AGREEMENTS AIMED AT LEVERAGING BARGAINING POWER OF FARMERS AND THEIR JUSTIFIABILITY UNDER ARTICLE 101(1) AND (3)TFEU
Name: Pedro Marques
Email: Pgilmarques@hotmail.com Student no. 12826391
Master Thesis
University of Amsterdam
International and European Law: European Competition Law and Regulation Supervisor: dr. K. J. Cseres
2 Abstract
Farmers have low bargaining power against retailers or buyers. In order to leverage such power, they often come together as, e. g., producers’ organisations. This strategy, in spite of mitigating the problem of lack of bargaining power, may raise problems in the light of competition law (Article 101(1) TFEU). In some cases, these agreements are exempted under Common Agricultural Policy derogations. However, when they do not fall under a Common Agricultural Policy derogation, is it possible to justify these agreements under Articles 101(1) and (3) TFEU? Having in mind that these agreements may results in several benefits, such as improving farmers living conditions, generating economies of scale, solving free-riding and hold-up problems, this thesis tries to find and to explain some approaches for justifying these agreements under Articles 101(1) and (3) TFEU.
3 Table of Contents
1. Introduction ... 5
2. Unfair Trade Practices and Directive no. 2019/633 ... 6
3. The European Union agricultural sector exceptionalism ... 8
4. Agreements between farmers under Article 101(1) TFEU ... 11
4. 1. Justifying agreements between farmers under Article 101(1) TFEU ... 11
4. 2. Agreements that do not restrict competition by effect or object ... 11
4. 3. The appreciability condition... 13
4. 4. The collective bargaining case law ... 14
5. Agreements between farmers under Article 101(3) TFEU ... 16
5.1. Justifying these agreements under Article 101 (3) TFEU ... 16
5.2. First requirement: the agreement results in efficiency gains ... 17
5.2.1. Economic benefits versus non-economic benefits ... 17
5.2.2. Economic benefits ... 18
5.2.3. Non-economic benefits ... 23
5.2.4. Critiques to a non-economic approach ... 24
5.2.5. Relevance of other provisions of the Treaty ... 26
5.2.6. The value of ‘fairness’ concerns under a broad economic approach ... 28
5.2.7. Willingness-to-pay surveys and the example of the ‘Chicken-of-tomorrow’ case 30 5.2.8. Conclusions regarding the first requirement of Article 101(3) TFEU ... 32
5.3. Second requirement: a fair share of the resulting benefits is passed on to consumers ... 33
5.4. Third requirement: the agreements must be indispensable to the attainment of the objectives ... 36
5.5. Fourth requirement: the agreement does not afford the possibility of eliminating competition ... 37
4
Bibliography ... 40
Official publications ... 44
Case law ... 45
Decisions of the Commission ... 46
5 1. Introduction
The farming business is highly atomistic.1 This means that there is a very high number of farmers with low market shares. They usually have a small-scale and work on atomised lands. Their business partners, to whom farmers sell the products they produce, are strong and concentrated retailers with high buying power.2 It could be said that there is a quasi-monopsony power. On the top of that, a trend of increasing market concentration of retailers in most of the Member States has been shown by studies.3
Due to this fact, farmers often find themselves in a position of bargaining disadvantage, and are unable to uphold their interests during the negotiations with their counterparts. Consequently, they often end up facing poor living standards.4 In fact, studies have shown that this market structure has led to an unequal distribution of welfare along the value chain.5
In order to gain bargaining power, farmers often engage in cooperation strategies. Usually, they come together and form producers’ organisations. In this way, they benefit from horizontal integration and joint selling, which result “in stronger bargaining, or at
least in an improved ability to resist to counterparts’ negotiation power”,6 that ultimately enables them to improve their own welfare.
However, some forms of collective action may raise problems from a competition law viewpoint, and fall within Article 101(1) of the Treaty on the Functioning of the European Union (‘TFEU’). My thesis will focus on how can these agreements escape from the scope of Article 101(1) TFEU or be justified under Article 101(3) TFEU.
1 European Competition Network, Report on competition law enforcement and market monitoring activities
by European competition authorities in the food sector (2012), 10.
2 Philippe Chauve, Antonia Parera and An Renckens, ‘Agriculture, Food and Competition Law: Moving
the Borders’ (2015) 5 Journal of European Competition Law & Practice 304, 304.
3 Philippe Chauve and An Renckens, ‘The European Food Sector: Are Large Retailers a Competition
Problem?’ (2015) 6 Journal of European Competition Law & Practice 513, 514-515; European Commission, The economic impact of modern retail on choice and innovation in the EU food sector: Final Report (2014).
4 Philippe Chauve, Antonia Parera and An Renckens, ‘Agriculture, Food and Competition Law: Moving
the Borders’ (2015) 5 Journal of European Competition Law & Practice 304, 309.
5 Beatriz Velázquez, Bruno Buffaria and European Commission, ‘About farmers’ bargaining power within
the new CAP’ (2017) 16 Agricultural and Food Economics 1, 3.
6 Alessandro Sorrentino, Carlo Russo and Luca Cacchiarelli, ‘Market power and bargaining power in the
6 The Research Question of this thesis is the following: can agreements between farmers aimed at leveraging their bargaining power be justified under Article 101(1) and (3) TFEU?
Even though my study will mostly follow a positive legal approach, I will have to undertake an economic analysis of cooperation agreements between farmers, in order to assess whether they can fulfil the requirements of Article 101(3) TFEU. Moreover, I will make some normative remarks regarding the relevance of non-economic concerns under competition law. My analysis will focus on the most common type of agreements between farmers: producers’ organisations.
Regarding the thesis structure, I will start by explaining why I think that Directive no. 2019/633 is not an adequate tool to address the problem of lack of bargaining power of farmers. This is only a preliminary question, but I believe that I have to clarify it before starting to answer the Research Question. Secondly, I will explain the Common Agricultural Policy (‘CAP’) derogations. Thirdly, I will outline some situations where these agreements do not fall within the scope of Article 101(1). Fourthly, I will analyse whether these agreements can be justified under Article 101(3) TFEU. This latter part is the most important of my thesis – the core part.
The importance of answering this Research Question is linked to the significance of the agricultural sector: since this sector plays a key role for the whole society, it is important to understand whether farmers are allowed to take their own measures to change a market structure and an unbalanced business relationship that are not optimal from an economic and fairness viewpoint.
2. Unfair Trade Practices and Directive no. 2019/633
It might be argued that the problem of the unbalanced relationship between farmers and retailers is already adequately addressed through other means.
Some national legislations, such as Portuguese Decree-Law no. 19/2012 of 8 May7 and the French Commercial Code8, prohibit the practice of Abuse of Economic Dependence. Furthermore, Directive no. 2019/633 on unfair trading practices in business-to-business relationships in the agricultural and food supply chain has been recently
7 Article 12 of the Decree-Law no. 19/2012 of 8 May. 8 Article L. 420-2 of the French Commercial Code.
7 issued. Are these tools sufficient to address the problem of the unbalanced relationship between farmers and retailers? If the answer is affirmative, perhaps we should not try to find a solution under competition law.
