Impossible to make an omelette without breaking eggs: will farm to fork break European antitrust? | Jones Day

In short

The situation: The European Commission (“EC”) is expected to publish guidelines regarding a newly introduced exemption from EU antitrust rules for certain agreements aimed at achieving EU sustainability goals in the agri-food supply chain. The guidelines will follow EC public consultation with agricultural and food industry stakeholders, including primary producers, processors, manufacturers, wholesalers, retailers and input suppliers.

The background: The EC Farm to Fork Strategy is one of the key initiatives of the European Green Deal, which aims to make Europe a climate-neutral continent by 2050. The Farm-to-Fork strategy aims to develop a “sustainable food system” that reduces greenhouse gas emissions, pesticides, antimicrobials and excessive fertilization; improves animal welfare; increase organic farming; and reverses the loss of biodiversity.

Look forward: The EU has made the political choice to allow certain agreements in the agri-food supply chain that it might otherwise consider to be contrary to its antitrust laws as long as these agreements reinforce higher sustainability standards than what is mandatory in under European and/or national laws. However, future EU exemption directives will need to clarify the EC’s enforcement intentions in this area to overcome the risks associated with breaching antitrust rules, including hefty fines and other remedies, and to promote its farm-to-fork objectives.

EU antitrust law prohibits agreements between firms that restrict competition, such as price fixing, bid-rigging, information sharing or other agreements between competitors that result in higher or lower prices. from production. Certain types of agreements like price-fixing and bid-rigging are condemned regardless of justification. Other agreements that restrict competition may be permitted, but only if the net benefit to competition outweighs the anticompetitive harm of an agreement.

The European Green Deal, and in particular the Farm to Fork Strategy, has led to a debate in the EU on whether competition rules prevent the EU from achieving its sustainability goals, given that EU competition laws prohibit or restrict competitors. (or supply chain) that could otherwise support EU climate policies. As the EC has launched various Green Deal initiatives, leaders at the highest levels of the EC, including those responsible for competition policy, have given their thumbs up to the magnitude of this debate. To achieve the goals of the Green Deal, the EC leadership said it would apply competition rules in a way that “best supports the Green Deal”. In the agricultural sector, cooperation between competitors or in the supply chain is seen, at least from a political point of view, as more desirable among EC leaders.

To support the farm to fork strategy, the European Parliament and the Council of the EU adopted an antitrust exemption to section 210a (the “Exemption”) of Regulation 2021/2117. The exemption stipulates that certain agreements between agricultural competitors or agreements in the vertical agricultural supply chain can have positive effects on the sustainability objectives of the EC. The exemption allows such an agreement, even if it harms competition, as long as the agreement aims to achieve sustainability standards above what is mandatory under EU and/or national law, and provided that any restriction of competition is essential to achieve sustainability. results. To benefit from the exemption, an agreement must promote certain EU environmental objectives:

  • Mitigation of climate change;
  • Sustainable use and protection of landscapes, water and soil;
  • Transition to a “circular economy”, including reducing food waste and preventing and controlling pollution;
  • Protection and restoration of biodiversity;
  • Reduction in the use of pesticides;
  • Reducing the danger of antimicrobial resistance in agricultural production; and
  • Improved animal health and welfare.

The European Parliament and the Council of the EU have instructed the EC to publish guidelines on exemptions to provide legal certainty so that businesses can support EC policy from farm to fork, while remaining away from violations of competition law. The EC conducted a public consultation with stakeholders such as primary producers, processors, manufacturers, wholesalers, retailers and input suppliers, which ended in May 2022. The EC plans to publish a draft exemption guidelines for public comment during the first half of 2023, with final guidelines expected by December 8, 2023. Companies will also be able to seek an opinion from the EC on whether a proposed agreement related to farm to fork would violate competition rules.

Despite policy announcements from the EC, key questions remain as to whether the exemption, including exemption guidelines, will provide enough clarity to encourage business cooperation in pursuing the farm-to-farm strategy. the fork. Even under the best of circumstances, it can be difficult for companies and antitrust authorities to accurately predict the net effect of an agreement on competition. Adding the impact on EU farm-to-fork objectives will only complicate this analysis, unless and until the EC adopts guidance that more clearly articulates sustainability objectives than it will credit and how to weigh sustainability benefits against potential anti-competitive harms.

Three takeaways

  1. The EC said it would relax some competition rules to achieve its farm-to-fork sustainability goals. Until the EC puts meat on those bones in the form of exemption guidelines expected to be released in early 2023, it will be difficult for companies to predict which business collaborations might succeed.
  2. Businesses active in the agricultural sector should consider collaborations with competitors or with industry that could help advance their business interests that also benefit EC farm-to-fork objectives. Beyond the first-mover advantage, companies or trade associations will have the opportunity to shape EC policies when it publishes the exemption guidelines for public comment in the first half of 2023.
  3. Global agribusinesses will not have the luxury of looking at the EC exemption in isolation. While other countries may share some of the EU’s policy goals, there is no indication that they plan to adopt a similar antitrust exemption.