On 22 April 2020, the European Commission ("Commission") announced plans to adopt an exceptional derogation from the EU competition rules for the milk, flowers and potatoes sectors based on Article 222 of Regulation 1308/2013 establishing a common organisation of the markets in agricultural products (the "CMO Regulation"). This forms part of the Commission’s response to the Covid-19 outbreak.
The EU competition rules found in Articles 101 to 106 TFEU and their implementing provisions normally apply, pursuant to Article 206 of the CMO Regulation, to agreements, decisions and practices in relation to the production of, or trade in, agricultural products.
However, Article 222 of the CMO Regulation enables the Commission to adopt implementing acts to disapply Article 101 TFEU from agreements and decisions of recognised producer organisations, their associations and recognised interbranch organisations in any of the agricultural sectors covered by the CMO Regulation, provided that the following conditions are met:
- there is a severe imbalance in the market;
- any agreements and decisions taken pursuant to that provision must not undermine the proper functioning of the internal market;
- the conduct is strictly aimed at stabilising the sector concerned;
- the conduct falls under one or more of the following categories: market withdrawal or free distribution of products; transformation and processing; storage by private operators; joint promotion measures; agreements on quality requirements; joint purchasing of inputs necessary to combat the spread of pests and diseases in animals and plants or of inputs necessary to address the effects of natural disasters; temporary planning of production taking into account the specific nature of the production cycle; and
- the Commission has already adopted other exceptional measures under Article 219 to 221 of the CMO Regulation or utilised public intervention or private storage aid tools.
The Commission has used Article 222 of the CMO Regulation in the past: in March 2016, to allow producer organisations, inter-branch organisations and cooperatives in the dairy sector to enter into voluntary agreements to limit production.
The Covid-19 derogation
On 22 April 2020, the Commission announced that it would allow the milk, flowers and potatoes sectors to collectively take measures to stabilize the market in the context of the current sanitary crisis triggered by the Covid-19 outbreak.
The exceptional derogation from EU competition rules will enable the milk producers to collectively plan milk production and flowers and potatoes providers to withdraw products from the market. Private operators will also be authorized to store such commodities.
The agreements and decisions that will result from such derogation measures will only be valid for a maximum period of six months.
The Commission stated that these measures will lead to a decrease of available supply on the market and rebalance the market in the long-term. The Commission also declared that it will closely monitor consumer price movements during that period to determine whether the measures could have adverse effects.
The final adoption of the derogation measures took place on 30 April, following a period of consultation with the Member States, and will come into force in the first week of May.
This exceptional derogation from the EU competition rules for the milk, flowers and potatoes sectors is part of a package of exceptional measures to support the agri-food sector during the coronavirus outbreak. The other exceptional measures proposed include granting private storage aid for other dairy products such as skimmed milk powder, butter and cheese as well as meat products. The scheme will also implement measures for the flexibility of the markets for fruit, vegetables, wine, olive oil and other markets.