Joint Committee on Agriculture, Food and the Marine debate -
Wednesday, 10 Apr 2024

Antitrust Guidelines for Sustainability Agreements in Agriculture: Discussion

An Cathaoirleach

Before we begin, I remind members and witnesses to turn off their mobile phones.

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The purpose of the first session is to receive a briefing on the antitrust guidelines for sustainability agreements in agriculture. The committee will hear from Ms Henrieta Jany-Roskova, team leader, unit E1, governance of agrifood markets, Directorate-General, DG, for Agriculture and Rural Development at the European Commission, AGRI, and Ms Antigoni Tsakona, also from AGRI. They are very welcome. Their opening statement has been circulated to members. I will allow them five minutes to read that statement. We will then to proceed to a question and answer session.

Ms Henrieta Jany-Roskova

I thank the Chair. Good afternoon to the honourable members. I thank them for the invitation to today's technical meeting on the new exclusion from competition rules on sustainability initiatives – Article 210a of the Common Market organisation, CMO, regulation - and the recently adopted guidelines providing further clarifications and guidance. This exclusion has been introduced in the last reform of the CMO regulation by European co-legislators to boost sustainable agricultural production practices and enable co-operation among farmers and other actors within the agrifood supply chain to achieve more ambitious environmental standards.

European competition rules normally prohibit agreements between companies that restrict competition, such as agreements that lead to higher prices or lower quantities, including fixing of prices or quantities. However, the new exclusion under Article 210a of the CMO regulation excludes certain voluntary agreements in the agricultural sector from that prohibition when those agreements are indispensable to achieve sustainability standards going beyond what is mandatory at EU or national level.

The question now is who can benefit from this new exclusion. Farmers are at the core of the new exclusion but, as said previously, other operators necessary to achieve those more ambitious standards can also be part of the agreement, for example, companies supplying inputs for production, distributing, transporting, or packaging the product. Such companies may include retailers or processing companies. At the same time, this means that agreements without agricultural producers cannot benefit from this exclusion. In addition, the agreements must always relate to agricultural products, according to annexe 1 of the treaty. This means agricultural raw materials directly from farming or products with a low degree of processing, such as cheese, milk, vegetable oil, sugar, jams, preserved meat or similar products.

What objectives can be covered under the sustainability agreements to benefit from this new exclusion? The objectives are laid down in Article 210a of the CMO regulation and may involve climate change mitigation and adaptation measures, environmental protection measures, a reduction in pesticides or the use of antimicrobials and antibiotics, and animal health and welfare. However, agreements pursuing economic and social aspects of sustainability objectives, such as those purely directed towards a fair remuneration for farmers or the working conditions of farm workers, fall outside the scope of the exclusion because those objectives are not included in Article 210a of the CMO regulation.

In order to benefit from the exclusion, parties need to agree on the adoption of sustainability standards that are higher than what is mandatory at EU or national level because we need to avoid greenwashing becoming a justification to deviate from competition rules. To benefit from the exclusion, sustainability agreements can only include restrictions to competition that are indispensable, or necessary, in other words, to achieve the sustainability standard. In particular, if there are weaker restrictions of competition that would allow achievement of the sustainability goal pursued, they could be preferred to having stronger restrictions.

The guidelines detail how to assess in practice whether a given restriction of competition is indispensable. For instance, operators can agree on payments to producers to cover additional costs as well as monetary incentives for producers to take the risk of adopting a certain sustainability standard. There is no need to notify the sustainability agreements to the Commission or competition authorities but, due to the novel character of this exclusion, farmers and their associations may request opinions from the Commission on their sustainability agreements in order to obtain legal certainty. The Commission and the national competition authorities may review the agreements ex post in cases where the implementation of a sustainability agreement leads, among other outcomes, to unreasonable consumer prices or to the elimination of certain products from the market for which there is a significant consumer demand. The new exclusion from competition aims at reinforcing co-operation between actors in the whole supply chain, while ensuring that farmers get a fair economic return for their efforts to enhance sustainability of production beyond what is currently mandatory.

I thank members for their attention. I am here to answer their questions.

An Cathaoirleach

I read the statement in the office before I came to the meeting. I have to say that I cannot grasp it. I am a farmer and have been involved with Brussels for more years than I want to remember. What is the rationale behind doing this? The statement mentions boosting sustainability and enabling co-operation but subsequently states that the new exclusion will not give greater remuneration. I just do not get this.

Ms Henrieta Jany-Roskova

I will put it in a simpler way.

