CJEU hears French endive cartel case and prepares to clarify the limits of competition law enforcement to farming activities

Written on 20 Feb 2017

On 31 January 2017, the Court of Justice of the European Union (CJEU) heard the French “endive cartel” case (Case No C-671/15). In this long-standing case, the European judges were invited to clarify the relationship between two major EU policies: agriculture and competition.

The particular issue at stake is whether and to what extent French endive producers’ anticompetitive behaviour could be exempted from competition law in the context of Common Agricultural Policy’s (CAP) objectives achievement.

Background to the case

In 2012, the French Competition Authority (FCA) sanctioned eleven endive producers and their professional associations with a global fine of €3.9 million for price-fixing and unlawful exchange of information between 1998 and 2012 (Case No 12-D-08 of 6 March 2012).

The FCA found that, through a computerised information exchange tool (Infoclar), the members of the cartel controlled prices and put in place retaliation measures against disobedient participants to the cartel.

As an introduction to its analysis, the FCA reiterated its “pragmatic approach” with respect to farming activities, which could support producers boosting their bargaining power against mass food retailers, or implementing improvement tools. Nevertheless, the FCA considered that “extensive courses of action available to producers, in particular under regulations implementing the Common Agricultural Policy” did not make certain practices, such as price-fixing, permissible.

Against this background, the FCA decided that although a “price-fixing cartel between competitors is undeniably a serious matter“, the limited impact on consumers had to be taken into account. The FCA observed in this respect that food retailers were able to force prices down due to their significant buying power. The FCA therefore insisted on the fines being moderated and proportioned to the circumstances of each producer and organisation. 

The dispute in the French courts

On 15 May 2014, the Paris Court of Appeal overruled the FCA’s decision. The Court decided that, pursuant to the EU regulations setting up Common Market Organisations (CMO) which regulate agricultural activities in Europe (CMO Regulations), the producers and their professional organisations were not in breach of competition law (Case No 2012/06498).

The FCA appealed the judgement before the Court of Cassation, arguing that “the sole fact that the practices at stake could be linked to the missions assigned to these organisations within the framework of CMO is not to exclude their anticompetitive nature“. The European Commission, intervening in the case to support this position, observed that CMO Regulations set forth “specific exemptions” to competition rules, outside of which those rules fully apply to agricultural activities. In the present case, the Commission argued that practices in question could not be considered as covered by such “specific exemptions“.

On 8 December 2015, the Court of Cassation rendered a judgement in which it observed that the CJEU “does not seem to have acknowledged the existence of “specific exemptions” to competition rules” that may result from the missions assigned to professional organisations, nor analysed “the outlines of these missions pursuant to [CMO Regulations]”, nor discussed “to what extent these missions may qualify as “specific exemptions” to competition rules“. The court therefore observed “a serious difficulty” raised by the case regarding the analysis of CMO Regulations, “especially with respect to the goal of produce price regulation assigned to these organisations“.

In such a context, the Court of Cassation stayed the proceedings and requested a preliminary ruling from the CJEU (Case No 14-19.598). 

CJEU invited to clarify the relationship between agriculture and competition law

The CJEU was invited to decide on whether anticompetitive behaviour from agricultural professional organisations may avoid competition law, “on the sole ground that they could be linked to the responsibilities assigned to those organisations“, even if “they are not covered by any of the general derogations” provided for by CMO Regulations and, in such a context, if anticompetitive practices such as price-fixing could be exempted in so far as they were aimed at achieving CAP’s objectives.

On the one hand, the FCA and the European Commission sought that the judges strictly limit specific exemptions, arguing that if producers may exchange information necessary to accomplish their tasks, this cannot result in cooperating on minimum prices and quantities.

On the other hand, the endives producers and organisations urged the judges to take into account the useful effect of EU agricultural rules. In the context of producers being subject to significant economic violence, especially from food retailers with significant market power, the producers and organisations claimed that achieving CAP’s goals justified the benefit of an exemption from competition rules.

This position was supported by the French government. The government argued that producers should be allowed to set up comprehensive measures to alert each other on a “strategic price” when considering a removal of produce from the market, to avoid oversupply and price collapse.

What’s Next?

Following the conclusion of the hearing on 31 January 2017, the Advocate General Nils Wahl announced that he will release its conclusions on the case on 6 April 2017. According to press reports, a judgement could be expected before summer 2017.

This case shows that competition law enforcement tends increasingly to take into consideration the specificities of agricultural activities in a context of an economic crisis.  Quite how far these factors will be taken into consideration will be seen when the CJEU delivers its verdict.