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Agriculture and Food

Overview

Background on the EU food supply chain: an important economic sector

Together, the distribution sector (wholesale and retail), the food and drink industry (processing and manufacturing), and the agricultural sector are the driving forces of the food supply chain and important economic sectors. In 2011 24 million people were employed in the food supply chain, which is about 11% of total EU employees. The total turnover of the food supply chain surpassed €3,500 billion in 2011 and generated a value added of about €650 billion (about 6% of the EU gross value added). Food spending represents about 15% of the average EU household budget.

There is no single, homogeneous, and common food supply chain at European level. The length and the degree of complexity of food supply chains depend on the product and market characteristics. The market structure varies at each level of the food supply chain depending on the products and Member States concerned.

Table 1: Structural overview of the food supply chain (2011)


 

Agriculture

Food and drink industry

Wholesale

Retail

Turnover (billion euros)

392

1,016

1,100

1,110

Value added (billion euros)

204

206

93

156

Number of employees (million)

11.9

4.2

1.8

6.1

Number of companies (1,000)

11,757
(2010 data)

286

250

839


Source: Eurostat and DG AGRI statistical and economic information report 2012

Competition in the food sector

Food prices increased significantly after 2007 and commodity prices have shown increased volatility since then. In addition, concentration has increased at the manufacturing level and to a lesser extent at the retail level. These developments have led to concerns about the overall functioning of the food supply chain.

Competition policy plays a key role in maintaining a level playing field in the food supply chain. This is why the Commission's competition department and the National Competition Authorities in the European Competition Network (ECN) have been very active in food markets over the last decade. The ECN Food Report of May 2012 provides a detailed account of their activity over the period 2004-2011.

General application of competition rules

EU competition rules apply to the whole food supply chain, from agricultural production to grocery retail. For all levels except the agricultural level, the same rules apply as for any other sector. The Treaty on the Functioning of the European Union (TFEU) and its predecessors have granted specific treatment to the agricultural level of the chain. Pursuant to Article 42 TFEU, the legislator can modify the standard competition rules when applying them to the agricultural level of the chain, taking into account the CAP objectives set out in Article 39 TFEU. The legislator has thus determined some specific rules for farmers, associations of farmers, producer organisations, and interbranch organisations.

The competition rules for agricultural products (other than fisheries products) are set out in Regulation 1308/2013. Regulation 1308/2013 is known as the "Common Market Organisation (CMO) Regulation". That regulation sets out in its Article 206 that standard competition rules apply to agricultural products except for some specific derogations set out in a number of other articles of the regulation.

The competition rules for fisheries products are set out in Regulation1379/2013. That regulation sets out in its Article 40 that standard competition rules apply to fishery and aquaculture products. The Regulation also sets out some specific derogations.

Agriculture

Agricultural markets are experiencing a transition from regulation to competition. Farmers are often atomised and often need to cooperate in order to achieve efficiency in production, marketing and distribution. The question of farmers' position in the supply chain, in particular their lack of bargaining power vis-á-vis their buyers, was at the heart of the reform of the Common Agricultural Policy (CAP) in 2013.

Specific rules existing before the 2013 CAP Reform

The CMO Regulation and its predecessors set out a few derogations to the application of Article 101 TFEU when applied to agreements between agricultural producers. The derogations which were in force before the 2013 Reform and are currently applicable to the agricultural sector include the rules set out in the following articles of Regulation 1308/2013:

  • Article 209 allows agreements which do not exclude competition, do not impair CAP objectives and do not entail the charging of identical prices.
  • Article 149 (from the so-called "milk-package") allows the joint supply and fixing of prices by raw milk suppliers under certain conditions.
  • Article 33 allows withdrawal of products from the markets by Producer Organisations in the fruit and vegetable sector.
  • Article 210 allows certain activities of interbranch organisations subject to a number of conditions.
The 2013 CAP Reform

The 2013 CAP reform, effective as of 1 January 2014, added new competition rules for the agricultural sector.

The new rules (Articles 169-171 of the CMO Regulation) allow producers of olive oil, beef and veal and arable crops to jointly sell/commercialise their products through Producer Organisations (POs). This is subject to certain conditions. The two main conditions are: (1) these POs should make farmers more efficient by providing farmers with supporting services other than sales, such as storage, distribution or transport services and (2) the volumes marketed by the PO should not exceed certain thresholds.

The new rules (Article 222 of the CMO Regulation) also allow a temporary waiver of Article 101 TFEU to measures carried out by producers (essentially short-term quantity management measures) in order to address severe market imbalances. This is subject to a number of conditions and requires a Commission Decision before any of these measures can be implemented.

Antitrust Guidelines in the agricultural sector

Following the agreement by Parliament and the Council in June 2013, the Commission announced (MEMO/13/621 ) that it would provide guidelines on potential competition law issues arising in the implementation of the new rules regarding joint sales by producers of olive oil, beef and veal and arable crops.

