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EU competition framework: specific rules for the food chain in the new CAP

EU competition framework: specific rules for the food chain in the new CAP. Catherine DEL CONT , Nantes University, France Antonio JANNARELLI, Bari University, Italy Luc BODIGUEL, CNRS, France. EU competition framework: specific rules for the food chain in the new CAP.

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EU competition framework: specific rules for the food chain in the new CAP

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  1. EU competition framework: specific rules for the food chain in the new CAP Catherine DEL CONT, Nantes University, France Antonio JANNARELLI, Bari University, Italy Luc BODIGUEL, CNRS, France EU competition framework: specific rules for the food chain in the new CAP (IP B AGRI CEI 2011 097 E012 SC1)

  2. EU competition framework:specific rules for the food chain in the new CAP The purposes of the study are : • To analyse the current legal competition framework; • To analyse the new CMO regulation proposal COM(2011) 626 final/2 : • recitals 85, 86, 88, 89, 90, 91, 93, 120, 121, 122 and 123 • articles 104 to 116 and 143 to 145; • To put forward recommandations in order to take into consideration the specificity of agriculture and to rebalance the food chain. EU COMPETITION FRAMEWORK: SPECIFIC RULES FOR THE FOOD CHAIN IN THE NEW CAP

  3. The EU competitionframework for agriculture Principle: • The article 42 TFEU : « the provisions of the Chapterrelating to rules on competitionshallapply to production of and trade in agricultural productsonly to the extentdetermined by the Council within the framework of Article 43(2) and in accordance with the procedure laid down therein, accountbeingtaken of the objectives set out in Article 39 ». The specificity of agriculture and the social function of the common agricultural policy should be considered in the application of competition rules, by articulating and even by reconciling two major Community policies: the Competition Policy and the Common Agricultural Policy. EU COMPETITION FRAMEWORK: SPECIFIC RULES FOR THE FOOD CHAIN IN THE NEW CAP

  4. The EU competition framework for agriculture Implementation of the Principle: • Council Regulation No26/62 of 4 April 1962 applying certain rules of competition to production of and trade in agricultural products: Competition law is applicable in principle to the production of and trade in agricultural products and retains only a few exceptions regarding undertakings (art.101TFEU) • Reg. No26/62 overturns the « philosophy » of article 42: « principle-exceptions » paradigm • Reg. No1184/2006 and No234/2007 maintains this model; • Decisional practices of COM and ECJ based on this logic. EU COMPETITION FRAMEWORK: SPECIFIC RULES FOR THE FOOD CHAIN IN THE NEW CAP

  5. The EU competitionframework for agriculture To summarize: • Implementation of the principle: • Council Reg. No26/62; 184/2006; 1237/2007COM (2010) 799; COM (2011) 626 Principle Article 42 TFEU Competition policy:art. 101 to 106 TFEU Competition policy:art. 101 to 106 TFEU CAP art. 39 TFEU CAP art. 39 TFEU Competition law is applicable to Agriculture only to the extent determined by the Council Competition law is applicable to Agriculture except few exceptions EU COMPETITION FRAMEWORK: SPECIFIC RULES FOR THE FOOD CHAIN IN THE NEW CAP

  6. The EU competitionframework for agriculture The Exceptions: • The exceptions regard only undertakings: • agreements, decisions and concerted practices pursuant to art. 101§1 TFEU • The regulations 1184/2006 and 1234/2007 on single CMO establish that article 101 TFEU does not apply in three situations: • Exception concerning restrictive practices which "form an integral part of a national market organisation”; • Exception concerning restrictive practices which "are necessary for the attainment of the objectives set out in article [33 now 39 TFUE]; • The exception contained in art. 176, par. 1, second sentence, of Reg. no. 1234/2007 and in art. 2, par. 1, second sentence, of Reg. no. 1184/2006. EU COMPETITION FRAMEWORK: SPECIFIC RULES FOR THE FOOD CHAIN IN THE NEW CAP

