“Acceptable” Cartels at the Crossroads of EU Competition Law and the Common Agricultural Policy: A Legal Inquiry into the Political, Economic, and Social Dimensions of (Strengthening Farmers’) Bargaining Power

• Date: 01 September 2020
• DOI: 10.1177/0003603X20929122
• Author: K. J. Cseres
• Published date: 01 September 2020

Article
The Antitrust Bulletin
2020, Vol. 65(3) 401-422
“Acceptable” Cartels at the
ª The Author(s) 2020
Crossroads of EU Competition
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Law and the Common
DOI: 10.1177/0003603X20929122
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Agricultural Policy: A Legal
Inquiry into the Political, Economic,
and Social Dimensions of (Strengthening
Farmers’) Bargaining Power
K. J. Cseres*
Abstract
Why does the European Union (EU) law allow for special treatment of the agricultural sector? Which
exceptions exist in applying the EU competition rules in this sphere, and how has their interpretation
evolved? How do these derogations address the fragmented nature of the agricultural sector and
strengthen farmers’ bargaining powers, and what are the justifications for doing so? These are the
questions that the current article seeks to answer, by analyzing the specific constitutional constellation
of the EU’s agricultural policy alongside its competition rules. This article critically analyzes how
derogations in the field of agriculture have developed in a market-oriented way, yet an unresolved
tension remains with the objectives of the Treaty’s competition rules. This article revisits this tension
and its underlying legal framework by taking account of the risk of political capture as well as of rel-
evant socioenvironmental externalities, most notably environmental and social sustainability, which
could shape its transformation in the future.
Keywords
cartels, agriculture, Common Agricultural Policy, unfair trading practices
I. Introduction
In 2012, the Hungarian Competition Authority (GVH) started an investigation into melon producers
and several trade associations, the Hungarian Melon Association and Hungarian Interbranch
* Amsterdam Centre for European Law and Governance, Faculty of Law, University of Amsterdam, Amsterdam, the
Netherlands
Corresponding Author:
K. J. Cseres, Amsterdam Centre for European Law and Governance, Faculty of Law, University of Amsterdam, Nieuwe
Achtergracht 166, 1018 WV Amsterdam, the Netherlands.
Email: k.j.cseres@uva.nl

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The Antitrust Bulletin 65(3)
Organization (IBO) for fruits and vegetables,1 who together had allegedly agreed on a “fair” minimum
price for watermelons produced in Hungary, as well as on restrictions to the distribution of imported
watermelons. The alleged agreement had been initiated by the Hungarian Ministry for Rural Devel-
opment, with the aim of securing a fair standard of income for farmers. After the GVH started its
investigation, the Hungarian Parliament adopted an amendment to the applicable domestic legalization
on IBOs,2 which thereafter exempted otherwise restrictive agreements in the agricultural sector from
the general prohibition on anticompetitive agreements contained in Hungarian competition law.
Although this move was investigated by the European Commission, the latter merely raised concerns
about the fact that the adopted law prevented the national competition authority (NCA) from sanction-
ing cartels on agricultural products. The Commission did, however, not question the underlying
premise of exemption itself and eventually dropped the case.
Although this episode is, first and foremost, an example of political capture within the Hungarian
competition enforcement system, the case raises fundamental questions that are equally relevant to the
application of the European Union (EU) and national competition rules across the various Member
States. Why does EU law allow for special treatment of the agricultural sector and what exceptions, in
particular, exist to the application of the competition rules? How do the derogations found within EU
law seek to remedy the fragmentation of farmers and strengthen their bargaining powers? What are the
justifications for these derogations, and how has their interpretation evolved within the current EU law
and policy framework? Tackling these complex questions—in short, when might ostensibly antic-
ompetitive behavior be considered permissible in the agricultural sector, and on what basis?—is the
focus of this article.
Ever since the inception of the Common Agricultural Policy (CAP) in 1962, the EU legislator has
sought to find ways to reinforce farmers’ bargaining power, while endeavoring to reconcile such
efforts with the EU competition rules. The perceived “special” nature of the agricultural sector under-
lies a fear that, if agricultural production and markets are left unregulated, they will fail to deliver a
secure and safe supply of food at stable and reasonable prices, which will in turn lead to a decline of
farm incomes and rural communities as well as natural resources and ecosystems. Accordingly, within
the EU, agriculture has been subject to constant market intervention in the form of direct subsidies,
rural development programs, and specific interventions in times of crisis.3 Over time, however, this
governance approach has been challenged by, among other factors, the increasing internationalization
of trade, the growth of neoliberal policies and institutions, and the privatization of agricultural market
regulation that increasingly requires a market-oriented approach. Thus, as market liberalism gained
political momentum in the 1980s, the EU law and policy of agriculture similarly developed in a more
market-oriented way. There is an inherent tension, however, between the notion that the agriculture
sector merits special treatment yet that it also requires ever-greater market orientation.
To understand these developments, and the remaining unsolved tensions, it is necessary to analyze
the specific constitutional constellation of the CAP and the EU competition rules. As the Court of
Justice has recognized, the CAP enjoys precedence over the objectives of the Treaty’s competition
rules.4 The CAP is not a competition-free zone, however, and the agriculture sector has been increas-
ingly subject to market mechanisms. Nonetheless, the CAP incorporates both general and specific
derogations from the application of the EU competition rules. One of the main reasons for these
exemptions, and indeed an explicit objective of the CAP itself pursuant to Article 39 of the Treaty
1. Case Vj-62/2012. Gazdas´agi Versenyhivatal.
2. Act No.CLXXVI of 2012 on interbranch organizations and on certain issues of the regulation of agricultural markets adopted
on Nov. 19, which amended Act CXXVIII of 2012.
3. A discussion of the main features of the CAP can be found on the Commission’s website at http://ec.europa.eu/info/food-
farming-fisheries/key-policies/common-agricultural-policy/cap-glance_en.
4. Case C 671/15, APVE and Others, EU:C:2017:860, para. 37.