An Cathaoirleach

That would be a help.

Ms Henrieta Jany-Roskova

Under normal conditions, for example, it is not possible to have an agreement between several farmers and a processor where they agree for the farmers to implement additional animal welfare objectives and agree on a fixed price. For example, if a farmer needs to have bigger stables, allow for animals to graze outside, carry out additional checks for animal welfare or reduce the use of antibiotics for the animals, this comes with a risk that there may be a reduction in the quantity produced. This also comes with a risk that there may be additional costs for complying with this more ambitious environmental or animal welfare and animal health standard, going beyond what is mandated by Union or Irish law. The farmer can agree with a retailer or processor to have a higher price if this is necessary to achieve this higher objective. Under normal conditions, these are hard restrictions to competition law and the farmer would not be allowed to do this. The idea was, in addition to the public funding from the CAP budget or from the national resources for additional sustainability initiatives, to have a market-based approach, allowing the market to pay for those additional sustainability efforts undertaken by the farmers.

Senator Lynn Boylan

One of the things we know is that farmers are really struggling at the moment to get a fair price for their products. Equally, households are really struggling with the prices they are paying at the supermarkets. My understanding of this is that sustainability agreements are one way to try to get around those large supermarkets that are setting the price and getting a premium, so that if a farmer wants to go a bit further with animal welfare or sustainability, they can then agree a price. My understanding is that this is a positive for both farmers and consumers who want to buy products that they know are being made with the highest sustainability or animal welfare practices.

One concern I have is how binding this is. It sounds great on paper but are there actually teeth to this agreement such that it is legally binding when somebody goes into it? Will human rights or environmental impact assessments be done on trade agreements or are trade agreements separate from this? Is this purely within the European Union and agreements between farmers and shops or suppliers, or will it also be wider than the European Union, with sustainability agreements in future trade agreements? That first question is about how binding it is.

My second question is on the public consultation that the Commission carried out. How much outreach has the EU done with regard to reaching out to the non-agriculture industry and non-corporate stakeholders? From the public consultation, it looks like many of the very big players made submissions to it. Was effort put in to try to reach out to the ones who I assume are trying to help with this type of process, who are not the big players but the small players, the farmers and consumers?

Ms Henrieta Jany-Roskova

I thank the Senator for the question and explanation. This is a tool for the market actors, for farmers to co-operate with other actors, such as processors or retail. It is not binding on the basis of a free trade agreement. These guidelines provide an explanation of how to design sustainability agreements between private operators in order to comply with the new exclusions from competition rules.

The second question was on the public consultation. We reached out to different actors. We have carried out two public consultations. One was on the basis of a questionnaire that was published and open to anybody who wanted to participate. We have reached out to ministers for agriculture and asked them to disseminate this. We have reached out to competition authorities and we also invited them to support us with the dissemination of this survey. We have also reached out to the various associations to support these outreach activities. In addition, in the context of the Commission CAP network, we also disseminated information concerning the public consultation through the thematic working group, which discussed sustainability agreements. We have reached out to farmers and farm associations. We have also been in contact with consumer associations. Consumers could, on the basis of the information in social media, contribute to this consultation. Moreover, we had a second round of consultations on the basis of draft guidelines explaining the exclusion and we used tools similar to those I have mentioned. After receiving the feedback for the public consultation, we also organised a conference in order to discuss the most important submissions and questions.

Senator Lynn Boylan

Ms Jany-Roskova says they are guidelines. If a group of farmers in a region decides to come together and says they want to have one of these sustainability agreements and will do certain things from the list Ms Jany-Roskova has with the examples of objectives that would be covered. They can then go to another market actor, whether a shop or supplier, but if it is not binding, who is policing or enforcing this? If farmers come collectively together, is it just based on trust that all the farmers will do what they say they will do and the shop will give them the price it says it will give them, if it is just based on guidelines? I do not understand how it will be enforced other than just based on goodwill.

Ms Henrieta Jany-Roskova

The agreements are contracts between the different market actors. Those would be enforced in the way that contracts are enforced, depending on the national system.

Moreover, one can benefit from this exclusion only if, for example, there is an agreement between the farmer and the shop that if the farmer does this, the shop will pay the farmer an additional premium or a certain price. If the shop does not do this, then, basically, the whole agreement collapses and, of course, the farmers may complain to the national competition authority. The nature of the agreement under Article 101 of the treaty, under competition rules, has been also dealt with and analysed with the European Court of Justice. There is case law and this is to be considered.

