Navigation path

HOME
Policy areas
Sectors
Who is in charge?
Competition and you
Cases
In this section:
Overview
What's new?
Documents
Legislation
Cases

Did you find what
you wanted? 
Yes No
What were you
looking for?
(Leave your email address
if you want a reply)
Any suggestions?

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. The food and drink industry is the EU's biggest manufacturing sector in terms of jobs and value added. In 2014, around 24 million people were employed in the EU food supply chain, representing approximately 10% of all EU employment. The total turnover of the food supply chain surpassed €3.9 trillion in the same year and generated an added value of around €700 billion (around 6% of the EU gross added value). Spending on food and non-alcoholic beverages represents approximately 13% of the average EU household budget.

Table 1: Structural overview of the food supply chain (2014)


 

Agriculture

Food and drink industry

Wholesale

Retail

Turnover (billion euros)

414

1,095

1,254

1,114

Value added (billion euros)

211

219

104

164

Number of employees (million)

11.2

4.2

1.9

6.3

Number of companies (1,000)

10,800

292

341

803

Source: Eurostat data collated by Food Drink Europe

There is no single, homogeneous, and common food supply chain at the 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.


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. Competition policy is about applying rules to make sure businesses and companies compete fairly with each other. This encourages enterprise, innovation and efficiency, creates a wider choice for consumers and helps reduce prices and improve quality for consumers. In a competitive market, prices are pushed down. Not only is this good for consumers - when more people can afford to buy products, it encourages businesses to produce and boosts the economy in general. Competition also encourages businesses to innovate in terms of e.g. production methods and improve the quality of goods and services they sell – to attract more customers and expand market share. Competition within the EU is also essential to make European companies stronger outside the EU too – and able to hold their own against global competitors.

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 2004-2011 period.

General application of competition rules

EU competition rules apply to all food products at all levels of the food supply chain, from the production of raw agricultural products to grocery retail. For all food products except agricultural products, 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 agricultural products. Agricultural products are defined in Annex I of Regulation 1308/2013. Pursuant to Article 42 TFEU, the legislator can modify the standard competition rules when applying them to agricultural products, taking into account the CAP objectives set out in Article 39 TFEU (i.e. increasing productivity of agricultural production, ensuring a fair standard of living for agricultural communities, stabilising markets, assuring supplies and ensuring reasonable prices for the consumer). The legislator has thus determined some specific rules for farmers, associations of farmers, producer organisations, and interbranch organisations in so far as they produce or trade in agricultural products.

The competition rules for agricultural products (other than fisheries products) are set out in Regulation 1308/2013 and as of 1 January 2018 also in Regulation 2017/2393. Regulation 1308/2013 is known as the "Common Market Organisation (CMO) Regulation", as amended by Regulation 2017/2393 as the "Omnibus Regulation". The CMO Regulation sets out in its Article 206 that standard competition rules (defined by Articles 101 to 106 TFEU) apply to agricultural products except for some derogations set out in a number of other articles of the regulation. This memo describes the derogations and standard competition rules that are applicable to agricultural products before 1 January 2018.

The competition rules for fisheries products are set out in Regulation 1379/2013. Under Article 40 of Regulation 1379/2013 standard competition rules apply to fishery and aquaculture products. The Regulation also sets out some specific derogations.

Agriculture

Commission competition investigations concerning the agricultural sector

In early 2015, the Commission initiated an investigation into an agreement between the French retailer, Carrefour, and the main French federation of vegetable growers, Les Producteurs de Légumes de France (Légumes de France). The agreement aimed to restrict most of Carrefour's procurement of certain seasonal vegetables in France to the members of Légumes de France, excluding vegetable producers from other Member States from the French market. The agreement, which was the first of its kind and was only limited to one retailer (Carrefour), was renounced by the retailer after the Commission initiated its investigation. The investigation was therefore closed without a finding of an infringement.

At the end of 2015, the Commission began investigating agreements that national associations of agricultural producers publicly reported that they had reached with national associations of processors and national associations of retailers in France. The agreements aimed at raising prices of some dairy and meat products and excluding supplies of producers from other Member States by committing the retailers to source 100% of the relevant products in France. The Commission intervention ensured that French supermarket shelves were not reserved for French products, thus preventing a damaging cycle of retaliations, blocking imports from outside their own Member States, for all farmers and the cases were closed in 2017.

