers can work together to remain competitive and benefit from bargaining power towards the buyers”.
Phil Hogan, Commissioner for agriculture and rural development, said: "The guidelines are about strengthening farmers' collective position in the food supply chain by setting out clear and practicable rules. They help farmers to counter-balance the effects of increasing concentration at the processing and retailing stages of the chain. This is an important step towards workable conditions of competition on agricultural markets and the full use of the available tools in the new CAP."
The new Guidelines complement the 2013 Common Agricultural Policy (CAP) Reform that introduced a number of changes to the rules on how EU farmers can cooperate. The aim of the CAP reform measures is to increase the competitiveness and sustainability of EU farmers and strengthen their bargaining power vis-à-vis buyers, while still preserving a market-oriented approach.
The EU's standard competition rules ban agreements to set prices or other trading conditions or to share markets unless the agreements improve production or distribution while allowing consumers a fair share of the resulting benefit (Article 101 of the Treaty on the Functioning of the EU). These standard competition rules apply to the agricultural sector subject to certain specific derogations as set out in the Common Market Organisation Regulation (Regulation (EU) No 1308/2013 - the "CMO Regulation").
These Guidelines are about three efficiency-based derogations that allow producers of olive oil, beef and veal, and arable crops to jointly sell and set prices, volumes and other terms through recognised organisations, if they fulfil certain conditions (Articles 169, 170 and 171 of the CMO Regulation). In particular:
- such organisations must make farmers significantly more efficient by providing them with supporting activities other than sales (e.g. storage, transport, distribution); and
- the volumes marketed by a given organisation must not exceed certain thresholds (20% of the relevant market for olive oil and 15% of the national market for beef and veal, and arable crops).
The new Guidelines help farmers to comply with these requirements. They will also help competition authorities and judicial authorities in the Member States to apply the new rules. In particular, they:
- provide a clear definition/indication of the type of activities that can create the significant efficiencies required to benefit from the derogation and give specific examples of situations in which such activities can create significant efficiencies;
- give guidance on how to calculate the volumes marketed by farmers' organisations and how to check that they do not exceed the thresholds, taking into account notably natural variations over time;
- explain how exceptional circumstances, e.g. a natural disaster, can be taken into account when calculating the volumes marketed by farmers’ organisations; and
- clarify the situations in which the national competition authorities and the Commission may apply the safeguard clause foreseen by the CMO Regulation. This safeguard clause allows competition authorities, in exceptional circumstances, to decide that joint sales of a farmers’ organisation should be either reassessed or should not take place if the overall market is negatively affected.
The Guidelines will be published in the EU Official Journal in the coming days.The full text of the Guidelines will be available here.
Background
Between January and May 2015 the Commission carried out a public consultation on the draft text of the Guidelines. Further to this, the European Parliament and the competition authorities of the Member States were consulted. All the replies to these consultations are available here.
Successive reforms have made the CAP increasingly market-oriented. Today, European agricultural producers compete on a daily basis in many markets, where they face specific challenges:
- increasing consumer demands, for better, sustainable and traceable products;
- global competition from non-European imports;
- business partners who are often larger and financially stronger, be it processors, manufacturers or retailers, as the majority of the agricultural holdings in Europe are very small.
The Commission's impact assessment in the context of the latest CAP Reform pointed out the need to improve the functioning of the food supply chain and to create the right conditions for the agricultural sector to become more competitive and innovative. In particular, this implies encouraging cooperation between farmers through producer organisations and associations of producer organisations while ensuring competition in the sector.
FAQ
- What is the purpose of the new Guidelines?
Article 101 of the Treaty on the Functioning of the European Union bans anticompetitive agreements, unless the agreements improve production or distribution while allowing consumers a fair share of the resulting benefit. In line with and to the extent provided by the relevant regulations, these rules apply to the agricultural sector, subject to specific derogations.
The 2013 Common Agricultural Policy (CAP) Reformintroduced such derogations for the sale of olive oil, beef and veal, and arable crops. The Common Market Organisation Regulation (the "CMO" Regulation) allows producer organisations and associations of producer organisations in these three sectors to jointly sell and set prices, volumes and other trade conditions for these products, if they create significant efficiencies through other joint activities (e.g. distribution, storage).