Deputy Johnny Mythen

I have some brief questions. How will the greenwashing be avoided? We can see where people can exploit prices here under the regime. If an agreement breaks down, whom does one go to? Who is responsible? What power do the national competition authorities really have? Do they have teeth? The rules are coming across as guidelines. Are they binding?

Ms Henrieta Jany-Roskova

No. The guidelines explain an exclusion. The agreements are voluntary. The guidelines are binding on the Commission, so if the Commission were to receive, for example, a complaint from a competitor, if there were such an agreement in place, the Commission would assess the complaint on the basis of the guidelines. Also, if the Commission were to assess a request for an opinion on a given agreement, the Commission would be bound by those guidelines. Those guidelines have been requested by the European co-legislators, by the European Parliament, when this new exclusion has been introduced. The reason behind that was that it is a new exclusion and farmers and other operators need explanations as to how to apply it to have some sort of guide to how the agreements can be designed in order to comply with this. This is purely voluntary, however, and that is why I would call it a market-based approach by the market participants.

Deputy Johnny Mythen

How, in Ms Jany-Roskova's opinion, can the greenwashing be avoided?

Ms Henrieta Jany-Roskova

This is why there are certain rules to this. Basically, you need to go beyond what is mandatory at EU or national level. In the absence, of course, of mandatory standards, everything that goes beyond is considered to be mandatory. At the same time, however, you need to prove that there is actually a need to co-operate so that this sustainability standard, this sustainability objective, in the sustainability agreement would not be achieved individually. You also need to prove that the restriction of competition is indispensable. This means that, for example, if you are going only a bit above what is mandatory, stricter restrictions to competition would be doubtful to pass the indispensability test.

Deputy Johnny Mythen

As Lynn said, how will this actually be policed? If, say, two rogue producers decided to put up standards but the standards were not really put up and they were charging extra for their product, is there any way-----

Ms Henrieta Jany-Roskova

It is a very interesting question. It is the same as any other contract. There are national systems in place as to how to police the compliance with certain contracts. If I do not pay in time for my delivery, there are certain rules that can be followed by the purchaser and by the supplier to require me to comply with the contract. This would be the same as for this agreement. In addition to that, there is a possibility, of course, to complain to other national competition authorities and, if this is of a European dimension, to the Commission if there would be distortions of competition.

Senator Lynn Boylan

I do not know if anyone else wants to come in. Please forgive me if this comes across as a stupid question. I understand the contract. Contract is contract law, but then surely it is binding if it is contract law. Ms Jany-Roskova is saying that if this is inter-EU and not just Irish-based, that is, if there are other member states involved, then it becomes an EU Commission problem. If, however, she is saying it is not binding, how is it an EU Commission problem?

Ms Henrieta Jany-Roskova

I understand that I was not clear enough, and I apologise for that. What is not binding are the guidelines. They are binding only on the Commission but they provide guidance to the operators. What is binding is the agreement between the two or three or several market actors. This is part of normal contractual law between market actors.

Senator Lynn Boylan

That is a bit clearer now. Is there other activity going on at the European Commission level around antitrust and anticompetitive practices? The global food market at the moment is a broken system in that it is concentrated in large monopolies. In parallel to this, then, is there other work ongoing at the European Commission level looking at anticompetitive practices within the food sector, something similar to the Facebook case? Is that sort of work happening at an EU level?

My other point goes back to those trade agreements on sustainability. Will the same guidelines apply to actors outside of the EU in respect of sustainability practices? We do not want the problem of cheap goods coming in from outside of the EU if farmers and so on are going into agreements here and then the market is flooded with cheaper products. What sort of protection measures are put in place to prevent that happening?

Ms Henrieta Jany-Roskova

Basically, the retailers or the shops could have the same agreement with third-country operators but, of course, the sustainability standard that would need to be respected is that of the EU or of the member state where the goods are delivered because, exactly as the Senator said, it is not possible that operators from the third countries would benefit from the sustainability agreements following lower standards than the ones mandated by the Union or by an EU member state.

Investigations are dealt with in the Directorate-General for Competition. I cannot comment within the remit of my work on any ongoing investigation because I am not aware of those, but in the past, there have been investigations, for example, into retail alliances. However, my colleagues from DG Competition have not found any evidence that the rules have not been respected. This is why those investigations have been closed. This is just one example.