The adoption of Directive no. 2019/633 appears to be quite relevant.9 This Directive aims to solve the problem of “significant imbalances in bargaining power between
suppliers and buyers of agricultural and food products”, which “are likely to lead to unfair trading practices”.10 This Directive assumes that those “unfair trading practices
are likely to have a negative impact on the living standards of the agricultural community”, and thus seeks to avoid them.11
Directive no. 2019/633 provides that Member States have to ensure that some practices against farmers, such as unilateral modifications to terms of supply agreements, cancellation of orders of perishable goods with a short notice and threats of carrying out commercial retaliations are prohibited under their national law.12
European law could also provide a general prohibition of Abuse of Economic Dependence. This provision would prohibit an undertaking from abusing of its position of economic strength against another one.
However, farmers are highly dependent on retailers.13 Their turnover often comes from a sole buyer. Having this in mind, I believe that farmers do not have incentives to file a complaint for unfair trade practices against retailers, since they probably fear that such action would damage a business relationship on which they depend. Therefore, I think that just penalising unfair trade practices is not enough to solve the problem of lack of bargaining power. Nevertheless, it can provide an additional bargaining power if farmers are already significantly aggregated.
In conclusion, since Directive no. 2019/633 does not provide the necessary instruments to leverage the position of farmers vis-à-vis retailers, there is still a need to assess whether the concerned agreements can be justified under Articles 101(1) and 101(3) TFEU.
9 Directive (EU) no. 2019/633 of the European Parliament and of the Council [2019] OJ L 111. 10 Recital 1 of Directive no. 2019/633.
11 Recital 7 of Directive no. 2019/633. 12 Article 3(1) of Directive no. 2019/633.
13 OECD, Supermarkets and the Meat Supply Chain: The Economic Impact of Food Retail on Farmers,
Processors and Consumers: The Economic Impact of Food Retail on Farmers, Processors and Consumers (OECD Publishing, 2006), 12.
8
3. The European Union agricultural sector exceptionalism
The European Union agricultural sector is subject to some legal specificities. I will now briefly outline them.
The European agricultural general framework is established by Articles 38 to 44 TFEU. Article 39 TFEU sets out the objectives of CAP: increasing agricultural productivity, ensuring a fair standard of living for the agricultural community, stabilising markets, assuring supplies and ensuring reasonable prices for consumers. Article 42 TFEU prescribes that the extent of the application of competition rules to the agricultural sector shall be determined by the European legislator within the framework of Article 43(2) TFEU, and taking into account the CAP objectives.14 The extent of the application of competition law has been established by Regulations nos. 1184/200615 and 1308/2018.16
The Court of Justice stated, in Milk Marque, that the agricultural sector is not a competition-free zone and that maintenance of effective competition is one of the objectives of the CAP.17 Articles 1 of Regulation no. 1184/2006 and 206 of Regulation no. 1308/2013 also prescribe that competition rules apply to the production and trade of agricultural products. Therefore, competition rules, such as Article 101(1) TFEU, apply to the agricultural sector.
However, the European Union framework provides certain derogations that allow farmers to engage in some forms of cooperation that would otherwise be prohibited under competition law. The underlying rational is to leverage farmers bargaining power. In Recitals 128 and 139 of Regulation no. 1308/201318, it is said that bargaining power of dairy farmers, beef and veal and olive oil producers should be enhanced in order to ensure
14 European Commission, An overview of European competition rules applying in the agricultural sector
(2016).
15 Council Regulation (EC) no. 1184/2006 applying certain rules of competition to the production of, and
trade in, agricultural products [2006] OJ L 214.
16 Richard Whish and David Bailey, Competition Law (9th edn, Oxford University Press, 2018), 995-996. 17 Case C-137/00, Milk Marque and National Farmers' Union [2003], ECLI:EU:C:2003:429, paras 31 and
61.
18 European Parliament and Council Regulation (EU) no. 1308/2013 establishing a common organisation
9 a viable development of production, fair standards of living and a fairer distribution of added value along the value chain.
There are two categories of CAP derogations: the general and the specific derogations. While the former apply to all the agricultural sectors, the latter only apply to certain specific sectors.
Article 2 of Regulation no. 1184/2006 states that Article 101(1) TFEU does not apply to agreements, decisions or practices that are part of the national market organisation. However, this general derogation has become obsolete due to the introduction of the common market organisation at European level.19
Article 209 of Regulation no. 1308/2018 provides two further CAP general derogations. They apply to: (i) conducts related to production or trade of agricultural products, as long as they are necessary for the attainment of the objectives prescribed by Article 39 TFEU; and (ii) conducts of farmers, farmers' associations, or associations of such associations, or recognised producer organisations “which concern the production
or sale of agricultural products or the use of joint facilities for the storage, treatment or processing of agricultural products, unless the objectives of Article 39 TFEU are jeopardised”.
The Court of Justice has held that, as any exception to a general rule, the CAP derogations must be interpreted strictly.20 Regarding the first general derogation of Article 209 of Regulation no. 1308/2018, the Court found, in Frubo, that an agreement must satisfy all of the heads of Article 39 TFEU in order to benefit from it.21 This means that, if applicants fail to show that the concerned agreement is not necessary to pursue all of the objectives of Article 39 TFEU, it cannot benefit from this derogation.
In Belgian Endives, the Court adopted a narrow interpretation of the CAP general derogations. According to this construction, the derogations do not apply if the concerned
19 European Competition Network, Report on competition law enforcement and market monitoring
activities by European competition authorities in the food sector (2012), 23.
20 Case C-399/93, Oude Luttikhuis and Others v Verenigde Coöperatieve Melkindustrie Coberco [1995],
ECLI:EU:C:1995:434, para. 23.
21 Case 71/74, Fruit- en Groentenimporthandel and Frubo v Commission [1975], ECLI:EU:C:1975:61,
paras 22-27. See also Case C-399/93, Oude Luttikhuis and Others v Verenigde Coöperatieve Melkindustrie Coberco [1995], ECLI:EU:C:1995:434, para. 25; Joined Cases T-70/92 and T-71/92, Florimex and VGB v Commission [1997], ECLI:EU:T:1997:69, para. 153; and Case T-217/03, FNCBV and Others v Commission [2006], ECLI:EU:T:2006:391, para. 206.
10 agreement is agreed between a number of producers’ organisations or associations of producers’ organisations. Conversely, the derogations can be applied to agreements arranged between members of producers’ organisation or associations of producers’ organisations, so long as those agreements are strictly necessary to pursuit objectives that were assigned to the producers’ organisation or to the association of producers’ organisations.22
This construction is quite restrictive, since it does not allow agreements that merely contribute to the objectives assigned to the producers’ organisation to be exempted. It is required that the objectives could not be achieved at all without such agreement.
Specific exemptions that allow producers’ organisations to negotiate on behalf of its members are also provided for three agricultural sectors: olive oil (Article 169 of Regulation no. 1308/2018), beef and veal (Article 170) and certain arable crops (Article 171).