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Cseres
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on the Functioning of the European Union (TFEU), is to strengthen the bargaining power of farmers
and their associations and to guarantee the fair standards of living and reasonable consumer prices. The
most recent Regulation 1308/2013 (CMO), accordingly, specifically provides the instruments for such
cooperation for all agricultural sectors. Yet this legislation has created even greater legal complexity
between agricultural and competition law, and greater legal uncertainty, by preserving a mix of old and
new policies that coexist in an unbalanced way. The different concepts underlying EU competition law
and the agricultural derogations in the CMO Regulation thus give rise to regulatory confusion and
uncertainty in interpretation. The lack of guidance has discouraged farmers and other private actors
from making use of the relevant derogations and has encouraged NCAs to adopt diverging approaches
to the interpretation of the agricultural exemptions.
Beyond the overarching tension between these different policy fields, this article reveals
another layer of inconsistency. This relates to the transformation of the CAP itself as a result
of, on the one hand, its adaptation to an institutional environment with liberalized markets and
transnational value chains and, on the other, pressing social and environmental concerns such as
sustainability, climate change, biodiversity, or food security. As the CAP has become subject to
market rules to a greater extent, it has been opened up to existing EU legal mechanisms, such as a
weighing against other EU policy objectives under the proportionality test developed in the
context of the internal market rules, and the Treaty’s linking clauses. However, these legal
mechanisms have not (yet) been operationalized in a systematic way in EU competition law.
Additionally, since 2004, EU competition law has operated within a narrowly defined analytical
framework focused on price and the consumer welfare standard, that has so far proved relatively
inflexible in terms of the integration of noneconomic concerns. This inconsistency surfaces, in
particular, with regard to a new layer of EU law, namely, Directive 2019/633, which has been
adopted to improve the bargaining power of agricultural producers vis-a`-vis other market parti-
cipants by prohibiting specific types of unfair trading practices.
This article will first map and critically analyze the tensions that have emerged between the
special treatment granted to the agricultural sector under EU law and the EU competition rules.
Second, it will assess how derogations in the field of agriculture have developed, over time, in a
more market-oriented way, while maintaining an unresolved tension with the objectives of the
Treaty’s competition rules. The aim of this article is to revisit this tension and its underlying legal
framework, by taking...