Last week, the European Commission (EC) issued an opinion letter on the application of EU competition rules for agricultural products in relation to a proposed agreement among organic wine producers in France seeking to promote sustainable cooperation.
This letter follows similar guidance recently issued by the EC to port terminal operators - discussed in our earlier blog post – but was provided under the mechanism that allows agricultural producers to request an EC opinion (within four months of the request) on the compatibility of their sustainability agreement with specific EU competition rules for the agricultural sector.
Sustainable wine production in France
Against the background of a French wine industry facing increasing consumer pressure to maintain low(er) prices, producers of organic and Haute Valeur Environnementale (HVE) wines in the Occitanie region sought reassurance on their agreement to:
- guide bulk wine transactions of wine meeting organic or HVE sustainability standards; and
- incentivise producers to use organic production methods over conventional production methods by setting indicative prices (or ‘orientation prices’) covering the cost of sustainable production, in addition to a profit margin of up to 20% of such costs.
Orientation prices and EU competition rules
The proposed agreement would establish orientation prices for six grape varieties sold in bulk wine transactions. These prices would be set annually for a period of two years.
As we have previously discussed, sustainability agreements involving an element of price fixing are often very likely to fall within the scope of the prohibition on anti-competitive agreements and practices under Article 101(1) of the Treaty on the Functioning of the European Union (Art. 101(1), TFEU), unless the sustainable benefits meet certain cumulative conditions as set out in Article 101(3) TFEU.
The relevant exemption from the Art. 101(1) prohibition, in the context of sustainability agreements concerning the trade of agricultural products, is set out in Article 210a of Regulation (EU) No 1308/2013 establishing a common organisation of markets in agricultural products (CMO Regulation). Under Article 210a, such agreements aiming to achieve sustainability objectives beyond what is required under EU or national law will not fall foul of EU competition rules, provided any resulting restriction of competition is indispensable for the achievement of those sustainability objectives.
In its opinion, the EC confirmed the proposed agreement between the wine producers complies with all conditions set out in Article 210a of the CMO Regulation.
At the time of writing, the EC’s opinion letter has not been made publicly available, reportedly due to confidentiality considerations. As a result, the reasons for treating such restrictions as indispensable – along with any further insights into the EC’s approach – remain unknown.
Comment
This positive opinion is the first issued under the special competition rules for sustainability agreements in agriculture. This can be taken as another step by the EC in broadening the traditional scope of competition law where cooperation may result in the attainment of sustainable benefits. It remains to be seen whether other agricultural producers will similarly seek reassurance under the CMO Regulation mechanism (or under the general antitrust rules governing cooperation between competitors), and how the EC and other regulators seeking to support and contribute to sustainability objectives can balance this against the need to protect consumers from price increases in essential food commodities or other competitive harms.