The CMO Regulation provides for a number of general and specific derogations from the EU competition rules in the agricultural sector. In January 2015, the European Commission published draft guidelines on the application of the specific derogations for the olive oil, beef and veal and arable crops sectors set out in the CMO Regulation. The European Commission plans to adopt final guidelines in the fourth quarter of 2015.
The CMO Regulation is long – 232 articles – and complex. Thus, a detailed description is outside the scope of this article. The antitrust-related provisions are contained in Title II and Title IV. Title II covers (among other matters) the formation of organisations of producers of relevant products and associations of those organisations (collectively, Producer Organisations). It also covers so-called inter-branch organisations, which may among other things collect and publish market data, forecast production and prices, co-ordinate how products are placed on the market, explore potential export markets and seek ways to restrict the use of animal health or plant protection products. Title IV provides for general derogations from the EU competition rules and specific derogations for particular sectors.
The general derogation
The CMO Regulation provides for a general derogation from the EU competition rules for all agricultural products covered by the CMO Regulation in two circumstances:
- Under Article 209(1)(i) of the CMO Regulation agreements that relate to the production of or trade in agricultural products are exempt from Article 101(1) of the TFEU if they are necessary for the attainment of the Common Agricultural Policy objectives. This derogation has been interpreted to require that the relevant agreement must be necessary for all of the Common Agricultural Policy objectives, not just one or more of them.
- Under Article 209(1)(ii) of the CMO Regulation, Article 101(1) of the TFEU does not apply to agreements, decisions and concerted practices of farmers, famers’ associations, associations of such associations or recognised Producer Organisations concerning the production or sale of agricultural products, or the use of joint facilities for the storage, treatment or processing of agricultural products, unless the Common Agricultural Policy objectives are jeopardised. It is not necessary for all of the Common Agricultural Policy objectives to be jeopardised for this limb of the general derogation to apply.
Therefore, the first limb of the general derogation applies to a wider range of undertakings, but the conditions for its application are stricter than for the second limb of the general derogation. No decision or authorisation is required; the application of the general derogation is based on self-assessment by producers. Neither limb applies to agreements, decisions and concerted practices that entail an obligation to charge an identical price or by which competition is excluded.
The specific derogations
Articles 169, 170 and 171 of the CMO Regulation set out specific derogations for the olive oil, beef and veal products and certain arable crops. These articles allow joint sales and salesrelated activities through Producer Organisations and are intended to strengthen producers’ bargaining positions in relation to downstream operators, provided that these activities generate significant efficiencies through the integration of activities in Producer Organisations so that the Producer Organisations’ activities contribute to the fulfilment of the Common Agricultural Policy objectives.
To ensure compliance with the objectives of concentrating supply and placing products on the market, Producer Organisations must effectively pursue a commercialisation strategy. In this regard, they would normally negotiate and set all elements relating to supply contracts, including prices, volumes, and possibly other contractual terms such as quality specifications, duration, termination, exit, payment periods and procedures, arrangements for collecting and delivering products and rules governing force majeure. Producer Organisations’ commercialisation strategies may also entail agreements on production planning and exchanges of commercially sensitive information.
A number of conditions must be satisfied for the specific derogations to apply:
- Formal recognition – the PO must be formally recognised by national authorities under Article 152(1) or 156 of the CMO Regulation.
- The Common Agricultural Policy objectives – the PO must pursue one or more of the objectives of concentrating supply, placing members’ products on the market or optimising production costs. A Producer Organisation must actually concentrate supply and place products on the market; pursuing the objective of optimising production costs is not sufficient.
- The significant efficiency test – integration of activities must generate significant efficiencies so that the Producer Organisation’s activities overall contribute to the Common Agricultural Policy objectives. Agreements to carry out contractual negotiations can restrict competition and ultimately impair the fulfilment of the Common Agricultural Policy objectives, for instance if producers conclude an agreement that fixes prices, reduces output or shares markets.
- Market share capital – the volume of a given product (subject to negotiations by a particular Producer Organisation) must not exceed 15 per cent of the total national production in the case of arable crops and beef and veal, or 20 per cent in the case of olive oil.
- No multiple memberships – producers cannot be members of more than one Producer Organisation negotiating supply contracts on their behalf. However, producers can sell their products both through a Producer Organisation and directly to the market.
- Notification – the Producer Organisation must notify the competent national authorities of the volume of products covered by the negotiations.
In addition to these general conditions, the CMO Regulation includes a safeguard clause authorising national competition authorities – not the European Commission – to decide that an individual negotiation should be reopened or should not take place. Such actions are considered preventive measures and would not involve sanctions, but if a Producer Organisation does not respect a national competition authority’s finding, proceedings can be launched under general competition rules.
Compared to the general derogation, the specific derogations have a narrower scope in that they apply only to contract systems and related activities for olive oil, beef and veal and certain arable crops. They also apply only to activities of Producer Organisations, not inter-branch organisations or other undertakings who may benefit from the general derogation. On the other hand, the conditions for applying the specific derogations may be easier to meet, and the assessment methods and notifications provided for give Producer Organisations greater certainty.