In response to the ongoing COVID-19 pandemic, the European Commission (“EC”) is taking steps to stabilise the most affected sectors of the economy. As part of its efforts, the EC has announced its support for the agricultural and food sectors which are severely affected by the pandemic. This includes an exceptional derogation from the EU competition rules for certain sub-sectors.

Measures to Support the Agri-Food Sector

On 2 April 2020, the EC announced the adoption of a set of measures to support farmers, rural areas, and EU countries by increasing flexibility in the use of European structural investment funds (“ESIF”). The measures include (a) enhanced flexibility in the use of financial instruments in the form of loans or guarantees at favourable conditions; (b) the reallocation of funds for rural development programmes (“RDPs”); (c) postponement for the submission of annual reports for RDPs; and (d) the fact that no amendments are required to EU partnership agreements to modify RDPs.

The EC also proposed certain common agricultural policy (“CAP”) instruments, including (a) the extension of the deadline for CAP payment applications (from 15 May to 15 June 2020); (b) higher advances of payments to farmers as of mid-October, i.e. direct payments (from 50% to 70%) and rural development payments (from 75% to 85%); and (c) a reduction of physical on-the-spot checks and leeway for timing requirements to reduce physical contact between farmers and inspectors monitoring eligibility requirements.

Further, on 4 May 2020, the EC adopted exceptional measures to provide additional support to the agricultural and food sectors. Next to measures relating to private storage aid for certain dairy and meat products, and the introduction of flexibility for market support programmes for various agricultural goods, the EC is also granting a temporary derogation from EU competition rules for the milk, flowers and potatoes sectors.

Exceptional Derogation From EU Competition Rules for the Milk, Flowers and Potatoes Sectors

Pursuant to Article 222 of Regulation 1308/2013 establishing a common organization of the markets in agricultural products (“CMO Regulation”), the EC will authorise exceptional derogations from EU competition rules for the milk, live plants and flowers, and potatoes sectors.

Article 222 of the CMO Regulation enables the EC during periods of severe market imbalance to adopt implementing acts halting the application of Article 101(1) TFEU to agreements and decisions of recognised producer organisations, their associations and recognised interbank organisations in any of the agricultural sectors covered by the CMO Regulation. Agreements and decisions that benefit from such derogations must not undermine the proper functioning of the EU Internal Market, must be strictly aimed at stabilising the sector concerned, and must fall into a set of categories specified in the CMO Regulation, which include measures relating to the joint processing, production, distribution, storage and/or withdrawal of products.

The exceptional derogation now granted by the EC enables producers of milk, flowers and potatoes to take certain joint actions to stabilise the market, and to rebalance it in the long-term. For a maximum duration of six months, milk producers may collectively plan milk production, whereas producers of flowers and potatoes may jointly decide to withdraw products from the market to mitigate oversupply. For the same reason, private operators may also store the affected products.

Specifically, the EC adopted:

Concluding Remarks

These measures aimed at supporting the agri-food sector come alongside a wider set of measures adopted by the EC to respond to the impact of the COVID-19 pandemic. They follow the earlier adoption of a temporary state aid framework, which enables EU Member States to grant aid to companies affected by the COVID-19 outbreak in order to ensure their continuing viability.

The EC stated that it will closely monitor “consumer price movements” and “any possible partitioning of the internal market” in order to avoid any adverse effects in the market resulting from these derogations. It is presently of the view that these derogations will not undermine the proper functioning of the Internal Market; in particular, the EC believes they will not lead to the partitioning of markets, discrimination based on nationality or price fixing.

 

The authors would like to thank Konstantina Sideri, legal trainee in the Brussels office, for her support in drafting this post.