European Union: Clarification On Relationship Between EU Common Agricultural Policy And Competition Policy (French Endive Cartel)

Last Updated: 17 May 2017
Article by Richard Burton

On 6 April 2017, Advocate General ("AG") Wahl of the Court of Justice of the European Union ("ECJ") issued an opinion on a preliminary reference from the French Supreme Court arising from the Endive cartel investigated by the French Competition Authority. In his opinion, the AG considers that agricultural producers' organisations and their associations may be held liable under EU competition law in specific circumstances.

The underlying case relates to a 2012 decision adopted by the French Competition Authority, in which it fined a number of endive producers' organisations and associations a total of € 4 million for their involvement in a price-fixing, output restriction and market-sharing cartel. The organisations and associations concerned appealed against the authority's decision, arguing that they had a responsibility, under EU law, to stabilise endive producer prices and to adjust production to demand. The French Court of Appeal upheld their argument, which was subsequently appealed before the French Supreme Court. The French Supreme Court stayed proceedings and requested guidance from the ECJ on, inter alia, the issue of how the objectives of the EU's Common Agricultural Policy ("CAP") can be reconciled with the objectives of EU competition policy.

The objectives of the CAP are different from those of EU competition law. While the CAP aims to actively address certain perceived failures in agricultural markets, the EU competition rules are premised on the objective of market liberalisation. Under Article 42 TFEU, the objectives of the CAP take precedence over the objectives of EU competition law. Hence, although agricultural producers' organisations ("POs") and their associations ("APOs") constitute forums for concerted action which would usually be considered problematic from a competition law perspective, they nevertheless escape the application of Article 101 TFEU in situations where the EU's common rules for agricultural markets provide for explicit derogations. These derogations are framed narrowly. Therefore, the question arises whether further derogations may follow implicitly from the POs/APOs' responsibility to adjust production to demand, to reduce the costs of production and to stabilise producer prices.

In his opinion, AG Wahl defends the view that actions taken by POs and APOs may escape the application of EU competition law where these actions: (i) relate to tasks specifically assigned to them; and (ii) are strictly necessary for the fulfilment of these tasks. This implies that the measures concerned must be adopted within the framework of the same PO or APO. In that case, the measure is comparable to an "internal" measure of a company or group of companies presenting itself on the market as a single economic entity. Such internal measures fall outside the scope of EU competition law.

In contrast, practices occurring (i) between different POs or APOs, (ii) between a PO/APO and other types of market operators, or (iii) within entities not responsible for marketing for their members are fully subject to EU competition law. These practices are considered to take place between economic entities which are supposed to be independent.

In his opinion, AG Wahl examines the alleged cartel on the French endive market in the light of the above principles. First, as regards the concertation on prices, he finds that a policy of fixing a minimum price between producers cannot escape the prohibition of Article 101(1) TFEU, whether that policy is determined between different POs/APOs or within the same PO/APO. In the AG's view, the fixing of a non-variable minimum price within the framework of POs/APOs cannot be justified given that their task is to negotiate, on behalf of their members, a single price with endive distributors that is applicable to all production and variable depending on marketing periods and the quality of the product concerned. If the POs/APOs negotiate a single, variable price for the products of their members, there is no need for these members to fix a minimum, non-variable price between them. According to the AG, such price fixing could only be conceived if the individual producers still had some powers in relation to the negotiation of the selling price of the products concerned (which, however, is not the case).

Second, as regards the concertation on the quantities placed on the market, AG Wahl takes the view that such concertation can escape the application of EU competition rules only if it takes place within the same PO/APO and is genuinely intended to regulate production to stabilise the prices of the products concerned.

Finally, as regards the exchange of strategic information, AG Wahl considers that the EU competition rules generally do not apply within the same PO/APO given that the tasks assigned to POs/APOs necessarily involve internal exchanges of strategic information. In contrast, exchanges of strategic information between different POs/APOs cannot be linked to their assigned tasks and are, therefore, subject to EU competition law.

The E") is expected to deliver its judgment in the next few months. The judgment is eagerly anticipated given that the issues involved are of great practical interest to the agricultural sector. As evidence of the importance of the case, the Grand Chamber of the ECJ is set to deliver the judgment. It is also noteworthy that the European Commission has submitted amicus curiae briefs to the French Supreme Court in the proceedings on the merits, which is rather exceptional (according to AG Wahl, this has happened only seventeen times in twelve years).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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