Policy

EU farmers face challenges due to the characteristics of the agricultural sector. Unforeseeable natural elements (such as adverse weather conditions and diseases) can significantly alter production, resulting in volatility of prices and revenues. Farmers also face increased demands in terms of quality, variety and traceability by end consumers. Further, some markets have been liberalised in recent years: EU law removed quotas for raw milk in 2015 and quotas and minimum prices for sugar production in 2017. In addition, agricultural producers form the least concentrated level in the food supply chain. The most common situation across sectors and Member States is that agricultural producers remain atomised or grouped into small cooperatives and other producer organisations. In contrast, their input suppliers and customers (processors, wholesalers and retailers) are often much larger and more concentrated. Agricultural producers therefore typically have very little bargaining power in their negotiations vis-à-vis large suppliers and buyers. These challenges can make it necessary for the less efficient agricultural producers to restructure or convert their businesses to be able to stay viable on the market.

The integration of producers into producer organisations can improve the management of these challenges significantly in various ways. Producer organisations can aggregate supply (both in terms of volumes and variety of products) and serve more customers and additional markets. Producer organisations can offer supporting services that reduce costs (e.g. procurement of inputs, pooling of equipment or services), better manage production (e.g. through advisory services and quality control) and facilitate innovation (e.g. through intelligence gathering and dissemination as well as advisory services). Producer organisations can add value through processing or distribution. In other words, the integration of producers into producer organisations can provide farmers with more stability, resilience, sustainability, flexibility, and more value. Ultimately, the integration of producers into producer organisations of appropriate size and activities can provide farmers with better and more stable revenues, while keeping adequate supply and reasonable food prices for consumers in line with the objectives.

The question of farmers' position in the supply chain, in particular their lack of bargaining power vis-à-vis their buyers, has been at the heart of policy discussions in the last decade. This included the reform of the Common Agricultural Policy (CAP) proposed in 2011 and concluded in 2013, the changes implemented by the Omnibus Regulation and the Commission proposal for a Directive on unfair trading practices (also referred to as UTPs) in business-to-business relationships in the food supply chain made in April 2018.

The 2013 CAP Reform

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

Articles 169-171 of the CMO Regulation allowed producers of olive oil, beef and veal and arable crops to jointly sell/commercialise their products through Producer Organisations (POs). This was subject to certain conditions. The two main conditions were: (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. On 27 November 2015 the Commission adopted (see press release and memo) Guidelines concerning the implementation of the rules regarding joint sales by producers of olive oil, beef and veal and arable crops in Article 169, 170 and 171 of the CMO Regulation (see note below). The Guidelines were meant to help producers, authorities and courts implement the rules by addressing practical and technical issues they raise. If you are a producer of an agricultural product covered by the Guidelines, this flowchart will guide you through the self-assessment process and other possible alternatives in case the derogation is not applicable.

Note: To prepare the Guidelines, in 2015 the Commission carried out a public consultation inviting stakeholders' views on a draft text of the Guidelines. The purpose of the consultation was for all stakeholders to comment on the draft text prepared by the Commission services and provide input or raise questions on the implementation of the rules. The consultation aimed 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 organised a conference on 4 March 2015 (details concerning the conference are available on the public consultation website).

While Article 169, 170 and 171 of the CMO Regulation have been repealed by the Omnibus Regulation as of 1 January 2018 they continue to be legally relevant for activities that took place while Articles 169, 170 and of 171 of the CMO Regulation where in force.

The 2013 CAP reform also introduced rules in Article 222 of the CMO Regulation that 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.

Omnibus Regulation

The CMO was amended as of 1 January 2018 by the Omnibus Regulation. Article 152 of the Omnibus Regulation introduced a horizontal competition derogation for recognised POs and APOs in all agricultural sectors, as far as certain activities (such as joint sales) of recognised POs and APOs are concerned. The existing sectorial derogations for recognised POs and APOs in the olive oil, beef and veal and arable crops sector (Articles 169-171 CMO) were consequently deleted. The Omnibus Regulation also amended Articles 209 (Recognised POs, APOs, farmers and farmers associations can ask the Commission for an opinion on the application of Article 209 CMO), 222 (extending the possibility of allowing collective agreements to manage supply in times of crisis –so-called "crisis cartels"- to entities that are not formally recognised such as farmers' associations and deletion of the last resort character of the authorisation of such collective agreements) and 232 (removing the sunset clause of the milk package) of the CMO Regulation. Article 172a of the Omnibus Regulation also extended the existing derogation from competition rules for agreements in the sugar sector on value sharing mechanisms - to all agricultural sectors.

On the occasion of the adoption of the Omnibus Regulation, the Commission made the following statement concerning producer co-operation (at the end of the Regulation):

The Commission takes note of the agreement between Parliament and Council on the amendments to Articles 152, 209, 222 and 232. The Commission notes that the amendments agreed by Parliament and Council are substantial in nature and included without an impact assessment as required by point 15 of the Inter-Institutional Agreement on Better Law-Making. This leads to an unwelcome degree of legal and procedural uncertainty of which the impact and implications are not known.