  7. The EU competitionframework for agriculture Primacy of competition policy • The specific regime of the agricultural sector is even more limited than the Commission and the European Court of Justice are making a rigorous and restrictive application of it. Hierarchy between competition policy and CAP even it is not determined in the Treaty. EU COMPETITION FRAMEWORK: SPECIFIC RULES FOR THE FOOD CHAIN IN THE NEW CAP

  8. Which competition framework for agriculture in the new CAP 2013?The new CMO proposal COM(2011)626 final/2: The proposal extends the current framework (fruit and vegetables, tobacco, wine and/or milk sectors) to other sectors in particular with regards to : • Producer and interbranch organisations : art. 106 to 109, art.110 and 111; • Contractual relations in milk sector : art.104 and 105; • Agreements and practices of producer and interbranch organisations : art.143 to 145. EU COMPETITION FRAMEWORK: SPECIFIC RULES FOR THE FOOD CHAIN IN THE NEW CAP

  9. The new CMO proposal COM(2011)626 final/2 :1.Producer and interbranchorganisations:art. 106 to 109, art.110 and 111. Article 106d) introduces a new compulsory condition to the recognition of Producer Organisations: the prohibition to « hold a dominant position on a given market unless this is necessary in pursuance of the objectives of Article 39 of the Treaty ». • does not exist in the EU competition law : only abuse of dominant position are prohibited (art.102 TFEU); • is in contradiction with the European Antitrust law; • is in contradiction with article 111 of the Proposal: the organisations have to hold a dominant position to be recognised as representative; • is in contradiction with the objectives of actors’ concentration and strengthening bargaining power displayed by the Commission (recital 85) Problems This prohibition for producer organisations is not repeated for interbranchorganisations which reveals a greater favor of the legislator towards interbranchorganisations. EU COMPETITION FRAMEWORK: SPECIFIC RULES FOR THE FOOD CHAIN IN THE NEW CAP

  10. The new CMO proposal COM(2011)626 final/2 :2. Contractual relations in the milk sector: art.104 and 105. • The principle stays the freedom of contract negotiation :« all elements of contracts for the delivery of raw milk concluded by farmers, collectors or processors of raw milk, including the elements referred to in paragraph 2(c), shall be freely negotiated between the parties ». • There is not really a will to protect the agricultural producer. Art. 104 and Art.185f Reg. No 261/2012 : establishe a written contract obligation ONLY for: delivery of raw milk by a farmer to any collector or processor. EU COMPETITION FRAMEWORK: SPECIFIC RULES FOR THE FOOD CHAIN IN THE NEW CAP

  11. The new CMO proposal COM(2011)626 final/2 :3. Competition rules applying to agreements and practices of producer and interbranchorganisations: art. 143 to 145. Principle: no change! • Art. 143: reaffirms the applicability on principle of Articles 101 to 106 TFUE to all agreements, decisions and practices referred to in Article 101(1) and Article 102 TFUE (cartels and abuses of dominant position) which relate to the production of, or trade in, agricultural products. • same wording of art. 283 COM (2010) 799 / Article 175 of Reg.1234/2007. EU COMPETITION FRAMEWORK: SPECIFIC RULES FOR THE FOOD CHAIN IN THE NEW CAP

  12. The new CMO proposal COM(2011)626 final/2 :3. Competition rules applying to agreements and practices of producer and interbranchorganisations: art. 143 to 145. Exceptions: extension of the scopes (annex I)! • Art. 144: provides the « exceptions for the objectives of the CAP and farmers and their associations ». • Extends the scope to all sectors (Art.176 Reg.1234/2007; 234 COM (2010) 799 ); • Price fixing is still prohibited (art.144 and 145); • Major change: the prohibition for producer organisations to hold a dominant position (by reference on art.106d). • Art. 145: states the exception for « agreements and concerted practices of recognised interbranch organisations ». • No major innovation in relation to the previous texts (Art.285 COM (2010) 799). • BUT extends the exception regarding fruits and vegetables to all sectors. EU COMPETITION FRAMEWORK: SPECIFIC RULES FOR THE FOOD CHAIN IN THE NEW CAP

