Enhancing farmers' bargaining power
There are 11 million farmers in the EU, many of whom work on relatively small family farms which operate independently of each other. By contrast there is a far higher concentration amongst both processors and retailers. This asymmetry of bargaining power makes it difficult for farmers to defend their interests when negotiating with other actors in the supply chain.
To strengthen farmers’ collective bargaining power, the EU supports farmers who wish to work together in producer organisations. Additionally, it also supports those that wish to work with their partners from the manufacturing and trading side of the food supply chain as part of what are known as interbranch organisations.
Producer organisations (POs) or associations of producer organisations (APOs) help farmers reduce transaction costs and collaborate when processing and marketing their products. Producer organisations strengthen the collective bargaining power of farmers by:
- concentrating supply
- improving marketing
- providing technical and logistical assistance to their members
- helping with quality management
- transferring knowledge.
The EU acknowledges the special role played by producer organisations and as a result, they can ask for recognition from the EU country they are based in. POs can take different legal forms, including agricultural cooperatives. Recognised POs can benefit from:
- exceptions from EU competition rules for certain activities, such as collective negotiations on behalf of their members, planning of production or certain supply management measures;
- access to EU funding within ‘operational programmes’ in the fruit and vegetables sector, such as those to support collective investment in logistics for the benefit of their members.
There are around 3,400 recognised POs in the EU (as of 2017). They mainly operate in three sectors:
Only three EU countries do not have any recognised PO: Estonia, Lithuania and Luxembourg.
As of 2017, eight EU countries recognised 80 APOs: France (30), Italy (19), Germany (9), Spain (7), Hungary (7), Greece (4), Belgium (3), and Poland (1).
Criteria for recognition
In order to be recognised, a PO in any agricultural sector must:
- have been set up on the initiative of producers;
- be made up of and controlled by producers of a specific agricultural sector;
- file a request with the EU country it is based in;
- carry out at least one of the activities listed by EU law, such as joint processing, distribution, transportation or packaging;
- follow at least one of the specific aims mentioned in agricultural legislation, such as optimising production costs or developing initiatives in the area of promotion and marketing.
In addition, POs need to meet some additional criteria such as having a minimum number of members and/or covering a minimum volume or value of products. There are also certain requirements with regard to their statutes. In particular, these must enable their members to scrutinise the organisation democratically.
EU countries may recognise POs upon request. EU countries have to recognise POs from the fruit and vegetables, olive oil and table olives, silkworm, hops and milk and dairy products sectors.
EU countries may also recognise associations of POs, in line with the criteria for POs.
Multi-national producer organisations
Farmers and POs in different EU countries can group together to form transnational POs. In these cases, recognition is granted by the EU country where the PO is headquartered. The headquarters must be in an EU country where it has a significant number of members or member organisations, or a significant volume of marketable production.
Farmers and processors or traders in the supply chain can also come together in interbranch organisations (IBOs). Those organisations adopt measures to govern the chain, without themselves being involved in production, processing or trade. IBOs serve as a platform for dialogue, promoting best practices and market transparency.
EU countries may also recognise IBOs, if the IBO is made up of:
- representatives of the production sector (i.e. farmers);
- representatives of at least one other part of the agro-food supply chain (such as those operating in processing or the distribution of food products).
Recognition of interbranch organisations is optional in most sectors but is mandatory in the olive oil, table olives and the tobacco sectors. IBOs with members in multiple countries are recognised in the same country as their headquarters are based.
Competition law exceptions
EU competition law prohibits any agreement between two or more independent market operators that restricts competition. For example, agreements that seek to limit or control production, market operation, technical development, investment, or sources of supply. The general competition law prohibition, outlined in Article 101 of the Treaty on the Functioning of the European Union, only permits limited exceptions.
However, due to the relative weakness of farmers in the agricultural and food supply chain, EU agricultural legislation allows certain exemption from competition rules in the cases of farmers’ associations, producer organisations, and interbranch organisations.
The conditions under which exceptions can be applied are set out in a number of articles of Regulation (EU) No 1308/2013 on the common market organisation.
Exceptions for producer organisations, farmers’ associations, and farmers
Article 152 of this Regulation provides for a derogation from competition rules for recognised POs and associations of POs if they fulfil certain conditions. Such derogations include for production planning and negotiating contracts for the supply of agricultural products.
Article 222 allows recognised POs to derogate from certain competition rules during periods of severe imbalance in markets.
Article 209 is not limited to recognised PO; it allows any farmer or farmers associations to work together, such as for the production or sale of agricultural products. Parties wanting to rely on this provision may ask the Commission for an opinion on whether their agreements are compatible with the objectives set out in Article 39 of the Treaty on the Functioning of the European Union. Interested parties can obtain this information by contacting AGRI-NOTIFICATION-209-CMO@ec.europa.eu.
All opinions concerning the compatibility of agreements with the CAP objectives under Article 209 are published by the Commission.
Exceptions for interbranch organisations
Article 210 of the Regulation on the common market organisation sets out certain conditions under which the agreements, decisions and practices adopted by interbranch organisations can be exempted from EU competition rules.
In order to attain an exemption, interbranch organisations must notify the Commission of their measures and seek clearance under Article 210.
Notifications can be sent to AGRI-NOTIFICATION-210-CMO@ec.europa.eu
All decisions taken under Article 210 are published by the Commission.
Article 149 sets out specific rules for contractual negotiations by recognised POs in the milk sector.
Article 150 sets out conditions under which POs or IBOs may manage the supply of cheese with a protected designation of origin or protected geographical indication.
Article 167 sets out marketing rules to improve and stabilise the operation of the common market in wines.
Article 172 sets out conditions under which POs or IBOs may manage the supply of ham with a protected designation of origin or protected geographical indication.
Competition rules in the agri-food sector
The legal bases governing producer and interbranch organisations and the common organisation of the markets in agricultural products are set out in Regulation (EU) No 1308/2013 and Commission Delegated Regulation (EU) 2016/232.
The EU has also adopted specific rules for a number of sectors:
- fruits and vegetables – Commission Implementing Regulation (EU) No 543/2011;
- hops – Commission Regulation (EC) No 1299/2007;
- olive oil and table olives – Commission Delegated Regulation (EC) No 611/2014, Commission Implementing Regulation (EU) No 615/2014;
- milk and dairy products – Commission Implementing Regulation (EU) No 511/2012, Commission Delegated Regulation (EC) No 880/2012, Commission Implementing Regulation (EU) 2016/1615.