The agri, food and retail sectors are receiving more attention than ever: from the nitrogen problem and higher prices for food and raw materials, to the sharply rising energy costs. Competition law is becoming increasingly important in light of these developments. When, for instance, may parties in the food supply chain work together to achieve climate and sustainability goals (faster)? What can producers do (jointly or individually) to defend themselves against the market power of retailers, for instance in light of rising food prices? And what new rules apply to retail with regard to consumers and consumer law? In this trend, we address these questions and also discuss the role of the Netherlands Authority for Consumers and Markets (ACM) and the European Commission (the Commission) in this context.
Sustainability initiatives: is there truly more room now?
The agri-food sector is under considerable pressure to rapidly become more sustainable and to switch to circular agriculture. It is generally accepted by now that supply chain management within the sector is required in order to take the necessary steps to achieve this aim. Although competition law has often proven to be an obstacle in this area in the past (see here and here), several developments are taking place that facilitate cooperation in making the agri-food sector more sustainable.
European Commission sustainability: Article 210a CMO
At the end of 2021, the Commission created more room for (joint) sustainability initiatives. It did so by adding a sustainability exemption to (the existing) CMO Regulation 1308/2013 (CMO) (Article 210a). A sustainability initiative that pursues a sustainability standard over and above the statutory minimum and meets the other requirements of Article 210a CMO is exempt from the cartel prohibition. At least one producer must furthermore be involved in the sustainability initiative. In Germany, the Bundeskartellamt (BKa) has already assessed several sustainability initiatives in the past six months. In some cases, the BKa expressly took Article 210a CMO into account in its assessment. It is worth noting that sustainability initiatives that come under Article 210a CMO may also be admissible if they lead to a price increase. That would be good news for the agri-food sector, since earlier sustainability initiatives failed on this very point (see, for instance, Kip van Morgen). Article 210a CMO in any event offers many opportunities for domestic, international and sector-wide sustainability initiatives. The question where exactly the boundary lies will have to be answered in practice. The Commission will first issue guidelines on the application of Article 210a in the course of 2023. More information on the new sustainability exemption of Article 210a CMO can be found here and here.
European Commission sustainability: block exemption
In April 2022, the Commission completed its public consultation regarding the new block exemptions for horizontal agreements and accompanying guidelines. These block exemptions provide insight into which agreements between competitors (or potential competitors) under certain conditions (i) fall outside the scope of the cartel prohibition; or (ii) can successfully make use of the “efficiency defence”. The Commission wishes to renew the current block exemptions and accompanying guidelines by 2023 at the latest.
With reference to the Green Deal, among other things, the draft new guidelines also deal with sustainability agreements among competitors. In its guidelines, the Commission addresses, for instance, standardisation agreements relating to sustainability. These include agreements among competitors to replace non-sustainable products and processes (e.g. relating to fossil fuels and plastics) with sustainable products and processes. The Commission will use what is known as a “soft safe harbour” for these agreements: if a standardisation agreement between competitors in the field of sustainability meets certain cumulative requirements, the Commission assumes that it will not have any anti-competitive effects. According to the Commission, the new guidelines do not apply to agreements on sustainability standards above and beyond the statutory minimum regarding the production of and trade in agricultural products. This is because such agreements (may) already fall under Article 210a CMO.
ACM sustainability
Also in the Netherlands, a great deal is happening in the field of competition law and sustainability that affects the agri, food and retail sectors. ACM published draft versions of its sustainability guidelines in 2020 and 2021. ACM thereby acted as a trailblazer within the EU to create more room for sustainability within competition law. ACM still has ambitions in this area, as this speech by ACM Board Chairman Martijn Snoep demonstrates. In July 2022, ACM also encouraged the Commission to make it easier for companies to request an informal opinion from the Commission on their sustainability initiatives.
In September 2022, ACM released a guidance on cooperation in the agrifood-sector, which can be found here. The ACM's credo - partly with reference to Article 210bis CMO - is that despite reservations in the agricultural sector many supply chain agreements are permissible under competition law. Also, by the end of 2023 another ACM Agro-Nutri monitor will be published (see here for the previous edition and here and here for more information).
