Rules of competition in the agricultural sector
In line with the Endives judgment rendered by the CJEU on November 14, 2017 and the Omnibus Regulation of December 13, 2017 amending the Regulation on the common organization of the markets in agricultural products (CMO) of December 17, 2013, the Competition Authority has clarified the conditions of application of competition rules to the agricultural sector in an opinion delivered on May 4, 2018. This opinion follows the need for legal certainty expressed by producers and inter-professional organizations in the agricultural sector during the General Food Conference. It comprises 18 questions classified around four main axes: horizontal practices between producers gathered within producer organizations (PO) or associations of producer organizations (PDO), vertical agreements between actors within inter-branch organizations, so-called tripartite approaches and quality channels.
This Newsflash will only deal with horizontal practices between producers within POs and PDOs and so-called tripartite approaches involving intermediate producers and distributors. These actions, although justified by the achievement of the objectives assigned to the Common Agricultural Policy (CAP) by Article 39 of the Treaty on the Functioning of the European Union (TFEU), are however also likely to come within the scope of application of Article 101 § 1 TFEU if they constitute horizontal and vertical restrictions of competition. This is the reason why the agricultural sector is subject to an exception to the application of competition rules, since these "are only applicable to the production and trade of agricultural products to the extent determined by the European Parliament and the Council within the framework of the provisions and in accordance with the procedure laid down in Article 43 (2), taking into account the objectives set out in Article 39 ”. This primacy of the CAP over competition policy is explained by the structural dysfunctions specific to the agricultural sector which require the regrouping of producers and the structuring of sectors. The opinion of the Competition Authority takes stock of the scope of the exemptions from the competition rules from which players in the agricultural sector may benefit depending on the form of cooperation they adopt.
I - Scope of the POs and PDOs: a derogation from the ban on cartels
POs or AOPs are structures formed on the initiative of producers in order to pool their resources and thus rebalance the commercial relations with economic actors upstream and downstream of their subsidiary. Necessary in order to achieve a concentrated offer and thus remedy market imbalances, the grouping of producers within POs and PDOs has always been encouraged by the legislator who considers that they constitute the basic elements of the common organizations. market. The CMO Regulation thus provides for a special treatment of producers' actions within these organizations with regard to the competition rules.
Article 206 of the CMO Regulation lays down a principle of application of the competition rules to the production and marketing of agricultural products unless the Regulation provides otherwise. In its opinion, the Autorité de la concurrence deduces from this article two types of derogation from the competition rules: the express derogations contained in Articles 207 to 210 of that Regulation to which Article 206 refers and those applicable in cases where "the Regulation provides otherwise ", the application of which has been clarified by the CJEU in its Endives judgment.
In accordance with the provisions of Article 209 of the CMO Regulation, Article 101 §1 TFEU shall not apply to the practices of recognized POs and PDOs where these relate to the 'production or sale of agricultural products or the use of 'common storage, processing or processing facilities for agricultural products, unless the objectives of Article 39 TFEU are jeopardized'. However, it is clarified that the derogation does not apply to practices that involve an obligation to charge a specified price or that exclude competition.
In addition to this express derogation, the CJEU, seized of a preliminary question by the Court of Cassation concerning the application of the article 101 §1 TFEU to practices of agreements between producers grouped within OP and AOP in the fruit and vegetable sector has exempted from the scope of Article 101 § 1 TFEU the practices necessary to enable POs and PDOs formally recognized by a Member State to achieve the objectives assigned to them. Certain practices such as strategic information exchanges, collective fixing of minimum selling prices or consultations on volumes may thus escape the application of Article 101 § 1 TFEU. However, as the Competition Authority mentions the CJEU, CMOs are not spaces without competition.
- the practice must be implemented within OP or AOP formally recognized by a Member State to pursue one of the objectives of the CMO concerned
- carrying out a proportionality test according to which the practice must be strictly necessary to achieve the objectives assigned to the PO or the AO.
Now, for a practice to be exempted from the prohibition of cartels, it will be appropriate to apply this grid of reading. This was decided by the Court of Cassation in its judgment of 12 September 2018 following the Endive judgment. It thus broke the judgment of the Paris Court of Appeal reversing the decision of the Competition Authority of 6 March 2012 which sanctioned a fine of nearly 4 million euros the OPs and AOP concerned for agreement complex and continues on the French endive market. The Court of Cassation, automatically raising a new ground of appeal, criticizes the Court of Appeal for having deprived its decision of legal basis by subtracting from the scope of Article 101§1 TUE price, consultation on prices or quantities placed on the market and exchange of strategic information, without having examined whether the two conditions mentioned above were met.
It should also be made clear, as stated in the Authority's opinion, that the CMO Regulation avoids the application of Article 101 §1 TFEU but not that of Article 102 TFEU. POs and PDOs recognized as dominant in their market must therefore be particularly cautious in their behavior.
Lastly, the Authority points out the possibility of referring the matter to the European Commission for opinion if the POs or the AOPs have doubts about the compatibility of their practices with the competition rules.
II - Tripartite procedures: the application of the rules relating to vertical agreements
Tripartite approaches, in that they involve producers, manufacturers and distributors in order to ensure for each of them a sufficient margin, are likely to distort competition. It is often a succession of bipartite contracts providing a volume of production and purchase prices of a product and backed by specifications setting product quality criteria.
These agreements are necessary to combat the fluctuation of supply and demand. The Autorité de la concurrence recognizes their ability to produce efficiencies that ensure better remuneration and guarantee of outlets for the producer, a guarantee for the manufacturer to make part of its infrastructure profitable and for the distributor a compliant supply. its requirements of quality and transparency for the consumer.
In its opinion, the Autorité de la concurrence merely refers to the rules applicable to vertical agreements and more specifically to the conditions of application of Block Exemption Regulation No. 330 / 2010. Thus, agreements concluded in the framework of tripartite procedures when they are concluded between operators having less than 30% of market shares and where they do not contain characterized restrictions of competition will be exempted. The Authority, however, draws attention to exclusivity clauses for the benefit of buyers, which would be added to the quality specifications. These clauses are likely to cause the agreements to lose the benefit of the exemption granted by Regulation No. 330 / 2010 when their duration exceeds five years or when, in the presence of similar agreements, they contribute to a cumulative effect of market closure. .
i CJEU, judgment of 14 November 2017, C-671/15, hereinafter “Endives judgment”
ii Council and European Parliament, Regulation on the common organization of the markets in agricultural products and repealing regulations (EEC) n ° 922/72, (EEC) n ° 234/79, (EC) n ° 1037/2001 and (EC) n ° 1234/2007 of the Council, December 17, 2013, n ° 1308/2013
iii TUE, article 42
iv Council and European Parliament, Regulation on the common organization of the markets in agricultural products, supra note 2
v Cour de Cassation, September 12, 2018, n ° 754 FS-P + B
vi Paris Court of Appeal, May 15, 2014
vii Competition Authority, Decision of March 6, 2012 on practices implemented in the endive production and marketing sector, 12-D-08
viii European Commission, Regulation concerning the application of article 101, paragraph 3, of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices, April 20, 2010, n ° 330/2010
Pierre de Montalembert
Partner
With 40 years of experience working as a lawyer in business law, Pierre de Montalembert mainly advises companies but also a few foundations and individuals.
