Antitrust: Commission invites comments on draft Guidelines for sustainability agreements in agriculture

The European Commission today launched a public consultation inviting all interested parties to comment on its draft proposal for Guidelines on how to design sustainability agreements in the field of agriculture (‘Guidelines’) using the novel exclusion from EU competition rules introduced during the recent reform of the common agricultural policy (‘CAP’).

Article 101 of the Treaty on the Functioning of the European Union (‘TFEU’) generally prohibits agreements between companies that restrict competition, such as those between competitors that lead to higher prices or lower quantities. However, Article 210a of Regulation 1308/2013 establishing a common organisation of the markets in agricultural products (‘CMO Regulation‘) excludes certain restrictive agreements in the agricultural sector from that prohibition, when those agreements are indispensable to achieve sustainability standards.

The draft Guidelines aim at clarifying how operators active in the agri-food sector can design joint sustainability initiatives in line with Article 210a.

In particular, the draft Guidelines:

• Define the scope of the exclusion. The exclusion only concerns agreements concluded by agricultural producers, either between themselves or with other actors active along the agri-food chain, such as companies supplying inputs for production, distribution, transport or packaging of the product. Agreements concluded only between operators in the agri-food supply chain without including agricultural producers cannot benefit from the exclusion, even when the agreement concerns an agricultural product.
• Define the eligible sustainability objectives. The Guidelines clarify the scope of the sustainability objectives that can be pursued with the agreements. These objectives are laid down in Article 210a of the CMO Regulation and can be divided in three categories: (i) environmental protection; (ii) reduction of pesticide use and antimicrobial resistance; and (iii) animal health and welfare. For example, the Guidelines clarify that the environmental protection objective includes agreements to protect soil and to improve soil resistance to erosion, in order to increase its biodiversity or to improve its composition.
• Set requirements for sustainability standards. In order to benefit from the exclusion, parties need to agree on the adoption of a sustainability standard that is higher than what is mandatory under EU or national law. While the Guidelines do not set a minimum level of improvement that the parties need to achieve compared to mandatory standards, they do clarify that the assessment of the indispensability of this improvement will need to take into account the level of the restrictions. They also clarify that if there is no existing mandatory standard, a sustainability agreement that adopts one may still fall under the exclusion, provided that the agreement pursues one of the sustainability objectives laid down in Article 210a.
• Set the test to identify indispensable restrictions to competition. Parties to a sustainability agreement need to assess whether any restrictions to competition stemming from their agreement is indispensable to achieving the sustainability standard. This assessment includes four elements : (i) identifying the obstacles that would prevent the parties from attaining the sustainability standard on their own and explaining why collaboration is necessary ; (ii) determining the appropriate type of agreement (e.g. an agreement on price or quantity) ; (iii) identifying indispensable restriction(s) to competition (e.g. an agreement on price can either fix the whole price, establish a minimum price or establish a price premium) ; and (iv) determining the appropriate level (e.g. the amount of the price) and duration of the restriction(s). When conducting this test, the parties shall choose the option that is the least restrictive to competition.
• Define the scope for ex-post intervention. The Guidelines clarify that the Commission and the national competition authorities have the right to stop or require amendments of the sustainability agreements if this is necessary in order to prevent competition from being excluded or if it is considered that the objectives of the Common Agricultural Policy set out in Article 39 TFEU are jeopardised.

Next steps

Following the comments by the interested parties on the draft Guidelines, the Commission will carefully analyse those and implement any necessary changes with a view of having the Guidelines in place by 8 December 2023.

In addition, the Commission plans to hold a workshop with participants to this public consultation in June 2023 to further discuss the draft text and address any pending issues.

Background

In the context of the common agricultural policy reform for 2023-2027, the European Parliament and the Council of the European Union adopted in 2021 a new exclusion from competition rules for agricultural products.

The new exclusion is contained in Regulation 2021/2117, which amended Article 210a of the CMO Regulation. This provision states that agreements aimed at achieving a set of sustainability objectives by applying standards higher than what is mandatory under EU and/or national laws are allowed, provided that any restrictions of competition that result from such agreements are indispensable for the achievement of those objectives.

The European Parliament and the Council of the European Union asked the European Commission to issue guidelines on the application of this exclusion.

On 28 February 2022, the Commission launched a call for evidence and a public consultation inviting stakeholders to share their experience with agreements aimed at achieving sustainability objectives in the agri-food supply chains. The Commission published the replies to this consultation in May 2022.