EU Proposals for the Dairy Industry

Written evidence submitted by the European Commission (DRY 15)

Follow up questions to the oral evidence session on Tuesday 3 May 2011

1. Please could you clarify why the Commission's proposals for Producer Organisations in Dairy do not include the grants for adding value that were available to those in Fruit and Vegetable Producer Organisations? What grants will be available to Dairy Producer Organisations?

As regards the aid for producer organisations (PO) in the fruit and vegetable sector, please see Regulation (EC) No 1234/2007, Title I, Chapter IV, Section IVa, on aids in the fruit and vegetable sector.

Contrary to milk, where ± 95% of the production is delivered to dairies for adding value by processing into dairy products fit for consumption, most of the fruits and vegetables are fit for direct consumption after having been harvested, cleaned, possibly cut and packaged. Therefore value can be added at farmer level especially where they are organised in producer organisations, which allows also to concentrate the offer.

To start a public aid scheme to finance investments in processing milk by PO would create distortion of competition between such PO's and existing industry. However, nothing prevents producer organisations to develop into a processing co-operative on the basis of investments paid by the members.

A proposal is made to grant starting up aids (no investments) for setting up producer groups that can develop into producer organisations (see COM (2010) 537 final, point 7).

2. You referred to Mr Paice, the Minister for Agriculture's involvement in a forum on the functioning of the food chain. Please could you provide the Committee with additional information on the workings and output of this forum?

Please see Commission Decision establishing the High Level Forum for a better functioning Food Supply Chain (Official Journal C 210 of 3.8.2010, page 4).

3. Under current EU competition law, what is the limit on the proportion of national or EU-wide milk production that can be produced by a single co-operative or private company?

There is no such limit. Article 102 TFEU only prohibits abuse of a dominant position; it does not prohibit the existence of a dominant position itself. Under the Merger Control Regulation, however, as administered by DG COMP, however, mergers of undertakings may be prohibited if the size of the resulting entity would give rise to competition concerns. No such rules would apply to the normal growth of an entity (e.g. by more members joining a co-operative).

4. Can you explain what ability National Competition Authorities will have to investigate cases of unfair competition under the current European Commission Milk Package proposals?

First, it is worth noting that currently EU competition law applies to the dairy sector, pursuant to Article 175 sCMO, subject to the limited exceptions of Article 176. Therefore both NCAs and the Commission (DG COMP) may apply the general rules on cartels and monopolies (EU and/or national) in the dairy sector in the same way as in other sectors of the economy under general competition law.

The only changes made to this situation by the dairy proposal are a limited anti-trust exemption for certain activities of dairy inter-branch organisations, and in particular a provision permitting collective negotiations by producer organisations on behalf of their members with dairy processors (subject to certain limits) as set out in the milk package proposal point 4, adding a new Article 126a to the sCMO..

To apply this Article, the competent national authorities first have to recognise the producer organisation. They should also ensure that the provisions of Article 126a are respected. In case that competition is excluded or to avoid serious prejudice to SME processors, National Competition Authorities may intervene in situations covering their national territory (see paragraph 5 of the same proposed Article).

May 2011