At this point, it is possible to remark that the European agricultural framework reflects a tension: while there is a need to ensure that effective competition is maintained in the agricultural sector, it is also necessary to exempt certain forms of cooperation from competition rules in order to pursue the remaining objectives of CAP.
Regulation no. 1308/2013 has abolished the prior notification system, leading to high uncertainty, since producers’ organisations and associations of producers’ organisations are now required to make a self-assessment to ascertain whether they are covered by a CAP exception. This might be problematic, because the CAP derogations seem to be highly technical. Lastly, the Agricultural Task Force claimed that these derogations are very limited, too complex, and has depicted them as ‘dormant’.23
It appears, thus, that the CAP derogations are not as effective as it would be desired to address the problem of lack of bargaining power of farmers. For this reason, it is crucial to assess whether agreements between farmers may be justified under Article 101(1) or (3) TFEU when they do not fall under a CAP derogation.
22 Case C-671/15, APVE and Others [2017], ECLI:EU:C:2017:860, para. 67.
23 Jay Modrall, ‘EU competition policy in the agriculture sector’ (2017) 14 Cultivate: Food and agribusiness
11 4. Agreements between farmers under Article 101(1) TFEU
4. 1. Justifying agreements between farmers under Article 101(1) TFEU In some cases, agreements between farmers fall outside Article 101(1) TFEU for several reasons. In this chapter, I will outline three situations where these agreements escape from the scope of this provision.
4. 2. Agreements that do not restrict competition by effect or object
It is important to clarify that agreements between farmers aimed at strengthening their bargaining power do not restrict competition in every and each case. In a number of situations, they do not raise any problems from a competition law viewpoint.24
Only those agreements or practices that restrict competition by effect or object fall within the scope of Article 101(1) TFEU.25 These requirements are alternative, rather than cumulative. This means that, where an agreement or practice is found to be restrictive by object, a further analysis of its effects is not required.26
An agreement restricts competition by object if “such coordination reveals in itself
a sufficient degree of harm to competition”.27 Restrictions by object include price-fixing, market-sharing and output restrictions. For instance, an agreement between farmers by which they fix the selling price of corn or agree on the quantities of flour that they produce/sell is likely to be a restriction by object. Therefore, if farmers enter into an agreement that includes such features, it will fall within Article 101(1) TFEU without the need to assess anti-competitive effects.
Alternatively, an agreement or practice may restrict competition by effect. In order to ascertain whether an agreement falls within this category, one should assess its effects on actual and potential competition. Specifically, it should be evaluated whether the agreement is “liable to have an appreciable adverse impact on the parameters of
competition, such as the price, the quantity and quality of the goods or services”.28
24 Anna Gerbrandy, ‘Solving a Sustainability-Deficit in European Competition Law’ (2017) 40 World
Competition 539, 543.
25 Case C-56/65, Société Technique Minière v Maschinenbau Ulm [1966], ECLI:EU:C:1966:38.
26 Richard Whish and David Bailey, Competition Law (9th edn, Oxford University Press, 2018), 121-122. 27 Case C-67/13 P, CB v Commission [2014], ECLI:EU:C:2014:2204, para. 57.
12 Joint selling or collective bargaining is not likely to be restrictive by object, but sometimes it significantly reduces the incentives for farmers to compete and is prone to lead to collusion between them. It is also pointed out that joint selling may reduce incentives to improve productivity, create supply scarcity, destabilise markets and lead to excessive prices.29 Where these effects occur, the conduct will probably be qualified as a restriction of competition by effect.
Furthermore, the Guidelines on the applicability of Article 101 of the Treaty on the Functioning of European Union to horizontal co-operation agreements30 refer to ‘Joint Selling Agreements’ under the broader category of ‘Agreements on Commercialisation’.31 The main competition concerns outlined are: (i) the risk of leading to price-fixing; (ii) of facilitating output restriction; (iii) of becoming a tool for dividing markets and allocating orders or costumers; (iv) and leading to exchange of strategic information and commonality, which may cause collusive outcomes.32
However, if accompanied with other joint activities besides joint selling or collective bargaining, cooperation between farmers may not deteriorate competition. While in some situations producers’ organisations result in higher prices on consumers, evidence has shown that those forms of cooperation do not necessarily lead to such outcome or to products of lower quality.33 In fact, some authors have found economic evidence showing that producers’ organisations may improve market performance, and thereby lead to lower prices on consumers. It should be, however, noticed that most of these studies have focused on the United States markets.34
29 European Commission, An overview of European competition rules applying in the agricultural sector
(2016), 2.
30 Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to
horizontal co-operation agreements [2011] OJ C 11, (‘Horizontal Guidelines’).
31 Horizontal Guidelines, paras 225-256. 32 Horizontal Guidelines, paras 230-233.
33 Van Herck, Assessing efficiencies generated by agricultural Producers Organisations (European
Commission Report, 2014), 8.
34 Lisa Petraglia and Richard Rogers, ‘The Impact of Agricultural Marketing Cooperatives on Market
Performance in U. S. Food Manufacturing Industries for 1982’ (1991) Food Marketing Policy Center Research Report no. 12; Lawrence Haller, ‘Branded Product Marketing Strategies in the Cottage Cheese Market: Cooperatives versus Proprietary Firms’ (1992) Research Reports 25208, University of Connecticut, Food Marketing Policy Center.
13 Therefore, if those forms of cooperation between farmers do not have an adverse impact on any parameter of competition, such as the price or quality of the concerned goods, they will not restrict competition by effect.35 Unless a restriction that reveals in itself harmful to competition (a restriction by object) is involved,36 those forms of cooperation will not fall within Article 101(1) TFEU.
4. 3. The appreciability condition
In order to infringe Article 101(1) TFEU, an agreement or practice must appreciably affect inter-state trade and competition.37 The appreciable impact on competition condition should be highlighted.
In Voelk v Vervaecke, the Court of Justice held that “an agreement falls outside the
prohibition in Article 85 [currently Article 101] when it has only an insignificant effect on the markets, taking into account the weak position which the persons concerned have on the market of the product in question”.38 Thus, if the combined market share of the farmers entering into an agreement is low, there will be no appreciable restriction of competition, and so it will fall outside Article 101(1) TFEU.
This requirement is especially relevant when assessing agreements between farmers, because they often have low market shares.
Therefore, if a number of farmers engage in collective action to increase their bargaining power, they may still not go beyond the threshold of appreciability.
Yet, it should be noted that, in Expendia, the Court said that there is no need for an appreciability test in restrictions by object.39
35 Case C-382/12 P, MasterCard and Others v Commission [2014], ECLI:EU:C:2014:2201, para. 93. 36 Case C-67/13 P, CB v Commission [2014], ECLI:EU:C:2014:2204, para. 57.
37 The Commission Notice on agreements of minor importance which do not appreciably restrict
competition under Article 81(1) of the Treaty establishing the European Community (de minimis) [2001] 2001/C 368/07.
38 Case C-5/69, Voelk v Vervaecke [1969], ECLI:EU:C:1969:35. See also Horizontal Guidelines, para. 44. 39 Case C-226/11, Expedia [2012], ECLI:EU:C:2012:795, para. 37.
