It is known that competition rules prohibit agreements and other forms of coordination between companies which are restrictive of competition in the market. For instance, because economic operators coordinate the prices they apply to their products, the quantities to be sold or the common policy they (will) adopt regarding the (non-)use of a certain product.
But what if agreements or joint initiatives’ goal is to pursue sustainability objectives? Isn’t this an area where certain forms of enhanced cooperation between companies in the agri-food supply chain are legitimate and perhaps desirable? Is it possible or even viable or feasible to pursue certain sustainability goals according to an “every man for himself” approach? What will be the incentive to invest in certain necessary infrastructures, when one knows in advance that it is unfeasible to recover them? What about the risk of free riding by competitors?
One option is to consider that each scenario and the specific legal-economic context of each initiative will necessarily call for different answers, making an automatic check-list unfeasible. That may be the case. However, the truth is that these and other questions have caused some discomfort and are at the origin of a debate on the role of competition law regarding the green transition (or, in other words, the necessary harmonization between the various policies of the Union).
The big question is: are competition rules hindering the pursuit of the Union’s sustainability goals? How can we ensure that they do not act as a ‘barrier’ or a counter-stimulus to sustainable practices and initiatives by agricultural producers?
Aware of the challenges facing the agri-food sector, the European Union adopted in 2021 a “derogation” for agricultural products, as part of the reform of the common agricultural policy. Such derogation is provided for in Article 210a of the Regulation establishing a common organisation of the markets in agricultural products. Its aim is to exclude the application of European competition rules to agreements, decisions and concerted practices of agricultural producers (either among themselves - horizontal agreements - or with other operators at different levels of the supply chain - vertical agreements) relating to the production of or trade in agricultural products.
For the application of the safe harbour, the agreements’ aim must be to achieve a standard of sustainability (a more demanding one than mandatory national or European standards) geared towards one or more of the following objectives: (i) environmental protection; (ii) reduction of pesticide use and antimicrobial resistance, and (iii) animal health and welfare. These are in line with two central strategies of the European Ecological Pact - the Biodiversity Strategy and the Meat to Plate Strategy.
Notwithstanding its apparently clear wording, the diagnosed impossibility of a closed and automatic answer for the different types of sustainability agreements and their possible combinations led to the need for some clarification by the European Commission. In this regard, a public consultation is open until 24 April 2023, whereby all interested parties are invited to submit comments on draft Guidelines for sustainability agreements in agriculture.
These guidelines not only define the scope of the derogation and the eligible sustainability objectives, but also clarify the requirements of the sustainability standards (which may establish quantified targets or provide for the adoption of specific technologies or production methods). The criterion for identifying restrictions on competition (which must be “indispensable” to the pursuit of the objectives or achievement of sustainability standards) is also provided for. Finally, indications as to the possibility of dialogue between producers (or their associations) and the European Commission are included, as well as a “safeguard mechanism”, which will legitimise intervention by the European Commission and national competition authorities, with a view to the amendment, suspension or termination (of application) of agreements that may result in the elimination of competition in the market or endanger the objectives of the common agricultural policy.
There is no doubt that the derogation is to be applauded in view of the uncertainty of the unknown, and the plasticity of competition rules. However, its apparent automaticity does not remove the burden of proof that the conditions for exemption are met. Besides, interested parties will have to assess (i) why they could not achieve the same standard and objectives on their own (‘each for itself’), and (ii) whether the provisions of the agreement and the restrictions of competition appear indispensable in the light of realistic alternatives.
In view of the above, and as evidenced by the ‘safeguard mechanism’ itself, it is perhaps rash to claim or trust on an “immunity” from competition rules. On the contrary, they remain in a state of latency, ready to act when it is found that the supposed ‘green initiatives’ result in undesirable consequences, such as reducing incentives for innovation, excluding competing products that could meet a substantial part of consumers’ demand, or even hindering the introduction of alternative products meeting a higher sustainability.
Let us not be pessimistic, of course... But we must be parsimonious.
And particularly for agricultural producers, it is important to understand that the current state of affairs is not (yet) one of total usefulness of competition rules to the policy of sustainability. On the contrary, the utmost caution is required when designing forms of cooperation, which cannot be satisfied with the “label” or with mere adequacy. They but must rather achieve the substance and meet the requirements of necessity.
