Will ACM target the purchasing power of retailers and sustainability claims in the agri-food sector?

The agri-food sector can count on increasing interest from the Netherlands Authority for Consumers and Markets (“ACM”) and other competition authorities in the European Union (“EU”). This blog highlights a number of developments. First, the ACM’s enforcement of the Wet oneerlijke handelspraktijken landbouw- en voedselvoorzieningsketen (Unfair Commercial Practices in the Agricultural and Food Supply Chain Act). What is the situation regarding the purchasing power of (cooperating) retailers? It also addresses the ACM’s Agro-Nutri monitors, which focus on price setting in the food supply chain: who pays for the sustainability of the food supply chain? The enforcement of the ACM regarding misleading sustainability claims, the KoeMonitor in combination with the ACM Guideline on Sustainability Agreements, are also discussed in this blog.

Unfair Trade Practices in the Agricultural and Food Supply Chain Act

In response to the 2017 coalition agreement, more attention is being paid to the protection of producers and intermediate suppliers in the agricultural sector. This is because, in practice, they have a weak negotiating position in comparison to the concentrated and highly organised buyers in the food supply chain. Farmers, horticulturists and intermediate suppliers would often lose out in the form of late payments for perishable products or last-minute cancellations of orders by customers. The Wet oneerlijke handelspraktijken landbouw en voedselvoorzieningsketen (Unfair Commercial Practices in the Agriculture and Food Supply Chain Act (the “Act”) was adopted by the Senate on 2 March 2021 and must be enacted before 1 November 2021. The Act is the implementation of Directive (EU) 2019/633, which aims to protect micro, small and medium-sized enterprises (including producer organisations) selling agri-food products to large buyers, such as retailers; see also this blog. More specifically, the Act prohibits:

  • late payments and/or last-minute cancellations of perishable products and other agri-food products;
  • various unilateral amendments to the terms of the supply agreement;
  • forcing a supplier to pay for spoilage and loss of products;
  • making payments unrelated to the sale of the supplier's agricultural and food products;
  • refusing a supplier's request to confirm in writing the terms of a supply agreement;
  • unlawfully obtaining or using the supplier's trade secrets;
  • threatening or engaging in commercial retaliation if the supplier exercises its contractual or statutory rights; and
  • requiring reimbursement of costs associating with investigating customer complaints related to the sale of the supplier's products, despite the absence of negligence or fault on the part of the supplier.

Recently, the ACM announced that as from November 2021, it will actively monitor the Act, which not only contains the above mentioned prohibitions, but also allows certain commercial practices (such as payment for storage or marketing activities) only after prior and unambiguous written consent of producer and supplier. The question is whether small producers dare to complain to the ACM about violation of the Act, since they would be biting the hand that feeds them. Whether the Act will have an effect will therefore depend (at least in part) on the ACM’s prioritisation policy and the extent to which the ACM is willing to conduct ex officio investigations following compliance with the Act by purchasing organisations and retailers. The ACM will at least gain insight into the relationships in the food distribution chain through its Agro-Nutri monitors 2020 and 2021.

Purchasing power of (cooperating) retailers restricted? Competition authorities in EU Member States regularly conduct ex officio investigations into the purchasing behaviour of (covertly or not) cooperating retailers and traders. After conducting dawn raids on large traders in the agricultural sector in 2019, the ACM will publish the results of an investigation into an alleged purchasing cartel of certain agricultural products during the course of 2021.

In 2019, the Belgian Competition Authority (“BMA”) launched an ex officio investigation into an alliance between Carrefour Belgium and Provera, the purchase alliance of the Louis Delhaize group for the joint purchase of numerous products. The investigation was prompted by an agreement concluded between Carrefour and Provera in 2018. The purchasing alliance was intended to strengthen bargaining power against Carrefour and Provera's 140 main suppliers. On 6 May 2021, the BMA announced it was ceasing its investigation after receiving commitments from the parties.

In Germany, the Bundeskartellamt (“BKartA”) recently completed an investigation into the Edeka retail chain. After acquiring 45 stores from competitor Real in March 2021, Edeka demanded specific benefits, including marketing activities, from suppliers. According to the BKartA, that may constitute abuse of an economic dominant position. Since the investigation has shown that Edeka also reciprocates the (optional) marketing activities of suppliers, the BKartA has closed the investigation.

In France, the purchasing alliance of Casino, Les Mousquetaires and Intermarché may not fare as well. As part of an investigation by the European Commission (the “Commission”), unannounced dawn raids took place at these retailers in February 2017 and May 2019. The Commission is investigating whether the retailers' cooperation went beyond joint purchasing of agricultural products. In particular, it is investigating whether the retailers coordinated the development of their own retail network and consumer prices. It remains to be seen whether the Commission will be able to impose a fine in this case. In October 2020, the General Court partially annulled the Commission’s decision to carry out dawn raids in 2017. Thereupon, in early 2021, the purchasing alliance appealed to the European Court of Justice on the basis of multiple violations of the rights of defence.

Elsewhere in the EU, attention is also being paid to the relationship between producers and buyers. On 21 April 2021, the Polish competition authority (“UOKiK”) published a report with its findings regarding the discount policies of several retailers. According to UOKiK, many suppliers get into trouble due to the use of retroactive discounts unilaterally imposed by retailers. This is because discounts that are not agreed upon in advance and are unilaterally imposed with retroactive effect create a large factor of (financial) uncertainty for suppliers. Thus, according to the Competition Authority, the timing of discounts is crucial to whether there are competition concerns in the relationship between retailers and suppliers. UOKiK argues that discount structures should be established at the time of the conclusion of contracts.