14 4. 4. The collective bargaining case law
The Court of Justice has held that certain restrictions that occur in the context of collective bargaining between trade unions and employers do not fall within Article 101(1) TFEU.40
In Albany, the Court stated that “It is beyond question that certain restrictions of
competition are inherent in collective agreements between organisations representing employers and workers. However, the social policy objectives pursued by such agreements would be seriously undermined if management and labour were subject to Article 85(1) of the Treaty when seeking jointly to adopt measures to improve conditions of work and employment.”41 Taking this into account, the Court decided “that agreements
concluded in the context of collective negotiations between management and labour in pursuit of such objectives must, by virtue of their nature and purpose, be regarded as falling outside the scope of Article 85(1) of the Treaty.”42 This line of reasoning was adopted in FNV Kunsten Informatie en Media,43 Brentjens',44 Drijvende Bokken,45van der
Woude,46 Pavlov and Others,47and AG2R Prévoyance.48 The EFTA Court also followed this rational in Norwegian Federation of Trade Unions and Others v Norwegian
Association of Local and Regional Authorities and Others.49
The Albany doctrine applies if the following conditions are met: (i) the agreement has been entered into in the framework of collective bargaining between employers and employees; and (ii) has been concluded in pursuit of the objective of improving the conditions of work and employment.50
40 Richard Whish and David Bailey, Competition Law (9th edn, Oxford University Press, 2018), 92-93. 41 Case C-67/96, Albany [1999], ECLI:EU:C:1999:430, para. 59.
42 Case C-67/96, Albany [1999], ECLI:EU:C:1999:430, para. 60.
43 Case C-413/13, FNV Kunsten Informatie en Media [2014], ECLI:EU:C:2014:2411, para. 23. 44 Joined Cases C-115/97, C-116/97 and C-117/97, Brentjens' [1999], ECLI:EU:C:1999:434, para. 57. 45 Case C-219/97, Drijvende Bokken [1999], ECLI:EU:C:1999:437, para. 47.
46 Case C-222/98, van der Woude [2000], ECLI:EU:C:2000:475, para. 22.
47 Case C-180/98 to C-184/98, Pavlov and Others [2000], ECLI:EU:C:2000:428, para. 67. 48 Case C-437/09, AG2R Prévoyance [2011], ECLI:EU:C:2011:112, para. 29.
49 Case E-8/00, Norwegian Federation of Trade Unions and Others v Norwegian Association of Local and
Regional Authorities and Others [2002] EFTA Ct. Rep. 114, paras 33-46.
50 Case E-8/00, Norwegian Federation of Trade Unions and Others v Norwegian Association of Local and
15 The scope of this case law is limited to collective negotiations aimed at improving workers conditions. The rational does not seem to apply to any other non-economic concern, such as environment or sustainability. Applying this case law to those concerns would be opening a door that the Court did not want to open.
However, the social reasons behind the Albany doctrine appear to be transposable to farmers collective bargaining. In the case of farmers, the purpose of the concerned agreements is to improve the conditions under which they develop their activity as well. It has been already noticed that unions and farmers’ cooperatives (and other forms of collective action) share the same aims. Arie Reich points out that “The situation of the
agricultural cooperatives in this regard was somewhat similar to that of the labor unions, in that both were needed in order to put the individual workers/farmers on a level playing field with the more powerful firms that procured the fruits of their labor”.51
Thereby, I think that the Albany doctrine could be extended to situations where farmers come together to leverage their bargaining power for social reasons (i. e., to improve their living standards). Conversely, I do not believe that it should be extended to environmental or any other non-economic reasons. Thus, if farmers engage in an agreement aimed at improving environmental standards, this doctrine should not be applied.
In order to transpose the Albany doctrine to farmers collective action, the conditions for its application should be slightly adapted. Those conditions could be the following:
(i) the concerned agreement has been entered into in the framework of collective
bargaining between farmers’ cooperatives (or other forms of collective cooperation) and retailers (or other buyers); and (ii) has been concluded in pursuit of the objective of improving the living/working conditions of farmers.
In conclusion, the rational of Albany doctrine appears to apply to agreements between farmers aimed at leveraging their bargaining power, and thus these agreements could, perhaps, fall outside the scope of Article 101(1) TFEU under this doctrine.
51 Arie Reich, ‘The Agricultural Exemption in Antitrust Law: A Comparative Look at the Political Economy
of Market Regulation’ (2006) Bar-Ilan University Public Law and Legal Theory Working Paper no. 06-7, 5.
16 5. Agreements between farmers under Article 101(3) TFEU
5.1. Justifying these agreements under Article 101 (3) TFEU
In a number of cases, agreements between farmers aimed at leveraging their bargaining power may raise problems in the light of competition law, and fall within Article 101(1) TFEU. Nonetheless, it should be assessed whether these agreements also result in positive effects. According to the case law, if an agreement or practice restricts competition and, at the same time, has beneficial effects, Article 101(3) TFEU is the proper place to take those benefits into account.52
An agreement or practice that falls within Article 101(1) TFEU can still be justified under Article 101(3) TFEU, as long as the following conditions are met: (i) the agreement or practice contributes to improving the production or distribution of goods or to promoting technical or economic progress; (ii) while allowing consumers a fair share of the benefit; (iii) does not impose on the undertakings restrictions which are not indispensable to achieve its objectives nor (iv) it afford such undertakings the possibility of eliminating competition in a substantial part of the products.53 These requirements are cumulative, which means that the agreement or practice has to comply with all of them.54 The burden of proof lies on the undertakings claiming the justification of Article 101(3) TFEU55 – in this case, on the farmers entering into the agreement.
Despite being regarded as particularly severe, restrictions by object (including price-fixing) can also be justified under Article 101(3) TFEU, as long as they fulfil the requirements of this provision.56
The assessment under Article 101(3) TFEU does not consist on a total welfare test or a full assessment of pro-competitive against anti-competitive effects. Instead, Phedon
52 Case C-209/07, Beef Industry Development and Barry Brothers [2008], ECLI:EU:C:2008:643, para. 21;
Case T-112/99, M6 and Others v Commission [2001], ECLI:EU:T:2001:215, para. 78.
53 Richard Whish and David Bailey, Competition Law (9th edn, Oxford University Press, 2018), 157. 54 Case T-17/93, Matra Hachette v Commission [1994], ECLI:EU:T:1994:89, para. 85.
55 Article 2 of Council Regulation (EC) no. 1/2003 on the implementation of the rules on competition laid
down in Article 81 and 82 of the Treaty [2003] L001.
56 Case T-17/93, Matra Hachette v Commission [1994], ECLI:EU:T:1994:89, para. 85; Richard Whish and
David Bailey, Competition Law (9th edn, Oxford University Press, 2018), 126; Case C-209/07, Beef
Industry Development and Barry Brothers [2008], ECLI:EU:C:2008:643, para. 39; Case T‑460/13, Sun Pharmaceutical Industries and Ranbaxy (UK) v Commission [2016], ECLI:EU:T:2016:453, para. 228; Visa International — Multilateral Interchange Fee (Case COMP/29.373) Commission decision 2002/914/EC [2002] OJL 318.
