The Belgian Competition Authority issues opinion on draft laws relating to pricing in the agricultural sector

The Belgian Competition Authority issued on 8 May 2024 its opinion on three draft laws aimed at amending the Code of Economic Law regarding the pricing of agricultural products. The opinion concerns the compliance of the draft laws with competition law and highlights possible undesired side effects and its major concerns.

First, the Authority assessed the new disposition aimed at imposing conditions and mandatory clauses on sales made by agricultural producers. It expresses its concern it could lead to uniformity of contractual terms. Under the new framework, where a producer mandates an organization to negotiate on its behalf, conclusion of the contract with the buyer is subject to compliance with a framework agreement. The Authority recalls in its opinion that such aggregation into an organization should comply with the European Commission guidelines on horizontal agreements (between competitors) and especially with the requirements of the voluntary participation of producers and the prohibition of agreements between organizations on minimum prices, quantity and information exchange.

As for the draft article limiting the margin made in the mass retail sector on unprocessed agricultural products to the average margin made on all other sale products, the Authority is of the opinion that the ambiguity about the margin presented alternately as high and low should be resolved and that the notion of “product” should be clarified. The measure may also incentivize mass retail actors to raise their margins on other products and create a competitive distortion between distributors as small actors are excluded, on a questionable turnover criterion.

Regarding the limitation of rebates on agricultural products to a third of the normal displayed price and to a quarter of the annual expected sale volume, the Authority considers that there exists a risk of coordination between wholesale and retail sellers, and a risk of inflation. It may also lead to barriers to entry, preventing small competitors from proposing “super deals”. Furthermore, it is not clear whether this measure only concerns unprocessed products.

One of the draft laws provides for proceedings whereby the Price Monitoring Authority reports any margin or price issue on the market, leading to a temporary decision of the Competition College, which is the decision body of the Authority. The draft law should foresee for an advisory opinion from the General Auditor, head of the Investigation and Prosecution Service of the Authority. Such prior opinion from the Authority and/or the Price Monitoring Authority should also be provided when the Government considers taking price control measures in exceptional circumstances to protect consumers or undertakings.

Another measure aims at increasing the minimum price on food by a factor of 1.1, under which a sale would be at loss. On this issue, the Authority notes both an inflation risk and a distortion of competition between distributors, as those whose commercial strategy focuses on low prices and margins would be discriminated against, and an increased transparency in the market.

Finally, concerning the procedure whereby the Competition College imposes temporary measures, there should be a prior opinion from the General Auditor, and where the temporary measures are insufficient, the Authority should approve the potential imposition of a framework contract providing for other measures limited to a fixed term.

The Authority concludes its opinion by emphasizing the importance of an impact assessment prior to the adoption of the measures at stake, and the implementation of a review mechanism of their effects after a certain period.

The Belgian legislator must now review the draft laws in the light of the Authority’s recommendations.