I am aware that several national competition authorities - for example, the Swedish competition authority and the Austrian competition authority - have conducted sector inquiries in the context of the cost-of-living crisis to see the reasons for the increases in prices.

An Cathaoirleach

Is Senator Boylan okay with that?

Senator Lynn Boylan

Yes. It is as clear as mud.

An Cathaoirleach

I suppose I have a better grasp than I had at the start. I thank Ms Jany-Roskova. She is saying that if people take on extra sustainability measures, they will be allowed to make an agreement with a processor to get an extra return to cover their costs. That is what she is saying about primary producers. Previously they would have been debarred by competition law from doing that, but now they are getting an exemption.

Ms Henrieta Jany-Roskova

Exactly. However, Ireland does not have many recognised producer organisations. There have already been exclusions for competition law for recognised producer organisations in particular if the farmers have concentrated supply through this recognised producer organisation. However, with this new exclusion even someone who is not a farmer, does not have a recognised producer organisation and is not concentrating their supply through this recognised producer organisation may enter into a collective agreement with a processor without fear of being subject to investigation by the competition authorities.

Deputy Michael Fitzmaurice

I thank Ms Jany-Roskova for coming. As she pointed out, we have some producer groups in Ireland. Why have producer groups in Ireland not been successful? Particularly in the beef sector, the groups that they have gone to would not recognise them or work with them. Obviously, a producer group would be more interested in someone who had 1,000 lambs than someone who had one lamb. It has not been accepted or it has not worked in this country. Why is that the case?

Deputy Claire Kerrane took the Chair.

Ms Henrieta Jany-Roskova

This is a very interesting question and we are trying to understand it. Very often there are more recognised producer organisations in the fruit and vegetable sector because in the past there have been sectoral intervention programmes supported by the CAP and thus financial incentives have been provided to join a producer organisation. This is less so in other sectors, as the Deputy mentioned. At European level, we have some conditions when it comes to recognition. The responsibility for recognition of the producer organisations is at the national level. We are currently reflecting how the role of producer organisations can be further strengthened and how the recognition can be simplified in order to provide more incentives for the co-operation of farmers with producer groups in order to improve farmers' bargaining position in the supply chain.

Deputy Michael Fitzmaurice

Ms Jany-Roskova's presentation stated:

What objectives may be covered under the sustainability agreements to benefit from the exclusion? The objectives are laid down in Article 210a and involve: climate change mitigation and adaptation, as well as environmental protection; reduction of pesticide use and antimicrobial resistance; and animal health and welfare.

Some of the stuff done in Europe does not take into account the type of landscape where people produce food in all our countries. The difference between land in Germany and land in parts of Ireland is like chalk and cheese. I come from a part of the west of Ireland where there is a thing called rushes. If a farmer is not using sprays to try to keep them at bay, their land will go out of control because our land quality is not good. With a lot of these sustainability programmes coming in, some of those people feel they are nearly pushed out of the system by EU directives or legislation.

Ms Henrieta Jany-Roskova

I can only comment on the sustainability objectives under Article 210a. Those have been chosen by the co-legislators.

Deputy Michael Fitzmaurice

By whom?

Ms Henrieta Jany-Roskova

By the co-legislators, specifically the European Parliament. This article has not been introduced by the Commission. During the last reform of the CAP, the Parliament proposed adding this article and decided on the objectives. This is why it is difficult for me to respond to the Deputy's questions. In the guidelines we explain what kinds of measures could be considered to fall within those environmental objectives.

It also includes improving resistance of soil to erosion and measures improving soil composition, so those objectives are relatively flexible to take into account the different features in different member states. Farmers, of course, know best what is good for their soil and their landscape.

Deputy Michael Fitzmaurice

On the sustainability side, Ms Jany-Roskova is aware of the nature restoration law, which is thankfully on hold at the moment in Brussels. If a farmer in the west of Ireland was producing beef on a peat-type soil that under the nature restoration law should be rewetted, would that be viewed as not sustainable and would that farmer be at a disadvantage under this?

Ms Henrieta Jany-Roskova

I apologise, I did not fully understand the link between the nature restoration law and the sustainability agreement. What is mandatory for an individual farmer cannot be considered as sufficiently ambitious to benefit from the sustainability exclusion. However - and I apologise for my lack of in-depth knowledge of the nature restoration law at this juncture - when it comes to laws that are mandatory and binding on the member states this is not considered to be hindering the fact that there are agreements that go beyond standards that would be binding on individual farmers. If there are no binding standards on individual farmers then everything beyond zero is better than nothing. One would need to see, on the basis of a case-by-case assessment, whether this co-operation and this agreement is necessary, at the individual level, and whether the restrictions to competition are necessary to achieve this objective.