17 Nicolaides remarks that Article 101(3) TFEU provides a four layers filtering system which intends to “eliminate, first, agreements which do not generate benefits, then
agreements that contain unnecessary restrictions, then agreements that fail to provide sufficient benefits to consumers and, finally, agreements that substantially eliminate competition.”.57
Therefore, rather than engaging in a total welfare analysis of agreements between farmers aimed at leveraging their bargaining power, it should be assessed whether the four requirements of Article 101(3) TFEU are fulfilled.
Lastly, the individual assessment under Article 101(3) TFEU is only relevant for those cases that are not covered by a CAP exemption.
5.2. First requirement: the agreement results in efficiency gains
In order to comply with the first requirement of Article 101(3) TFEU, an agreement or practice must contribute to “improving the production or distribution of goods or to
promoting technical or economic progress”. This means that the concerned agreement or
practice must generate appreciable objective advantages that compensate the disadvantages which it entails for competition.58
In the following sections (5.2.1 to 5.2.8), I will explain which benefits may result from agreements between farmers aimed at leveraging their bargaining power.
5.2.1. Economic benefits versus non-economic benefits
Before listing the benefits that may result from agreements between farmers, it is convenient to distinguish economic from non-economic benefits, because, while it is clear that the former are relevant under the first requirement of Article 101(3) TFEU, it is disputed whether the latter should be taken into account. I will use the concepts drawn by the Office of Fair Trading (‘OFT’), since I find them particularly simple and clear.
Regarding economic benefits, the OFT has proposed the categories of direct economic benefits and indirect economic benefits. Direct economic benefits are defined as cost and qualitative efficiencies that accrue to direct or indirect users of the products
57 Phedon Nicolaides, ‘The Balancing Myth: The Economics of Article 81(1) & (3)’ (2005) 32 Legal Issues
of Economic Integration 123, 142-143.
18 or services covered by the agreement,59 while indirect economic benefits are defined as cost and qualitative efficiencies around price, quality, range and services dimensions of a product or a service that are not in the relevant affected market.
Non-economic benefits have been defined by the OFT as benefits that arise from the agreement but are not directly related to the characteristics of the product or service (i. e., price, quality, range and service).60
5.2.2. Economic benefits
The Guidelines on the application of Article 101(3) TFEU61 suggest that an examination under this provision should follow an economic approach. Paragraph 32 states that the analysis under Article 101(3) TFEU consists on “the assessment of the
positive economic effects of restrictive agreements”. Moreover, paragraph 33 refers only
to “pro-competitive effects by way of efficiency gains” and “objective economic benefits”, and paragraph 59 mentions only two categories of efficiencies: (i) cost efficiencies and
(ii) qualitative efficiencies “whereby value is created in the form of new or improved products, greater product variety etc”.62
Even though the Guidelines correspond to a soft law instrument that is binding only on the Commission, they are a crucial interpretation tool, since Member States are required, in the light of Article 4(3) of the Treaty on European Union (principle of sincere cooperation), to take due account of policy notices of the Commission.63
Furthermore, the words “improving the production or distribution of goods or to
promoting technical or economic progress”, clearly refer to an economic-centred
approach. Therefore, a narrow reading, limited to economic efficiency standards, appears to be more consistent with the wording of Article 101(3) TFEU.64
59 Office of Fair Trading, Article 101(3) – A Discussion of Narrow versus Broad Definition of Benefits:
Summary note for OFT breakfast roundtable (2010), paras 2.1 and 2.2.
60 Office of Fair Trading, Article 101(3) – A Discussion of Narrow versus Broad Definition of Benefits:
Summary note for OFT breakfast roundtable (2010), para. 2.13.
61 Guidelines on the application of Article 81(3) of the Treaty [2004] OJ C 101.
62 N. Rosenboom, ‘How does article 101(3) TFEU case law relate to EC guidelines and the welfare
perspective’ (2013) SEO Economic Research Working Paper, 3.
63 Opinion of Advocate-General Kakott in Case C-226/11, Expedia [2012], ECLI:EU:C:2012:544, para.
38.
19 Authors argue that, in the context of the competition law modernisation carried out by the issuance of Regulation no. 1/2003, and the consequent conferral of new competences to national competition authorities (‘NCAs’) for applying Article 101(3) TFEU,65 the Commission intentionally aimed at decreasing the relevance of non-competition concerns, because it suspected that Member States would use such capability to pursue public policy interests at the expense of the competition process.66
Taking all of this into consideration, when assessing whether agreements between farmers can be justified under Article 101(3) TFEU, economic benefits should be highlighted and play the main role.
I will now list some of the positive economic benefits that may result from these agreements.
Firstly, some NCAs have identified the atomistic structure of the agricultural production sector, in combination with the small-scale of farmers, as a factor that can hinder the competitiveness of this sector. These NCAs have suggested a restructuring of the sector and recommended mechanisms such as the promotion and creation of producers’ cooperatives and other forms of cooperation as a way of achieving more competitiveness.67 Following this reasoning, it might be argued that cooperation between farmers is likely to lead to an improvement of the competitiveness of the agricultural sector.
Secondly, some NCAs have noticed that agricultural production is often poorly organised due to the small-scale of farmers. As a consequence, sometimes retailers have to rely on intermediaries to get their supplies from farmers.68 A higher number of intermediaries in the supply chain can result in an increase in consumer prices. Joint
65 Council Regulation (EC) no. 1/2003 on the implementation of the rules on competition laid down in
Article 81 and 82 of the Treaty [2003] L001, Article 5; Richard Whish and David Bailey, Competition Law (9th edn, Oxford University Press, 2018), 167.
66 Nicolas Petit, ‘The Guidelines on the application of article 81(3) EC: A critical review’ (2009) Working
paper Institut d’Etudes Juridiques Europeennes no. 4/2009, 9; Christopher Townley, ‘Is There (Still) Room for Non-Economic Arguments in Article 101 TFEU CASES?’ (2012) The Conference on Aims and Values in Competition Law, Copenhagen, September 20.
67 European Competition Network, Report on competition law enforcement and market monitoring
activities by European competition authorities in the food sector (2012), 10.
68 European Competition Network, Report on competition law enforcement and market monitoring
20 action of farmers may enable them to improve their organisation, and therefore eliminate the need for intermediate activities.
Thirdly, cooperation may allow farmers to benefit from economies of scale. This is supported by economic studies developed by Arcas, García and Guzmán, who have found evidence of a positive correlation between the size of producers’ organisation and their efficiency.69
Economies of scale are likely to improve farmers capacity to make investments in transport, production and storage facilities. Marketing, transportation, distribution and production services may be improved.70 Farmers may be able to buy inputs in bulk and to access to joint financing.71 Economies of scale can reduce transaction costs, foster embedded services and capacity development. It has been also shown that large producers’ organisations offer a wider range of services.72 Moreover, farmers may gain access to market channels that were previously closed to them. For instance, small-scale farmers may be able to meet the minimum volume requirements demanded by large buyers.73 Finally, large producers’ organisation may allow farmers to spread their fixed costs over a large volume of sales.74
In fourth place, joint action is often necessary to solve free-ridings problems related to shared advertisement and forming/maintaining a brand. Individual farmers do not have incentives to promote a geographic brand (e. g., Italian Prosciutto di Parma or Oporto
69 Narciso Arcas, Domingo García and Isidoro Guzmán, ‘Effect of size on performance of Spanish
agricultural cooperatives’ (2011) 40 Outlook on Agriculture 201.