As the changes to the Commission's original proposal taken together result in a significant change to the legal framework, the Commission notes with concern that some of the new provisions in favour of producers' organisations might have the effect of endangering the viability and wellbeing of small farmers and the interest of the consumers. The Commission confirms its commitment to maintain effective competition in the agricultural sector, and give full effect to the objectives of the CAP laid down in Article 39 of the Treaty on the Functioning of the European Union. In this context, the Commission notes that the amendments agreed by the co-legislators foresee only a very limited role for both the Commission and the national competition authorities to act to preserve effective competition.

The Commission's overall agreement on the "Omnibus" proposal, including the amendments agreed by Parliament and Council, is without prejudice to any future proposals the Commission may make in these areas in the context of the reform of the common agricultural policy for the post-2020 period and other initiatives which are specifically meant to address some of the issues touched upon by the text now agreed by the European Parliament and the Council.

The Commission regrets that the issue of the very limited role for both the Commission and the National Competition authorities to act to preserve effective competition has not been addressed in a satisfactory manner by the co-legislators, and expresses concern with the possible implications of this limitation for farmers and consumers. The Commission notes that the legal text must be interpreted in a manner consistent with the Treaty, notably as regards the possibility for the Commission and national competition authorities to intervene if a producer organisation, which covers a large share of the market, seeks to restrict the freedom of action of its members. The Commission regrets that this possibility is not clearly safeguarded in the legal text.

Proposal for a Directive on unfair trading practices (UTPs) in business-to-business relationships in the food supply chain

On 12 April 2018, in line with its 2018 Work Programme, the Commission adopted a proposal for a Directive on unfair trading practices in business-to-business relationships in the food supply chain. This initiative follows the references to the food chain in President Juncker's State of the Union speeches of 2015 and 2016, and is a response to the EP resolution of 7 June 2016 and the Council conclusions of 12 December 2016 on UTPs.

The Commission proposes to ban the more damaging unfair trading practices in the food supply chain to ensure fairer treatment for small and medium sized food and farming businesses. Smaller operators in the food supply chain, including farmers, are vulnerable to unfair trading practices employed by partners in the chain. These SME suppliers often lack bargaining power and alternatives to get their products to consumers.

The Commission proposal provides for minimum harmonisation on the unfair trading practices which are to be banned by Member States as well as minimum enforcement standards with the designation of a national enforcement authority. This authority should be vested with the necessary powers to conduct investigations upon its own initiative or following a complaint. Parties filing a complaint will be able to request confidentiality and anonymity to protect their position towards their trading partner. The proposal also foresees a coordination mechanism between enforcement authorities to enable the exchange of best practices.

The unfair trading practices to be banned at all times (so-called "blacklist") are

    (1) late payments for perishable food products,
    (2) last minute order cancellations,
    (3) unilateral or retroactive changes to contracts and
    (4) forcing the supplier to pay for wasted products.

Other practices will only be permitted if subject to a clear and unambiguous upfront agreement between the parties (so-called "greylist"):

    (5) a buyer returning unsold food products to a supplier,
    (6) a buyer charging a supplier payment to secure or maintain a supply agreement on food products,
    (7) a supplier paying for the promotion or the marketing of food products sold by the buyer.

The proposed measures are complementary to measures existing in Member States and the code of conduct of the voluntary Supply Chain Initiative.

It is important to emphasise that regulation of UTPs has a scope that is different from competition law. Competition rules prohibit unilateral practices of a dominant operator and anti-competitive agreements between undertakings that affect the market overall. EU competition rules are not concerned with problems faced by small suppliers in the context of their bilateral contractual negotiations with stronger buyers which have no negative effects on the competitive process or on consumer welfare. Such contractual imbalances associated with unequal bargaining power are tackled through other policy tools, such as contractual law or rules on UTPs. UTP rules address practices of any significant operator that affect a comparatively smaller partner in their bilateral commercial relationship without necessarily having an effect on the market overall. Accordingly, the UTP rules proposed by the Commission are distinct from the EU’s competition rules.

Studies on Producer Organisations

In June 2018 the Commission published a Study on Producer Organisations and their activities in the olive oil, beef and veal, arable crops sectors .

The study was commissioned by DG Competition to understand the implementation of these rules and how farmers organise themselves in these sectors in order to improve their position in the food supply chain. The report is the result of extensive data collection and analysis by experts from Ecorys and the Wageningen Economic Research.

