Agriculture, Analytics, Competition, EU – Baltic States, Markets and Companies, Modern EU

The report is quite small, just 15 pages, and is prepared by the Commission, the Parliament and the Council with a particular focus on the application of EU competition rules to the agricultural sector. The Report is seen at: http://ec.europa.eu/competition/sectors/agriculture/report_on_competition_rules_application.pdf

On the basis of the report’s recommendations, the Commission will instigate dialogue with stakeholders in the agricultural sector, as well as with the member states, the European Parliament and the Council, on future policy choices concerning the application of competition rules to the agricultural sector. The Commission will also intensify its monitoring of the market, in particular as regards collective agreements in the agricultural segment of the EU’s internal market.  

The report covers a period from 1 January 2014 to mid-2017 (as far as derogations from the competition rules in the CMO Regulation are concerned), and from 1 January 2012 to mid-2017 for the review of antitrust investigations.

Background

The Commission's findings in the report are based on input from national competition authorities, private organisations, as well as Commission study on producer organisations in the olive oil, arable crops, beef and veal meat sector.

Commission’s Study (185 pp) in: http://ec.europa.eu/competition/publications/reports/kd0218732enn.pdf

Under Article 225(d) of the Common Market Organisation Regulation ("CMO Regulation"; mentioned below), the European Commission must present to the European Parliament and the Council a report on the application of the competition rules to the agricultural sector, in particular on the operation of Articles 209, 210 and 169, 170 and 171 of the CMO Regulation; art. 169-171 have been deleted.

The new Article 152 of the CMO Regulation (introduced in January 2018), provides a safe harbor from the application of competition rules for recognised producer organisations and their associations.

The European Competition Network had published in May 2012 a report on competition law enforcement and market monitoring activities by the European competition authorities in the food sector, which describes antitrust investigations for the period 2004-2011.

The report in: http://ec.europa.eu/competition/ecn/food_report_en.pdf ; it is accompanied by the additional information on the derogations and the antitrust investigations.

Trends in agro-sector

The Commission’s idea is to modernize CAP policy through embracing new agro-technology and digitization. Precision agriculture, the use of big data and the generational renewal of European farmers would accelerate those changes.

European commissioner for agriculture, Phil Hogan said in July 2018 that farmers in the EU states have to be “part of the solution” rather than the problem. However, the issues of farmers’ complaint and problem about the European Common Agriculture Policy (CAP) reform are reforms’ extreme complications.

The goal is to modernize the policy through adopting new agro-technologies, digital solutions and, generally, through inviting to European farming a younger generation of people to accelerate changes.

Another aspect in reforming CAP is the decentralization: there is need for a fundamental shift from strict rules from Brussels to practical performance and results on the place. That means, the member states shall be more responsible and accountable in meeting CAP targets. In cases the states’ farmers “hit the targets”, the EU should pay them a “performance bonus”.

There is a risk that CAP reform (as well as the EU long-term budget’s proposal for 2021-27) will not be finished in time for the 2019 European Parliament election; there is strong need to overcome the doubts of national leaders.

Additional efforts on agricultural tariffs and quotas would unlock opportunities for industrial sectors, financial services and public procurement bidders to stimulate agro-sector.

EU competition rules, in general, apply to the production and trade of agricultural products; they prohibit agreements on setting prices (or other trading conditions), or on sharing of markets. However, the Common Market Organisation Regulation ("CMO Regulation") contains member states’ derogations from the application of these rules, which affect all or some agricultural sectors or deal with specific situations. On CMO: https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1447432257267&uri=CELEX:32013R1308

Commissioners’ opinion

Commissioner for the European competition policy, Margrethe Vestager underlined that the report provided key insights into the competition issues in the agricultural sector, especially in protecting farmers from anti-competitive behavior and ensuring that farmers and consumers could benefit from a fully open internal market. 

Commissioner for agriculture and rural development, Phil Hogan added that the most important task is to strengthen farmers’ position in the food supply chain and in a market oriented agro-policy. The report, he underlined, highlighted how agricultural and competition law go hand-in-hand in achieving fairer and more efficient outcomes for both producers and consumers.

He stressed that farmers have had a special place in competition: recognised producer organisations can help them strengthen their position in the food supply chain.

Report’s main findings

There are three main aspects in the report:

1. The European competition authorities’ activity. This work is divided into the following sectors:

(a) Carrying out agro-investigations: European competition authorities have carried out 178 investigations in the agriculture sector. More than a third of these concerned processors of agricultural products with farmers being the single largest group of complainants.

Almost half of all the competition infringements are connected to agreements on prices. These agreements were most typically between competing processors to set the wholesale price (e.g., for sugar and flour) or between processors and retailers to set the retail price (e.g., for dairy products, meat or sunflower oil). Other infringements related to agreements on output, information exchange or sharing of markets.

The report found that the enforcement work of European competition authorities benefitted farmers with better deals for their products. In particular, the report identifies several instances of European competition authorities stopping and sanctioning practices employed by large buyers that aimed to reduce prices paid to farmers. Furthermore, the work of European competition authorities has also helped farmers improve their conditions with cooperatives.

 (b) Safeguarding the internal market: one of the key findings of the report is that some EU states have sought to restrict imports of specific agricultural products from other member states. Several European competition authorities have investigated and stopped a number of collective agreements, where for instance farmers in a given EU state attempt to hinder sales by farmers from other states.

Competition authorities’ actions have helped both the consumers in the states where imports could have been restricted but also the farmers in all EU states that would have been affected by the attempt to hinder cross-border sales. 

(c) Providing guidance and monitoring: European competition authorities have provided guidance to farmers, other operators and governments on how to interpret and apply competition law in the sector, such as on the farmers' sustainability initiatives or the publication of prices by sector organisations. 

European competition authorities have also proactively monitored the situation in the sector and conducted sector inquiries into the functioning of the supply chain, with a particular focus on issues like the transmission of prices in the chain and the balance of bargaining power between farmers and other levels of the chain.

2. Derogations from competition rules for producer and inter-branch organisations

Recognised producer organisations and recognised inter-branch organisations can help strengthen the farmers' position and can contribute to a more efficient food supply chain.

The recognition of producer organisations by national authorities is widely used in the fruit and vegetables sector, where almost 50% of production is marketed by producer organisations, but also in the milk, meat, olive oil and cereals sectors. In addition, there are 128 recognised inter-branch organisations in the EU, mainly located in France and Spain.

3. Sectoral tools in the agricultural industry

The report confirms that the specific sectoral tools available in the agricultural industry are being used for the benefit of farmers and the sector at large:

• The possibility of agreeing on a value-sharing mechanism on a voluntary basis in the sugar sector has been widely implemented;
•  market stabilisation measures in the wine sector have also been frequently used;
•  supply management measures were put in place for products with protected designations of origin or geographical indications in the cheese and ham sector.

General reference: Commission press release in: http://europa.eu/rapid/press-release_IP-18-6182_en.htm?locale=en; text In Latvian: http://europa.eu/rapid/press-release_IP-18-6182_lv.htm