70 Arie Reich, ‘The Agricultural Exemption in Antitrust Law: A Comparative Look at the Political Economy
of Market Regulation’ (2006) Bar-Ilan University Public Law and Legal Theory Working Paper no. 06-7, 5.
71 Food and Agriculture of the United Nations, Developing Sustainable Value Chains for Small-Scale
Livestock Producers (FAO Animal Production and Health Guidelines no. 21, 2019), 60 and 88.
72 Van Herck, Assessing efficiencies generated by agricultural Producers Organisations (European
Commission Report, 2014), 6.
73 Van Herck, Assessing efficiencies generated by agricultural Producers Organisations (European
Commission Report, 2014), 16.
74 Beatriz Velázquez, Bruno Buffaria and European Commission, ‘About farmers’ bargaining power within
21 wine), since the remaining farmers would free-ride on their investment. Thereby, farmers have to engage in collective action to make such brand investments.75
In fifth place, research and development (‘R&D’) is a public good in the sense that there is no way of excluding non-innovators from the resulting benefits. Thus, there are no incentives for individual farmers to engage in R&D efforts. The formation of groups of farmers that are likely to benefit from such efforts appears to be an effective manner of solving this market failure and fostering R&D investments.76
However, part of these benefits, such as the scale economies that are not related to joint selling and the effect of fostering investment in advertisement, branding and R&D, could be properly achieved without collective bargaining or joint selling. These benefits could actually be attained through forms of cooperation that do not entail collective bargaining.77 Nonetheless, I will now try to outline some beneficial roles that are directly related to collective bargaining.
Firstly, it has been argued that collective action and price/quantities negotiation may help to mitigate the uncertainty related to the agricultural sector. Farmers have to make planting decisions in conditions of uncertainty about supplies available and future demand. Moreover, there is a great distance between farmers and consumers, and they do not have complete demand information.78 On the top of that, market demand is not always consistent with harvest cycles.79
With collective negotiation, farmers may have access to relevant information that allows them to predict future demand conditions. This means that they will be able to schedule and adapt planting decisions in line with such information, and so supply and
75 OECD, Competition and Regulation in Agriculture: Monopsony Buying and Joint Selling (Policy
Roundtables, 2004), 22.
76 OECD, Competition and Regulation in Agriculture: Monopsony Buying and Joint Selling (Policy
Roundtables, 2004), 24.
77 OECD, Competition and Regulation in Agriculture: Monopsony Buying and Joint Selling (Policy
Roundtables, 2004), 22.
78 Arie Reich, ‘The Agricultural Exemption in Antitrust Law: A Comparative Look at the Political Economy
of Market Regulation’ (2006) Bar-Ilan University Public Law and Legal Theory Working Paper no. 06-7, 4.
79 United States Department of Agriculture, Farm Bargaining Cooperatives: Group Action, Greater Gain
22 demand for agricultural products would be more balanced.80 Thus, this leads to an improved prediction ability and more efficient decisions, which may result in more allocative efficiency and lower prices on consumers. Considering this, collective action may solve the problem of inconsistency between market and harvest cycles in the agricultural sector.
Secondly, the long-term development of agricultural production should be mentioned. If farmers are not adequately remunerated, they may not have the chance to accumulate the capital needed to make investments. Thus, farmers may not be able to invest in new forms of products, production, storage and R&D.81 Following this logic, low margins may result in loss of innovation and variety of products. Conversely, if farmers are sufficiently rewarded, they may gain financial conditions to make such investments.
This might be seen as a diluted long-term beneficial effect to consumers, which should not be a problem, since the Guidelines on the application of Article 101(3) TFEU refer that the fact that the pass on to consumers occurs with a time lag does not exclude Article 101(3) TFEU.82
Thirdly, collective bargaining may solve a hold-up problem. In some cases, farmers produce perishable goods, which they have to sell within a strict time lapse. When the time lapse is about to end, farmers are forced to accept any selling conditions. Moreover, they often have only one buyer.
The buyer may initially refuse to buy the goods to force farmers to sell them when they are already at risk of getting spoiled. At this point, farmers will be forced to accept a lower price.83 Ultimately, this leads to a lack of incentives for farmers to produce and invest. When farmers come together and leverage their bargaining power, buyers are no longer able to adopt this harmful strategy.
80 Brant Hueth and Philippe Marcoul, ‘An Essay on Cooperative Bargaining in U. S. Agricultural Markets’
(2003) 1 Journal of Agricultural & Food Industrial Organization 1, 8.
81 Philippe Chauve, Antonia Parera and An Renckens, ‘Agriculture, Food and Competition Law: Moving
the Borders’, 5 Journal of European Competition Law & Practice 304, 312.
82 Guidelines on the application of Article 81(3) of the Treaty [2004] OJ C 101, para. 87.
83 Van Herck, Assessing efficiencies generated by agricultural Producers Organisations (European
23 It should be, however, pointed out that, unlike agreements aimed at protecting the environment,84 those that are intended at leveraging the bargaining power of farmers do not appear to reduce negative externalities.85 Thus, this long-term benefit, that has been mentioned by the Dutch Competition Authority (‘ACM’) as quite relevant, seems to have no application in the case of agreements between farmers with social aims, unless they also include certain measures intended at reducing the environmental impact of the agricultural activity.86
In conclusion, agreements between farmers may result in a number of economic benefits, such as improving the competitiveness of the agricultural sector, eliminating the need for intermediaries in the supply chain, generating economies of scale, solving inconsistency problems between market logic and harvest cycles, allowing a long-term development of the agricultural sector, and mitigating free-riding and hold-up problems.
However, most of the efficiencies that have been listed are generated only where the bargaining activity is accompanied by other joint activities.87 For example, in order to achieve most of the economies of scale identified and solve free-riding problems, forms of cooperation besides collective bargaining are required. Thus, it can be concluded as well that these agreements are more likely to generate efficiencies, and thus comply with the first requirement of Article 101(3) TFEU, where they include other joint activities, in addition to collective bargaining.
5.2.3. Non-economic benefits
Besides the economic benefits that have been just mentioned, agreements between farmers aimed at leveraging their bargaining power may result in a positive effect in terms
84 Nordic Competition Authorities, Report from the Nordic competition authorities, Competition Policy and
Green Growth (2010), 13.
85 Barbara Baarsma and Nicole Rosenboom, ‘A veritable tower of Babel: on the confusion between legal
and economic interpretations of Article 101(3) of the Treaty on the Functioning of the European Union’ (2015) 11 European Competition Journal 402, 408; N. Rosenboom, ‘How does article 101(3) TFEU case law relate to EC guidelines and the welfare perspective’ (2013) SEO Economic Research Working Paper, 6.
