Agrifood

Court affirms precedence of CMO over competition rules

News Update Agrifood November 2017
11 January 2017

Court affirms precedence of CMO over competition rules

On 14 November 2017, the Court of Justice of the European Union (CJEU) affirmed that the rules regarding the common organisation of markets (CMO) have precedence over competition rules. The CJEU answered the questions referred by the French Cour de Cassation for a preliminary ruling on the application of the competition rules on agreements, decisions or practices of producer organisations (POs), associations of POs (APOs) and professional organisations. The questions were raised in the cases before the French courts about the so-called “endive cartel”.

The decision of the CJEU is in line with the Opinion of Advocate General Wahl given earlier this year. Wahl argued that the competition rules do not apply to POs as long as they pursue the objectives assigned to them by the Common Agricultural Policy (CAP). Agreements on prices or practices whereby minimum prices and quantities or practices are collectively fixed or exchanging strategic information within individual POs or APOs escape the prohibition on restrictive agreements laid down in Article 101(1) TFEU, on the condition that they do not go beyond what is strictly necessary to achieve the general objectives assigned to the POs and APOs. The French endive cartel could not escape the competition rules: the practices of this cartel consisted of concertation on the price and the quantities placed on the market, not within one PO or APO, but  between various POs and APOs and several unrecognized entities. In addition, the cartel concerned the exchange of other strategic information. Finally, the minimum prices were applied not only to sales made collectively by the POs and APOs, but also to the individual sales made by the various members of the POs.

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Amendment Dutch Competition Act regarding cooperation between producers

The coalition agreement of the new Rutte III government, which was announced on 10 October 2017, stipulates that the Dutch Competition Act (Mededingingswet) will be amended in favour of the agricultural and horticultural industries. Cooperation between producers or producer organisations (POs) in this sector will explicitly be allowed in order to compensate for the unequal relations in the supply chain, notably to compensate producers and POs for their weak position towards retailers. At the request of POs, the government can declare sectoral agreements in the agriculture and horticulture sector to be universally binding, for example for the financing of research into innovative products or complying with sustainability standards. It is being investigated whether and how the Competition Act can be amended where it prohibits such cooperation that aims to stimulate sustainability. European frameworks and the Dutch export position are being taken into account.

As regards the CAP, the new government states that this should be less focused on income support and more on innovation, sustainability, food security and food safety. In addition, the CAP should facilitate cooperation between farmers and contribute to the crisis-resilience of the sector. With this focus, according to the coalition agreement, the reduction of the CAP budget can also be accommodated by Brexit.

The coalition agreement (in Dutch)

Extension of exemption competition rules for Producers Organisations

On 12 October 2017, the Estonian presidency and the European Parliament reached a provisional agreement on the agriculture chapter in the so-called Omnibus regulation. On 16 October 2017, the EU Member States represented in the Special Committee on Agriculture endorsed this agreement.

It has been agreed that some prerogatives for POs will be extended to all sectors in order to improve the position of farmers in the supply chain. On the one hand, these prerogatives concern planning production, optimising production costs, and placing agricultural products on the market by the POs. On the other hand, the prerogatives concern the specific exemption to the competition rules for POs already existing in certain sectors (olive oil, beef and arable crops). The extension of this specific exemption enables POs in all sectors to negotiate contracts for the supply of agricultural products on behalf of members.

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Gerrit Oosterhuis

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Fleur Tuinzing-Westerhuis

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Greetje van Heezik

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