Sustainable Agricultural Agreements Excluded from the EU Competition Rules – Draft Guidelines Published

In the context of the common agricultural policy reform for 2023-2027, the European Parliament and the Council of the European Union adopted in 2021 a new exclusion from the EU competition rules for agricultural products.

The Commission has now published a draft proposal for sustainability agreements in the field of agriculture (‘Guidelines’) and at the same time launched a public consultation inviting comments.

The Guidelines aim to provide guidance on how operators in the agri-food sector can design joint sustainability agreements to achieve indispensable sustainability standards and still be excluded from the general prohibition on restrictive agreements in Article 101 of the Treaty on the Functioning of the European Union (‘TFEU’).

Clarifications in the draft Guidelines:

• The exclusion only concerns agreements concluded by agricultural producers, either between themselves or with other actors active along the agri-food chain, such as companies supplying inputs for production, distribution, transport or packaging of the product.
• The scope of the sustainability objectives that can be pursued with the agreements can be divided in three categories: (i) environmental protection; (ii) reduction of pesticide use and antimicrobial resistance; and (iii) animal health and welfare.
• In order to benefit from the exclusion, parties need to agree on the adoption of a sustainability standard that is higher than what is mandatory under EU or national law.
• Parties to a sustainability agreement need to assess whether any restrictions to competition stemming from their agreement is indispensable to achieving the sustainability standard. The parties shall choose the option that is the least restrictive to competition.

The Guidelines clarify that the Commission and the national competition authorities have the powers to prohibit or require amendments of the sustainability agreements if this is necessary in order to prevent competition from being excluded or if it is considered that the objectives of the Common Agricultural Policy are jeopardised.

Next steps

Following the consultation and analysis of the comments the Commission aims to have the Guidelines in place by 8 December 2023.

In addition, the Commission plans to hold a workshop with participants to this public consultation in June 2023 to further discuss the draft text and address any pending issues.

Will the Guidance be guiding?

Meeting the demand for sustainable products and reducing food retailers and wholesalers’ environmental impact of their own operations is an essential part in the green transition. Cooperation among different actors in the food supply chain may at times be necessary.

Similar as to the revised guidelines on the application of Article 101 TFEU to horisontal agreements and their new chapter on sustainability agreements, there is a great call for the upcoming Guidelines to provide the necessary legal certainty for businesses cooperation. There is an explicit request for examples of agreements which would fall under the exemptions as well as clear definitions of key concepts. Let’s hope that the contributions during the consultation provide the necessary input and that the EU institutions manage to deliver the expected guidance. The dance between industry and policy makers and/or enforcers must be smooth and score high points in order to enable the crucial green transition.