Deputy Michael Fitzmaurice

Ms Jany-Roskova talked about the MEPs. Is it not the Commission that does up all of this first, and then puts it to the Parliament?

Ms Henrieta Jany-Roskova

The Deputy is right. Under normal conditions the Commission proposes regulation. In this case the Commission, in the complex of the reform of the Common Agricultural Policy, proposed changes to the common agricultural regulation. This was specifically to take out the sectoral interventions from the Common Market organisation regulation and to introduce them on a different legal basis - the strategic plan regulation. However, this Parliament has the opportunity when the Commission submits a proposal to introduce amendments, and through those amendments, Article 210a has been introduced by the European Parliament and accepted by the Council in the trilogue.

Deputy Michael Fitzmaurice

I also notice, as part of these undesignated areas, there would be more restrictions under this. Is that correct?

Ms Henrieta Jany-Roskova

I apologise, I did not fully understand.

Deputy Michael Fitzmaurice

There are certain areas in our country designated under environmental law, and there would be more regulation on them in terms of pesticides. SACs are one type of designation. An NHA is another type of designation. Am I correct to say there would be more regulation with regard to pesticides and use of those lands?

Ms Henrieta Jany-Roskova

Yes. The question is what this regulation means, and whether it is binding at the level of the farmers, or binding on the regional authorities. If it is a standard, if it is a designation-----

Deputy Michael Fitzmaurice

I apologise for interrupting. In Ireland, we happen to own the land, thank God, but it might be moving away. It is different from most of Europe in that we have private property rights. All the farmers own their land, but it is designated because of things like the habitats directive and the nature restoration law is another piece of legislation coming from Europe. However, regulation is being put on it. When you read the document Ms Jany-Roskova is talking about it states clearly from my reading, but I am open to correction, that it would put more restrictions on designated areas in terms of the use of it especially in terms of pesticides.

Ms Henrieta Jany-Roskova

If a certain standard is imposed on the farmer using this specific land, then you would indeed need to have a more ambitious sustainability agreement than maybe in other parts.

Deputy Michael Fitzmaurice

I have a final question and I thank Ms Jany-Roskova for her time. In Ireland at the moment a new sustainable agreement is being done. The European Commission has given the go ahead. It is for grass-fed beef. It is coming in as a new offering. There will be certain restrictions. I cannot think of the name of the group, but it is where farmers have agreements with the co-ops. It would be a better environmental standard overseen by Bord Bia. Grass-fed beef is the name we have on it, and the EU has given the go ahead. A farmer might be doing something special or extra and our local body, Bord Bia, will be over it. The farmer might be doing something to produce an animal under a certain spec. Ireland has a lot of grass-fed beef and not as much meal fed. Would Ms Jany-Roskova expect that those farmers would be better rewarded than someone who is not doing that? The producers group is the name I was trying to think of. Ireland has a grass-fed producers group and a recognition. Would she imagine that beef would be more attractive in Europe if it has more sustainability and more terms and conditions for rearing it?

Ms Henrieta Jany-Roskova

It is difficult for me to judge whether it would be more attractive.

You would need to do a market study to understand the consumer demand. As to whether you could have a sustainability agreement for that purpose, we had discussions with some stakeholders about putting such initiatives forward. When allowing the raising of animals, you would need to demonstrate animal welfare and whether the standards would be legally binding, that is, mandatory. We must also consider the fact that standards such as those for organic production are not mandatory. They are voluntary production methods so the standards are not considered mandatory at EU or national level, although you need to produce according to certain rules. I do not know what the current situation is. This is something that would require more in-depth assessment. To determine whether this would be more beneficial for that purpose, one would need to carry out a market study to understand demand at the level of the consumer and whether consumers are willing to pay more in such a situation.

Deputy Michael Fitzmaurice

I thank Ms Jany-Roskova for her time.

An Cathaoirleach Gníomhach (Deputy Claire Kerrane)

If there is no one else to contribute, I will thank the witnesses very much for their time. On behalf of the committee, I thank them for their engagement this evening. We will suspend proceedings to allow the witnesses to exit and the witnesses for the next session to take their seats.

Ms Henrieta Jany-Roskova

I thank the members for their interest.

Sitting suspended at 6.32 p.m. and resumed at 6.50 p.m.