The severe economic impact of the COVID-19 pandemic has resulted in a temporary relaxation of EU competition law rules in key parts of the food sector.  The European Commission (Commission) has granted a temporary derogation from these rules to help bring stability to these markets.

In practice, this means that some food producers will be able to co-ordinate with competitors on issues such as production planning, storage and joint promotion, which they would previously have been prevented from doing under EU competition law rules.

EU competition and agricultural product rules

EU competition law rules concerning horizontal agreements (i.e. agreements between competitors) are contained in Article 101 of the Treaty on the Functioning of the European Union (TFEU), which prohibits all anti-competitive arrangements between undertakings.  Such arrangements may include agreements between undertakings or decisions by associations of undertakings.  Such anti-competitive behaviours vary from obviously harmful (or ‘hard-core’) conduct such as price-fixing and market-sharing to other behaviours, including co-ordinating output and joint production.

Regulation (EU) No 1308/2013 (the 2013 Regulation) establishes the common organisation of the EU’s agricultural product markets.  This law contains several measures targeting these markets including providing a ‘safety net’ for agricultural markets; encouraging co-operation between producers (e.g. by permitting the establishment of producer organisations); and setting out minimum marketing standards.

Recital 173 of the 2013 Regulation makes clear that EU competition law rules should apply to the production of, and trade in, agricultural products.  However, Article 222 provides that, in order to address “severe imbalances” in markets, the Commission may apply a temporary derogation from Article 101 TFEU to certain specific categories of arrangement.  Hard-core infringements such as price-fixing between competitors may not be exempted under Article 222, but Article 222 permits the Commission to derogate other arrangements including market withdrawal or free distribution; joint promotion; temporary production planning, and others.

COVID-19 – temporary derogations in certain agricultural markets

As businesses and the wider economy continue to adjust to the COVID-19 pandemic, the Commission has sought to implement measures enabling firms to cope.  In the agricultural sector, the Commission has adopted three implementing regulations, each of which, to a varying extent, relaxes the scope of Article 101 TFEU in specific food sectors, in each case for six months.  In each implementing regulation, the Commission has cited the financial difficulties and cash-flow problems faced by farmers and food producers:

• For potato producers, Commission Implementing Regulation (EU) 2020/593 permits the conclusion of agreements and decisions for processing on market withdrawals and free distribution, transformation and processing, storage, joint promotion and temporary planning of production from 5 May 2020.
• Under Commission Implementing Regulation 2020/594, producers of certain plants (described as “live trees and other plants, bulbs, roots and the like, cut flowers and ornamental foliage”)  to conclude agreements and decisions on market withdrawals and free distribution, joint promotion and temporary planning of production from 5 May 2020.
• In the dairy sector, Commission Implementing Regulation (EU) 2020/599 permits the conclusion of agreements and decisions planning the volume of raw milk to be produced from 1 April 2020.

Under Article 222(3) of the 2013 Regulation, the six-month derogation period may be extended by a further six months.

Comment

The measures adopted by the Commission should be welcomed by farmers and food producers, as it offers them some protection against the worst effects of the current crisis.  Given that they are likely to avoid any shortfall in food production, the measures should also be welcomed by consumers.  More broadly, like the Temporary Framework for State aid, the measures are a further indication of the Commission’s willingness to allow the full flexibility of competition law rules in the face of the crisis.  It will be interesting to see if further similar measures are adopted in other areas of food production as the crisis evolves.