ACM: Agro-Nutri Monitor 2020

In 2020, the ACM completed its Agro-Nutri Monitor 2020. The Monitor was presented to the Ministry of Agriculture, Nature and Food Quality in October 2020. It focused on the (sustainable) production and pricing of the following products: onions, white cabbage/sauerkraut, pears, tomatoes, cow's milk and pork. One of the striking findings of the Agro-Nutri Monitor 2020 is that there currently seems to be too little demand at home and abroad for a large-scale transition to sustainable production. According to the ACM, many primary producers that have switched to organic production are, however, receiving an average price premium that covers the average additional costs. That conclusion was not universally endorsed. LTO Nederland criticised the Agro-Nutri Monitor 2020, also on behalf of the Pig Breeding Producers’ Organisation (“POV”), the Glastuinbouw Nederland, the Dutch Fruit Growers Organisation (“NFO”) and the Biohuis (the Dutch Organic Farmers’ Organisation). According to LTO et al., the monitor does not provide a complete picture of the diversity of the producers and was not sufficiently established in consultation with the sector. The ACM has not responded publicly to this criticism.

ACM: Agro-Nutri Monitor 2021

The ACM is also investigating the sustainable production of agricultural products in 2021. For that purpose, the ACM sent requests for information in February 2021 to companies that operate in the production chains of yellow onions, (solid-boiling) unpeeled ware potatoes, Brussels sprouts, round tomatoes and vine tomatoes, hand pears, daily fresh milk products and freshly packaged pork. Again, the study focuses on price development and barriers in the chains for regular and sustainable production. The outcome of the Agro-Nutri Monitor 2021 is expected in July 2021. It is clear that the results of the follow-up investigation can once again count on the sector’s attention.

ACM aims its sights on misleading sustainability claims

The ACM has been paying attention to misleading sustainability claims for quite some time and previously spoke of a proliferation of sustainability labels. In early 2021, the ACM published its GuidelinesSustainability Claims. These Guidelines contain rules of thumb for companies that make use of sustainability claims. It follows from the Guidelines that if companies mislead consumers about the sustainability of their products, the ACM will impose high fines. In 2020, the ACM called on companies to refrain from using misleading sustainability claims and logos. The ACM is now taking the next step and will crack down on misleading sustainability claims in 2021. In May 2021, the ACM announced an investigation into misleading sustainability claims in three sectors: energy, dairy and clothing. In this context, more than 170 companies were written to and called upon to check their sustainability claims. The energy, dairy and clothing sectors were chosen because in these sectors sustainability plays a major role in consumer purchases, according to the ACM. In the dairy sector, for example, it is often about potentially unclear and misleading sustainability claims on the packaging of dairy products. For instance, it is unclear to consumers what the difference is between an organic and a non-organic dairy product. The ACM's research fits within a trend where consumer law is a spearhead of the ACM agenda. The (online) deception of consumers can count on more and more attention and capacity from the ACM (see also this and this blog). When looking at the actions of the ACM regarding (online) misleading of consumers, it should not be underestimated what energy the ACM will give to this topic and what sanctions may follow. For five practical tips in the context of the ACM's supervision of fair advertising of consumer sustainable products, see this blog.

KoeMonitor

On 3 May 2021, the ACM announced that it would not conduct a further investigation into the KoeMonitor (the integral assurance system for the Dutch dairy farming sector). This monitor is a system that allows dairy farmers and dairy producers to demonstrate that their products meet legal requirements in the areas of animal health, animal welfare and food safety.The ACM started an exploratory investigation in August 2020 in response to objections from dairy farmers against the KoeMonitor. According to several dairy farmers, the KoeMonitor would impede their freedom of choice with respect to the production process. Agreements had allegedly been made to make the KoeMonitor compulsory for suppliers of dairy products. The ACM has now concluded that there is insufficient evidence of such agreements. The ACM has furthermore stated that, based on the information provided, there is no serious risk of the KoeMonitor giving rise to any appreciable restriction of competition in the dairy sector. The ACM therefore does not consider a further competition law investigation to be justified. The ACM has stated, however, that it is aware of the difficult situation in which many dairy farmers find themselves and calls on the parties involved in the KoeMonitor to discuss possible adjustments to the KoeMonitor. It is remarkable that in 2000 the NMa (the Netherlands Competition Authority; ACM’s predecessor) did take action against the comparable quality system Keten Kwaliteit Melk (“KKM”). The fact that ACM is now leaving its successor, KoeMonitor, alone for the time being does not mean that the last word has been said about it.

Update of ACM Guidelines on Sustainability Agreements

However, the approach of the Koemonitor fits in the new vision of the ACM that European competition law offers (more) room for sustainability agreements between competitors, as follows from this web report. The ACM plays a pioneering role within Europe in the discussion about the tension between sustainability and competition; see here. In January 2021, the ACM published a second draft of its Guidelines on Sustainability Agreements – Possibilities within Competition Law. The ACM also indicated earlier that it will not impose fines if companies and industry associations follow the Guidelines as closely as possible or consult with ACM and adjust their agreements where necessary. Whether the Dutch policy can count on support elsewhere in Europe will not become clear until later this year, when the Commission continues its evaluation of the rules on horizontal agreements between companies. In any case, it is clear that sustainability agreements will have to be repositioned in the Commission's competition policy in the coming years. Commissioner Verstager, for instance, recently reported that the current guidelines offer insufficient clarity on digitalisation and sustainability agreements.

Follow Maverick Advocaten on Twitter and LinkedIn

Contact details

Diederik Schrijvershof

T +31 20 238 20 03
M +31 6 81 364 318

Martijn van de Hel

T +31 20 238 20 02
M +31 6 21 210 853

Wouter Jans

T +31 20 238 20 06
M +31 6 46 666 347