86 Autoriteit Consument & Martk, Competition & Sustainability (Vision Document, 2014), para. 3.5.2;
Autoriteit Consument & Markt, Guiderlines Sustainability agreement: Opportunities within competition law (Draft, 2020), para. 30.
87 European Commission, An overview of European competition rules applying in the agricultural sector
24 of distribution of welfare. Due to these agreements, farmers may receive a fairer share of the value generated along the chain value, and thus their living conditions are likely to be improved. This could be qualified as a benefit in terms of ‘fairness’.
It is not clear whether non-economic benefits are relevant under Article 101(3) TFEU, and thereby whether they may play a role in justifying agreements between farmers. In fact, this is one of the most controversial questions in competition law nowadays.88 Therefore, it is important to ask if non-economic benefits are relevant.
5.2.4. Critiques to a non-economic approach
The option of giving relevance to non-economic interests under competition law may be subject to some critiques. I will now briefly explain some of them.
Firstly, it is difficult for authorities to balance non-market against market interests. While it is easy to compare ‘apples with apples’, it is inviable to compare ‘apples with oranges’.89 Some also say that there is a problem of incommensurability, since non-market interests cannot be measured or quantified objectively.
Moreover, the predictability of competition authorities’ decisions would decrease,90 because they would be based on ambiguous and open-ended concepts. In fact, non-economic concepts, such as ‘fairness’, ‘environment’ or ‘equity’ are quite vague,91 and some commentators call ‘fairness’ “a suitcase full of bottled ethics from which one freely
chooses to blend his own type of justice”.92 Finally, decision-making consistency over a period of time would be very difficult – if not impossible – to achieve.93
88 Anna Gerbrandy, ‘Rethinking Competition Law within the European Economic Constitutions’ (2019) 57
Journal of Common Market Studies 127, 131.
89 Charles Rule and David Meyer, ‘An antitrust enforcement policy to maximize the economic wealth of
all consumers’ (1998) 33 The Antitrust Bulletin 677, 694.
90 Paul S. Crampton, ‘Alternative Approaches to Competition Law – Consumers’ Surplus, Total Surplus,
Total Welfare and Non-Efficiency Goals’ (1994) 17 World Competition 55, 56-57.
91 Michael Trebilcock and Francesco Ducci, ‘The Multifaceted Nature of Fairness in Competition Policy’
(2017) Competition Policy International, 1.
92 George J. Stigler, ‘The Law and Economics of Public Policy: A Plea to the Scholars’ (1972) 1 Journal of
Legal Studies 1, 4.
93 Paul S. Crampton, ‘Alternative Approaches to Competition Law – Consumers’ Surplus, Total Surplus,
25 It is said that competition law is efficiency-oriented and aimed at improving total economic welfare, rather than making value judgments. Economization of competition law brought clarity and certainty, and including non-economic interests would threaten those merits.94 Competition law is intended to solve problems related to market power, and including public interest concerns would pollute this field of law.95 Following this logic, non-economic concerns should be addressed through other means, such as regulation.
Considering these critiques, one could say that farmers face unfair living conditions. But unfair in the light of which standard? How does one assess whether their living standards are unfair? How does one measure fairness? And how does one weigh the ‘fairness’ benefit that results from agreements between farmers against the anti-competitive effects generated?
Furthermore, it is argued that NCAs lack legitimacy to take non-market concerns into account. Most of NCAs do not have democratic legitimacy, and face limited political control. Weighting non-market concerns and deciding the outcome of such balance96 consists on a policy-making activity requiring value-choices, for which NCAs do not have legitimacy. Otherwise, NCAs have technocratic legitimacy, since they pursue efficiency and issue technical-based decisions. As long as NCAs restrain their assessment to technical or efficiency standards, they are still acting within their technical legitimacy.
Some authors suggest that, in order to address this political problem, democratic elements should be added to the decision-making process of NCAs, such as public consultations and the participation of representative groups.97
94 Giorgio Monti and Jotte Nulder, ‘Escaping the Clutches of EU Competition Law: Pathways to Assess
Private Sustainability Initiatives’ (2017), 42 European Law Review 635, 642; Anna Gerbrandy, ‘Solving a Sustainability-Deficit in European Competition Law’ (2017) 40 World Competition 539, 544.
95 K. J. Cseres, ‘The Controversies of the Consumer Welfare Standard’ (2007) 3 The Competition Law
Review 121, 127; Barbara Baarsma, ‘Rewritting European Competition Law from an Economic Perspective’ (2011) 7 European Competition Journal 529, 570; B. Baarsma, ‘Moeilijke Marktwerking en Meedogenloze Mededinging’, Inaugural speech as Chair of Market Economy and Competition Economics at the University of Amsterdam, 12 February 2010.
96 Martin Lodge, ‘Regulation, the Regulatory State and European Politics’ (2008) 31 West European
Politics 280, 292.
97 Rutger Claassen and Anna Gerbrandy, ‘Rethinking European Competition Law: From a Consumer
26 It is also argued that applying a public interest standard, under which authorities are required to engage in an ad hoc examination of ‘social’ and ‘political’ interests, would be much more costly and time-consuming than a market power/efficiency standard.98
Lastly, it is said that pursuing these concerns might be counterproductive, because, in the long-term, following efficiency objectives is more likely to contribute to good results in terms of non-market interests.99
In conclusion, giving relevance to non-economic interests under Article 101(3) TFEU may raise several problems, such as uncertainty and inconsistency, and NCAs do not appear to be the legitimate authorities to pursue those interests.
5.2.5. Relevance of other provisions of the Treaty
Some authors follow a slightly different approach. They say that, when applying Article 101(3) TFEU, the preamble and the provisions of the Treaty concerning other areas, such as agriculture, environment and employment, should be taken into consideration.100 They also base their arguments on the Treaty provisions that prescribe general goals101 and the integration or cross-section clauses.102
In this regard, the Commission states, in the paragraph 42 of the Guidelines on the application of Article 101(3) of the Treaty, that the “Goals pursued by other Treaty
provisions can be taken into account”. It should be, therefore, recalled that Article
39(1)(b) TFEU prescribes that one of the objectives of the CAP is “to ensure a fair
standard of living for the agricultural community, in particular by increasing the
Legitimacy Problem for Competition Authorities Taking into Account Non-Economic Values: The Position of the Dutch Competition Authority’ (2015) 40 European Law Review 769.
98 Paul S. Crampton, ‘Alternative Approaches to Competition Law – Consumers’ Surplus, Total Surplus,
Total Welfare and Non-Efficiency Goals’ (1994) 17 World Competition 55, 57; Charles Rule and David Meyer, ‘An antitrust enforcement policy to maximize the economic wealth of all consumers’ (1998) 33 The Antitrust Bulletin 677, 694.
99 Paul S. Crampton, ‘Alternative Approaches to Competition Law – Consumers’ Surplus, Total Surplus,
Total Welfare and Non-Efficiency Goals’ (1994) 17 World Competition 55, 57.