ACM has meanwhile suited its actions to its words and tested a sustainability initiative of ZuivelNL: the KoeMonitor. That monitor allows dairy farmers and dairy producers to demonstrate that they meet the requirements in the field of animal health, animal welfare and food safety. ACM tested whether dairy companies, in violation of the cartel prohibition, had taken concerted action to make the KoeMonitor mandatory for suppliers. ACM found insufficient evidence of this. It also found no indications that the KoeMonitor restricted competition (in a general sense). This summer, ACM also commented favourably on an agreement between (competing) soft drink suppliers to abolish the plastic handle on soft drink multipacks. According to ACM, the agreement (i) contributes to a sustainability goal; (ii) does not relate to a competition parameter; and (iii) does not negatively impact consumers. ACM assessed the agreement on the basis of its draft guidelines on sustainability agreements.
Room for Sustainability Initiatives bill
All of these developments at ACM and the Commission are impacting the Room for Sustainability Initiatives bill. This bill, which has been pending since 2018, has now been postponed by the Rutte IV government until at least 2023. The government reported that it is awaiting the Commission’s revised horizontal guidelines (early 2023) to see whether there will be reason to amend the bill. The government is also looking forward to the Commission’s guidance on Article 210bis CMO referred to above (also expected in 2023).
Rising supermarket prices: what should the agri, food and retail sector be on the lookout for?
Supermarket prices have been rising for various reasons in recent months. This has also created tensions between suppliers and supermarkets/buying groups. Suppliers are often forced to increase the prices of their products because of increased costs. Supermarkets have an interest in purchasing at the lowest price possible. Conflicts about purchase and sales prices are regularly leading to empty shelves in the shops (see for example here and here).
Vertical price maintenance
The developments described above often give rise to specific competition law questions. Steep price increases of raw materials or energy costs, for instance, can lead to advice from trade associations on how those price increases should or can be passed on. Such advice (see here) is readily at odds with the cartel prohibition. Another question that may arise is to what extent suppliers may influence the resale prices that (online) retailers charge for their products (also known as resale price maintenance (RPM)). ACM and the Commission are showing a great deal of interest in RPM.
Unfair Commercial Practices Act
As of this year, relationships between suppliers and retailers are (also) governed by the Wet oneerlijke handelspraktijken (Unfair Commercial Practices Act). The Unfair Commercial Practices Act came into force on 1 November 2021 and aims to strengthen the position of farmers, market gardeners and fishermen in relation to large buyers, such as retailers’ purchasing organisations (see also this blog, this article and this article). It aims to do so by prohibiting certain commercial practices (subject to conditions). ACM is in charge of enforcing the Unfair Commercial Practices Act. If buyers do not comply with the Act, suppliers can notify ACM (anonymously). ACM can impose an order subject to a penalty or a fine on a buyer that breaches the Act. When the Unfair Commercial Practices Act was introduced, a new disputes committee was also set up, which is in charge of resolving disputes relating to the Act. This disputes committee should serve as a low-threshold alternative to civil litigation for the supplier. The number of complaints filed with ACM under the Act is reportedly low at present, even though ACM has stated that it is happy to deal with complaints from suppliers.
ACM enforcement of consumer law on the increase: producers and retailers beware!
It has been known for some time that ACM continues to focus on consumer law and its enforcement (see this, this and this blog). The investigations that ACM recently completed again confirmed this.
ACM enforcement of sustainability claims
ACM recently critically investigated retailers that link sustainability claims to products. ACM published guidelines that should provide some guidance in this respect. ACM requires of companies that their sustainability claims are supported by facts. Quality marks and other visual sustainability claims may not confuse consumers. ACM makes no distinction between agricultural and other products in its guidelines. In sum, it is important that (also) sustainability claims for agricultural products are prudently communicated to consumers. More information on sustainability claims and consumer law can be found here.
ACM enforcement of Prices Act
Another development concerns the new rules on price indications that have been included in the Prijzenwet (Prices Act) since May 2022. These new rules are the result of a package of measures taken by the Commission, known as the New Deal for Consumers. These measures are intended to strengthen consumer law across the EU. The new rules in the Prices Act obligate retailers to be clearer when giving price discounts and making price comparisons. The ‘from’ price (also known as the reference price to which the ‘new’ price is compared) must be the lowest price charged by the retailer in the 30-day period before an offer. This should make the actual price advantage more visible to consumers. ACM has announced that it will enforce the new rules in the Prices Act. The changes in the Prices Act should therefore be a point of attention for the retail sector. The new rules in the Prices Act include exceptions that apply to specific product types, such as products with a limited shelf life. Discount offers may be made for such products in which the ‘prior price’ is the price that was charged immediately before the price reduction. An extensive blog on the new rules in the Prices Act can be found here.
All things considered, we expect plenty of developments in the agri, food and retail sectors in the remainder of 2022 and in early 2023. We will of course keep you informed.