  13. The new CMO proposal COM(2011)626 final/2 :3. Competition rules applying to agreements and practices of producer and interbranchorganisations: art. 143 to 145. Conclusion • The changes stay minor despite the ambitious goals of the reform which aims to make of farmers the actors of the Regulation and to rebalance the sector to benefit farmers, by increasing their bargaining power against upstream and downstream strength. • The changes to the state of the law raise questions about their effectiveness with regard to the ambitions formulated (report on the CAP towards 2020, explanatory memorandum and recitals 85, 86, 88, 89, 90, 91, 93, 120, 121, 122 and 123, COM (2011) 626 final /2). • The new CMO proposal confirms the primacy of Competition policy on Agricultural policy. EU COMPETITION FRAMEWORK: SPECIFIC RULES FOR THE FOOD CHAIN IN THE NEW CAP

  14. Recommendations: general scope In order to achieve the following objectives: • Rebalancing the food chain, and giving agriculture a regulatory framework taking into account the specificities of this sector, • Making farmers’ and producers’ organisations into real actors of the regulation, • Reading the objectives of Article 39 of the Treaty in the light of past changes and future CAP reforms, • Improving the coherence and the application of texts that apply to agriculture, the report proposes the following recommendations reflecting: • the state of substantive law (principle-exception scheme) • and the need to strengthen the effectiveness of exceptions. EU COMPETITION FRAMEWORK: SPECIFIC RULES FOR THE FOOD CHAIN IN THE NEW CAP

  15. Recommendations: competitionrulesArticle 144: Exceptions for the objectives of the CAP and farmers and their associations: Basis of recommendation: • A presomption of compatibility should be introduced: the agreements, decisions and practices of farmers, farmers' associations, or associations of such associations, or producer organisations mentioned in this provision should be presumed to pursue the attaintment of the objectives of article 39 TFEU. • The prohibition of dominant position (art. 106d) should be removed EU COMPETITION FRAMEWORK: SPECIFIC RULES FOR THE FOOD CHAIN IN THE NEW CAP

  16. Recommendations: competitionrulesArticle 144: Exceptions for the objectives of the CAP and farmers and their associations: New wording art. 144: • §1 first sentence: unchanged • §1 snd sentence : « In particular, are presumed to pursue the achievement of the objectives Article 39 of the Treaty, the agreements, decisions and practices of farmers, farmers' associations, or associations of such associations, or producer organisations recognised under Article 106 of this Regulation, or associations of producer organisations recognised under Article 107 of this Regulation, which concern the production or sale of agricultural products or the use of joint facilities for the storage, treatment or processing of agricultural products, unless competition is thereby excluded or those objectives are jeopardised ». EU COMPETITION FRAMEWORK: SPECIFIC RULES FOR THE FOOD CHAIN IN THE NEW CAP

  17. Recommendations: competitionrules Article 145: Agreements and concerted practices of recognisedinterbranchorganisations Basis of recommendation: • Article 145§1: the objectives detailled in article 108§2c) should be extended to all sectors, therefore article 145§1 should be modified. New wording Article 145§1 : • « Article 101(1) of the Treaty shall not apply to the agreements, decisions and concerted practices of interbranch organisations recognised under Article 108 of this Regulation with the object of carrying out the activities listed ». EU COMPETITION FRAMEWORK: SPECIFIC RULES FOR THE FOOD CHAIN IN THE NEW CAP

  18. Recommendations: competitionrules Article 145: Agreements and concerted practices of recognisedinterbranchorganisations Basis of recommendation: • The economic operators have need for legal certainty Recommendation: • Article 145§2a): it seems preferable to maintain the procedure of prior notification of agreements • At the same time an exemption regulation on vertical interbranchagreements should be developped: • It could take the form of a positive list of practices and interbranch agreements, presumed to be compatible with competition rules and necessary to achieve the CAP objectives • Thisexemption regulation should fall within the jurisdiction of the Council and Parliament in accordance with Articles 42 and 43 of the Treaty EU COMPETITION FRAMEWORK: SPECIFIC RULES FOR THE FOOD CHAIN IN THE NEW CAP