These new rules raise practical and technical issues. In addition, it is important to ensure legal consistency across EU Member States, as requested by the Parliament and the Council during the CAP reform. Accordingly, the Commission's competition department, together with the Commission's agricultural department, is drafting Guidelines regarding the implementation of these new rules. The Guidelines are meant to help producers, authorities and courts implement the new rules by addressing practical and technical issues they raise. Adoption of the Guidelines is planned before the end of 2015.

Public consultation on antitrust Guidelines

The Commission has launched a public consultation inviting stakeholders' views on the draft text of the Guidelines. The purpose of this consultation is for all stakeholders to comment on the draft text prepared by the Commission services and provide input or raise questions on the implementation of these new rules. The consultation aims to identify issues which might hinder and/or facilitate the implementation, as well as give concrete answers to certain questions set out in the draft text of the Guidelines. In the framework of this public consultation the Commission organises a conference on 4 March 2015 (details concerning the conference are available on the public consultation website).

Study on Producer Organisations

In connection with the work on Guidelines, the Commission has commissioned a report which defines and assesses efficiencies generated by producer organisations in the agricultural sectors. The report gives an overview of the existing empirical literature from the European Union and the United States that focus on the role of producer organisations in increasing productivity, increasing farmers' incomes and ensuring reasonable consumer prices. The report also contains case study evidence on producer organisations active in the beef and veal sector in Poland and in the arable crop sector in Romania.

Other work in the agricultural sector

The Commission's competition department works to ensure that all legislative proposals contribute to making agricultural markets more competitive and do not have anti-competitive effects. Together with the national competition authorities, the European Commission's competition department works to ensure that the competition rules are respected in the agricultural sector. The Commission has also adopted a number of decisions relating to mergers in the agricultural sector.

Past advocacy actions in the agriculture sector include a brochure which explains how co-operation between farmers can take place under competition rules.

State aid issues in the agricultural sector are handled by the Commission's department for agriculture. The Commission's department for agriculture is active in the control of state aid to the production, processing and marketing of agriculture products.

Retail

Recent trends in retail

Since 2000 the retail landscape has evolved due to a combination of different factors on both the demand and supply side.

First, consumers have become more demanding in terms of food, both in terms of product variety and price. The economic and financial crisis of 2008 had a significant impact on EU consumers' purchasing power. Therefore, seeking lower prices has become a priority for many EU consumers. In addition, changes in household composition, an ageing population, increased interest in healthy food and increased environmental awareness have all had an impact on the food retail market in Europe.

Second, apart from the demand-side factors, the supply side also experienced significant changes. Modern retail developed strongly across the EU over the last decade, although big differences in the share of modern retail in total edible grocery still exist across Member States. Large modern retail chains (especially discounters) have been opening stores in their domestic markets and in other Member States, where they increased their market share. The top 10 European food retailers accounted for 26% of edible grocery sales in the EU in 2000, compared to 31% in 2011.

Finally, retailers' own brands or private label products have become more and more successful in Europe over the last decade. Private label market share increased across most product categories in most Member States.

Modern retail study

The Commission has received complaints from operators in the food supply chain, as well as requests from the Parliament to investigate the impact of concentration in the chain. The complainants alleged that large operators, in particular large modern retailers, often impose detrimental conditions on their supplier,s and as a result these suppliers are not able to invest in new products. They alleged that this had reduced choice and innovation in food products for European consumers.

In December 2012, the Commission launched a comprehensive study on the modern retail sector, (the "modern retail study") to measure how choice and innovation have evolved over the last decade for consumers on the shop shelves. The study also measured the evolution of a number of factors affecting the market and identifies which of these has driven choice and innovation in the EU food supply chain over the past 10 years.

Please note that the DG Competition's modern retail study has been revised since the conference on 2 October 2014 and that a new version was published on the website on 5 December 2014.  The new version of the report updates the results on the relationship between private label penetration and choice/innovation following refinements made to the econometric analysis."

The study was carried out by a consortium of Ernst & Young France, Arcadia International and Cambridge Econometrics between June 2013 and October 2014.

The results of the study were presented at a conference held in Brussels on 2 October 2014 and are available in the report "The economic impact of modern retail on choice and innovation in the EU food sector".

Press release - Speech by Director-General Alexander Italianer - Presentation

Executive summary of the retail study (FR version, the EN version is included in the study) fr

The study also includes six additional case studies which analyse the supply chain and the evolution of choice and innovation for certain agricultural products in several EU countries: tomatoes, apples, olive oil, milk, cheese and pork meat.

Follow-up on retail issues

Following the publication of the modern retail study in October 2014, the Commission ran a public consultation inviting stakeholders in the food industry to give their views and comments. We would like to thank all those who provided us with their feedback on the study. Download all responses received (zip file).

The Commission is currently engaged in the follow up to the modern retail study and will take into account all comments received in identifying next steps.