The new Guidelines are aimed at helping farmers, producer organisations and associations of producer organisations in assessing whether they fulfil the conditions to benefit from the derogations. They include flowcharts, which explain step-by-step how to proceed
The new Guidelines also provide real life examples in each of the sectors concerned, illustrating situations in which farmers’ organisations either are or are not in compliance with the rules.
The new Guidelines should furthermore ensure that the derogations are applied in a consistent manner in all Member States. They will serve as a common reference for national competition authorities and courts.
- Why do the new Guidelines deal with three sectors specifically?
The new Guidelines focus on the new rules introduced by the latest CAP Reform, which were specifically geared towards these three sectors.
- Under which conditions can farmers engage in joint selling activities?
Farmers can engage in joint selling-activities in the arable crops, live animals for beef and veal production or olive oil sectors if the following conditions are fulfilled:
- The joint selling activities need to be carried out by producer organisations or associations of producer organisations ("the organisations") formally recognised by national authorities.
In case of individual farmers jointly selling their products outside those organisations, these activities will be assessed under the standard EU agricultural and competition rules.
- The quantity jointly marketed by the organisations cannot exceed:
- 15% of the national market for beef and veal, and arable crops; or
- 20% of the relevant market for olive oil
- The organisations should carry out other activities than joint selling, for example storage or distribution, and
- These additional activities must significantly improve farmers' competitiveness on the market (i.e. create significant efficiencies).
The new Guidelines provide explanations on how to measure the marketed volumes that must not exceed the required limits.
The new Guidelines also provide, for each of the three sectors, clear examples of activities that can create significant efficiencies and describe a number of situations in which these efficiencies are generated.
For example, the Guidelines explain how olive oil producers could jointly process their olives to share the high investment costs of acquiring an olive oil mill. A further example would be how beef and veal producers could jointly promote their products in cases when they are aiming at creating a distinctive product. Both examples are subject to the conditions set out in the new Guidelines as described above in question 3.
- How does that help the position of farmers in practice?
First, if farmers sell together volumes of up to 15% of national production for beef and veal and arable crops, and 20% of the relevant market for olive oil, they will represent as much of the demand as the largest buyers in the market. Hence, they will have significantly increased their bargaining power and achieved a better balance vis-à-is their buyers, compared to each selling separately.
Second, by carrying out supporting activities together through an organisation, farmers can get access to cheaper inputs (e.g. through joint procurement of feed or fertilisers), can reduce costs for transport or distribution, or offer more flexible or more reliable supplies (e.g. through storage and/or distribution). Ultimately, they may reduce their costs and improve their offers, meaning more competitiveness for farmers on the market.
- Does the joint selling require any prior authorisation?
No. Farmers or their organisations need to check themselves whether the joint selling activity fulfils the above listed conditions. However, when starting their joint-selling activities, the organisations have to notify without delay the competent authority appointed by their Member State. The list of competent national authorities is available here:
http://ec.europa.eu/agriculture/producer-interbranch-organisations/index_en.htm
- What is the role of competition authorities?
It is the Competition authorities' role to monitor the markets in order to maintain a level playing field for all competitors. Competition authorities are entitled to ask any entity engaged in an economic activity - including farmers - to provide information to verify that competition rules are respected. If an organisation receives such a request and would like to benefit from the specific derogations on joint-selling activities, it needs to demonstrate that the conditions set out in question 3 above are met.
In exceptional circumstances, and under certain limited conditions explained in the Guidelines, competition authorities may decide that a particular joint selling arrangement of an organisation should not take place or should be adjusted.
- How do the Guidelines fit together with other Commission initiatives for strengthening farmers’ cooperation?
The Guidelines' objective is to make it easier to apply in practice the new rules provided for in the CMO Regulation. Hence, their aim is to help farmers to engage in joint selling activities under certain conditions and to strengthen their position in the food supply chain.
The Commission will continue to look into the functioning of the food supply chain and the position of farmers in it. The Commission is in the process of establishing an Agricultural Markets Task Force, which will provide external advice and expertise regarding the functioning of agricultural markets and the farmers' position in the food supply chain, as well as make recommendations and propose possible policy initiatives in this field, after having taken into account global challenges for sustainable agriculture.