100 R. B. Bouterse, Competition and Integration: What Goals Count? (Kluwer Law International, 1994),
26-28.
101 For example, Article 3 of the Treaty on European Union.
102 Rutger Claassen and Anna Gerbrandy, ‘Rethinking European Competition Law: From a Consumer
Welfare to a Capability Approach’ (2016) 12 Utrecht Law Review 1, 8; Anna Gerbrandy, ‘Solving a Sustainability-Deficit in European Competition Law’ (2017) 40 World Competition 539, 548.
27
individual earnings of persons engaged in agriculture”. However, the Commission adds
that those goals may be taken into account only to “the extent that they can be subsumed
under the four conditions of Article 81(3)”, thus suggesting that they do not have an
autonomous relevance, i. e. alone they cannot justify a restrictive agreement or practice. On Basaran’s opinion, this is what implicitly results from Matra and Metro cases.103 Petit says that this paragraph of the Guidelines requires an economic translation and quantification of non-economic benefits.104
The cases cited by the Commission in the Guidelines (Matra and Metro) seem to confirm this construction. In Matra, the Court of First Instance recalled that the Commission had found that the impact on infrastructures and employment “(…) would
not be enough to make an exemption possible unless the conditions of Article 85 (3) were fulfilled, but it is an element which the Commission has taken into account.”105 The Court recalled that those circumstances had not been crucial, and that they had been mentioned by the Commission as a supererogatory argument, since the same decision would have been taken in their absence.106 The Court followed this line of reasoning.
In Metro, the Court of Justice held that “the establishment of supply forecasts for a
reasonable period constitutes a stabilizing factor with regard to the provision of employment which, since it improves the general conditions of production.”.107 The Court considered the employment stabilization effect, but only in so far as it contributed to improved production.108 Thus, the Court did not grant an autonomous or self-contained relevance to employment concerns.
Therefore, aims pursued by other Treaty provisions do not appear to have an autonomous relevance under Article 101(3) TFEU, since they can only be taken into consideration in so far as they are subsumed under the requirements of Article 101(3) TFEU.
103 Halil Rahman Basaran, ‘How should Article 81 EC address agreements that yield environmental
benefits’ (2006) 27 European Competition Law Review 469, 481.
104 Nicolas Petit, ‘The Guidelines on the application of article 81(3) EC: A critical review’ (2009) Working
paper Institut d’Etudes Juridiques Europeennes no. 4/2009, 7.
105 Ford Volkswagen (Case IV/33.814) Commission decision 93/49/EEC [1992] OJL 020, para. 36. 106 Case T-17/93, Matra Hachette v Commission [1994], ECLI:EU:T:1994:89, para. 139.
107 Case C-26/76, Metro v Commission [1977], ECLI:EU:C:1977:167, para. 21.
108 K. J. Cseres, ‘The Controversies of the Consumer Welfare Standard’ (2007) 3 The Competition Law
28 At this point, a first conclusion on the relevance of non-economic concerns could be made. Taking into consideration the critiques that have been explained and the clear definition of the Commission’s competition policy objectives, I believe that non-economic should not have a self-contained or independent relevance. This means that the interest in ensuring a fair distribution of welfare along the value chain and improving the living standards of farmers should not have a self-contained relevance.
5.2.6. The value of ‘fairness’ concerns under a broad economic approach Despite the conclusion reached in the previous section, there may be a way of giving relevance to ‘fairness’ concerns where they can be regarded from an economic or consumer welfare viewpoint.
Sometimes, consumers value certain standards such as ‘fairness’ and ‘environmental-friendly’ as part of the quality of the product. The OFT has suggested that these products features could be seen as direct qualitative efficiencies, while the ACM has stated that they can be regarded under an economic viewpoint, as long as consumers put a value on such concerns.109 This consists on a broad consumer welfare approach that, under the consumer sovereignty ideal, takes into account actual preferences of consumers.110
Following this logic, it could be argued that consumers perceive the fact that a product has allowed a fair distribution of added value as a quality as relevant as having a better taste or look. It is not unconceivable to imagine a consumer looking to the supermarket shelves, wondering whether he should buy the better-looking product or the one that has contributed to ‘sustainability’ or ‘fairness’.
As an example of agreements that could result in such qualitative efficiencies, the OFT has named the agreements between coffee producers on standards under which coffee trade could be deemed as ‘fair-trade’, as long as “consumers placed value on
products that are produced in a way that treat coffee growers 'fairly'”. This example is
quite important, because it has similarities with the case of agreements between farmers
109 Office of Fair Trading, Article 101(3) – A Discussion of Narrow versus Broad Definition of Benefits:
Summary note for OFT breakfast roundtable (2010), para. 2.4; Autoriteit Consument & Martk, Competition & Sustainability (Vision Document, 2014), para. 3.5.1.
29 aimed at leveraging their bargaining power: both concern the living conditions of individuals that work in the primary sector and are often poorly remunerated.
With regard to agreements between farmers, do consumers put a value on products that have allowed a fair distribution of welfare along the chain value and thus improved farmers’ living standards?111
On one hand, it could be said that this reasoning is valid for ‘fair-trade’ and ‘sustainable-friendly’ products, but not for products that have allowed farmers a decent remuneration. I am not completely sure whether the ‘average-consumer’ actually puts a value on the well-being of farmers. While consumers have been increasingly keen to contribute for ‘environmental’ and ‘fair-trade’ values, it is not clear whether the same can be said with regard to the well-being of farmers.
On the other hand, it could be argued that consumers are aware of the importance of the role of farmers, and thus that they have the desire to contribute to improve their living standards.112 This is not unlikely, since evidence shows that people are often motivated by altruism, reciprocity and inequality concerns.113 Moreover, the Covid-19 crisis has clearly demonstrated that farmers play a key role in the functioning of the food supply. Without farmers work, supermarket shelves would probably have been left empty during the lockdown. This might have changed the general awareness of consumers in relation to the living conditions of farmers.
Nonetheless, in order to clarify how consumers perceive the well-being of farmers, it would be crucial to assess actual consumer preferences. They should be given a chance to have their say. A willingness-to-pay survey could be carried out to ascertain whether consumers perceive such products as having a better quality than those that do not contribute to a fair distribution of added value.114 The undertakings claiming the benefit
111 Erik Kloosterhuis and Machiel Mulder, ‘Competition Law and Environmental Protection: The Dutch
Agreement on Coal-Fired Power Plants’ (2015) 11 Journal of Competition Law & Economics 855, 861; Autoriteit Consument & Martk, Competition & Sustainability (Vision Document, 2014), para. 3.5.1.
112 Erik Kloosterhuis and Machiel Mulder, ‘Competition Law and Environmental Protection: The Dutch
Agreement on Coal-Fired Power Plants’ (2015) 11 Journal of Competition Law & Economics 855, 861.
113 James Andreoni and John Miller, ‘Giving According to Garp: An Experimental Test of the consistency
of preferences for altruism’ (2002) 70 Econometrica 737.