The report presents unprecedented detailed information on producer organisations and their associations ("POs" and "APOs") in the olive oil, beef and veal, and arable crops sectors. The report provides for the first time an inventory of all organisations in these sectors in all 28 Member States and an in-depth analysis of the activities of these organisations based on a survey conducted for a representative sample of more than 200 POs and APOs, covering approx. 400 000 farmers.

The report provides the following insights:

1) The study finds that POs in these sectors take an efficiency-based approach to integration as was required by Articles 169-171 of the CMO Regulation. POs engaged in commercialisation related activities also carry out other potentially “efficiency enhancing activities” (i.e. organisation of quality control, distribution and transport, input procurement, packaging, waste management etc.). When asked specifically about the reasons for carrying out other activities than selling products, most POs and APOs indicate that these other (non-commercialisation related) activities are meant to establish an improved position of the members in negotiations with buyers. In other words, POs themselves consider that establishing a good negotiating position requires integrating activities going beyond selling activities. About two thirds of the POs and APOs also report that they carry out efficiency-enhancing activities to reduce the costs of their members.

2) POs consider that the main benefits for farmers of integration in POs are market and price stability and reduced costs and economies of scale. To a lesser extent, POs report that their joint-activities ensure higher prices for producers (and as a corollary a fair standard of living for the members) and improved market access.

3) Overall, POs consider that their activities contribute positively to CAP objectives.

4) The study shows that there are many more non-recognised POs than recognised POs: the study finds that there are over five times as many non-recognised POs as there are recognised POs. About half of the non-recognised POs and APOs indicated that they were not aware of the possibility to obtain recognition under the CMO Regulation. Most POs that are aware of the possibility to be formally recognised, but have not applied for recognition, consider that the main reason for not applying is that the benefits of recognition are unclear.

In connection with the work on Guidelines, in June 2014 the Commission published a report on assessing 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.

Manufacturing

Commission competition investigations concerning the manufacturing level of the food supply chain

The Commission is investigating whether the world's biggest beer brewer AB InBev has abused this dominant market position by pursuing a deliberate strategy to prevent supermarkets and wholesalers from buying Jupiler and Leffe at lower prices in the Netherlands and France, and from importing them into Belgium. The Commission has sent a Statement of Objections to AB InBev. In particular, the Commission is concerned with a number of AB InBev business practices, which have been in place since at least 2009. These include:

  • AB InBev appears to have changed the packaging of Jupiler and Leffe beer cans in the Netherlands and France to make it harder to sell them in Belgium: for example, it appears to have removed French text from its cans in the Netherlands, and Dutch text from its cans in France, to prevent their sale in the French and Dutch speaking parts of Belgium, respectively;
  • AB InBev appears to have limited access of Dutch retailers to key products and promotions, in order to prevent them from bringing less expensive beer products to Belgium: for example, it seemingly did not sell and/or limited the quantity of certain products sold to Dutch retailers and it appears to have restricted the availability of certain promotions, if there was a chance that the Dutch retailers could import the products into Belgium.

The Commission's preliminary view is that these practices have created anti-competitive obstacles to trade and partitioned the EU's Single Market along national borders. If confirmed, this would infringe Article 102 of the Treaty on the Functioning of the European Union (TFEU) that prohibits the abuse of a dominant market position. (see press release for more)

Retail

The Commission is also looking into an alleged infringement of EU antitrust rules that prohibit agreements between undertakings (Article 101 of the Treaty on the Functioning of the European Union) by some supermarket chains and some alliances of supermarket chains. The Commission, accompanied by national competition authorities, carried out inspections at the premises of several supermarket chains and alliances of supermarket chains, in France and Belgium. The Commission's investigation concerns possible competition issues linked to the general commercial strategies of some supermarket chains and to the procurement by some supermarket chains and alliances of supermarket chains of a large range of everyday consumer goods.

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 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 suppliers 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 2014, the Commission published a comprehensive study on the modern retail sector, (the "modern retail study") to measure how choice and innovation have evolved for consumers on the shop shelves over the decade before the launch of the study. 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, Cambridge Econometrics and Arcadia International 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)

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. Download all responses received (zip file).

One important part of the follow-up to the Modern Retail Study has been an investigation into the role of private labels, given that the Modern Retail Study suggested that private labels may have a strong negative relationship with innovation in a given category at the shop level. On numerous occasions throughout 2015 the Commission met on numerous occasions with representatives of retail and brand associations to seek their input and possible explanations for the relationship, and invited stakeholders to come forward with evidence on this subject. Various stakeholders submitted studies or anecdotal evidence. In addition, during the first part of 2016, the Commission worked with the Consortium who produced the Modern Retail Study to extract some further data on private labels and innovation. The Commission used this data to conduct some additional analysis into the nature of private labels. For a summary of the results of these investigatory steps, please see this presentation.