  19. Recommendations: competitionrules Article 145: Agreements and concerted practices of recognisedinterbranchorganisations Basis of recommendation: • In case of a crisis, decisions andinterbranch agreements must be implemented quickly. Thus, it should be necessary to add a paragraph to Article 145. New Article 145§7: • «In situation of crisis, the agreements, decisions and concerted practices may be put into effect before the opinion of the Commission. If, following expiry of a period of ten days, the Commission finds that the conditions for applying paragraph 1 have not been met, it shall, by means of implementing acts, take a Decision declaring that Article 101(1) of the Treaty applies to the agreement, decision or concerted practice in question». EU COMPETITION FRAMEWORK: SPECIFIC RULES FOR THE FOOD CHAIN IN THE NEW CAP

  20. Recommendations: competitionrules Articles 144 and 145 Basis of recommendation: • The main motivation of the prohibition of price fixing (administered prices’ policy) is left now. • The provisions of Reg.1184/2006 provides that the producers associations can implement agreements concerning the production; Recommendation: • The prohibition of price fixing should be removed in article 144 and 145 EU COMPETITION FRAMEWORK: SPECIFIC RULES FOR THE FOOD CHAIN IN THE NEW CAP

  21. Recommendations: farmer’s and interbranchorganisations Basis of recommendation: • to insure the concentrating of offer and to enforce a producers’ bargaining power and to be consistent with the european competiton law (art.102 TFEU) Recommendation: • Remove the prohibition of dominant position • Point c) of Article 106; • Art. 114b) regarding the delegate powers of the Commission. EU COMPETITION FRAMEWORK: SPECIFIC RULES FOR THE FOOD CHAIN IN THE NEW CAP

  22. Recommendations regarding farmer’s and interbranch organisations Basis of recommendation: • Article 108§1 c)i : In order to take into account the european and the international markets». New wording Article 108§1 c)i: • Remove «at regional or national level » and replace with« in the internal market and in the third countries ». EU COMPETITION FRAMEWORK: SPECIFIC RULES FOR THE FOOD CHAIN IN THE NEW CAP

  23. Recommendations: farmer’s and interbranch organisations Basis of recommendation: • considering that these objectives detailled in Article 108§2 (a, b, c) are restricted to olive oil and table olive and tobacco sectors; • These objectives should be extended to the other sectors because they are essential to each interbranch New wording of Article 108 : • Removing §2 and including it into the point c) of Article 108: • «concentrating and co-ordinating supply and marketing of the produce of the members; adapting production and processing jointly to the requirements of the market and improving the product; promoting the rationalisation and improvment of production and processing». EU COMPETITION FRAMEWORK: SPECIFIC RULES FOR THE FOOD CHAIN IN THE NEW CAP Presentation (edit title in master)

  24. Recommendations: contractual relations Basis of recommendation: • to ensure greater transparency and to rebalance the contractual relations; • the obligation to conclude written contracts (Art.104) should be extended to all sectors covered by Annex I. Recommendation: • new article 100 bis « Contract of supply of agricultural products »inserted in a new Chapter 1bis: «Common rules applying on contractual relations » of the Title II Rules Concerning Marketing and Producer Organisations. EU COMPETITION FRAMEWORK: SPECIFIC RULES FOR THE FOOD CHAIN IN THE NEW CAP

  25. Conclusion • The competition policy applied to agriculture shall reflect its specificity instead of erasing it. • Only legislative action can initiate and justify a modification of the application of the rules of competition to production and marketing of agricultural products as well as the interpretation of exceptions. To restore the original meaning and the scope of Article 42 of the Treaty, Regulation No1184/2006 should be modified or replaced. PowerPoint Presentation (edit title in master)

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