On January 18, 2022, the German Federal Cartel Office (“FCO”) published a press release of its review of two sustainability initiatives (see our blog post here). Only a week later, on January 25, 2022, the FCO provided further guidance for the implementation of sustainability initiatives under competition law: It concluded that a proposed agreement in the milk sector to introduce surcharges for the benefit of milk producers was anticompetitive. However, the FCO indicated that it would be open to consider a revised concept including sustainability objectives which is not based on a price agreement to the detriment of consumers.
In recent years, milk producers claimed that they faced economic difficulties due to the low prices for raw milk which often did not cover their costs. To address this issue, in the informal discussion group Agrardialog Milch (“Agrardialog”), milk producers, dairy companies and food retailers discussed the introduction of retroactive surcharges on the base milk price based on the average milk production costs for agricultural businesses. The FCO reviewed the proposed financial scheme as part of its offer to provide competition law guidance for new sustainability initiatives.
The proposed agreement violates competition law
The FCO rejected the proposed agreement because it did not improve sustainability in the milk sector, but the proposed scheme of surcharges would ultimately lead to price increases for consumers as they would not be able to switch to viable alternatives. The FCO’s president Andreas Mundt clarified that “the economic interest in a higher level of income per se cannot justify the exemption of such an agreement from competition law rule”. While according to Agrardialog, the surcharge was instrumental in financing the transformation of the agricultural sector, the FCO concluded that the proposed agreement did not include any sustainability aspects and thereby the initiative, in the words of Andreas Mundt, “clearly exceeds the boundaries of competition law”. Against this background, the proposed financial scheme could all the more not benefit from newly introduced rules at EU level which generally exclude from competition law scrutiny agreements that aim to apply a higher sustainability standard for agricultural products. Still, Mr. Mundt noted that “Agrardialog can at any time present us with a sustainability concept which is not based on a price agreement to the disadvantage of consumers”.
The FCO’s review of the proposed agreement in the milk sector as well as the review of the two sustainability initiatives concluded earlier this month, show that the FCO is generally open to consider sustainability considerations and to work with parties to implement their sustainability initiatives. Nonetheless, the FCO will carefully assess the initiatives’ compatibility with competition law. In particular, the FCO draws a red line where the agreement impacts prices without any clear sustainability benefits and it does not tolerate the “greenwashing” of anticompetitive cooperations.
 Article 210a Regulation (EU) No 1308/2013 of December 17, 2013 establishing a common organisation of the markets in agricultural products, as amended by Regulation (EU) 2021/2117 of December 2, 2021.