ACM puts the ball in the legislator’s court with agro-nutri monitor 2022: will there be a single sustainability label? - Lexology

2022-11-28 06:35:25 By : Ms. Aimee Chen

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ACM puts the ball in the legislator’s court with agro-nutri monitor 2022: will there be a single sustainability label? - Lexology

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In October 2022, the Consumer & Market Authority ("ACM") published its third Agro-Nutri Monitor. As in the previous two versions, the ACM examined price formation in the agricultural and food supply chain and provided insight into the bottlenecks that exist in making this supply chain more sustainable. The Agro-Nutri Monitor fits within the great interest that the ACM and other competition authorities in the European Union currently have when it comes to sustainability. In this blog we take stock after three Agro-Nutri Monitors and discuss the ACM's recommendations to the Minister of Agriculture, Nature and Food Quality (the "Minister").

In 2019, in response to declining sales prices of farmers, the Taskforce Verdienvermogen was established with the goal of investigating what preconditions are needed to accelerate (and make affordable) the path to circular agriculture. Also more attention had to be paid to the question of how to deal with higher than mandated requirements of sustainability, environmental friendliness, greenhouse reduction, animal welfare, (bio)labels. In that context, the ACM was instructed to develop the so-called Agro-Nutri Monitor. The ACM has since published three monitors.

The first Agro-Nutri Monitor focused on the sustainable production and pricing of the following products: onions, white cabbage/sauerkraut, pears, tomatoes, cow's milk and pork. The main conclusion from this monitor was that there appears to be little demand domestically and abroad for sustainable products. According to the ACM, producers of organic products received an average premium price that covers the average additional costs. Although there was much criticism on this conclusion, among others, from LTO Nederland, Glastuinbouw Nederland, the Dutch Fruit Growers Organization and the Biohuis, the ACM maintained this position in subsequent monitors. Read more about the Agro-Nutri Monitor 2020 in this blog.

The conclusions of the second Agro-Nutri Monitor largely overlap with the conclusions of the 2020 monitor. In 2021, the ACM specifically focused on the following products: yellow onions, (solid-bioling) unpeeled table potatoes, Brussels sprouts, round tomatoes and vine tomatoes, hand pears, daily fresh milk products and fresh packaged pork. Stronger than before, the ACM concluded that the higher price for sustainable products is the biggest barrier to increased sustainable production. Consumers are not willing to pay the higher price as long as there are cheaper alternatives on the shelves. Read more about the Agro-Nutri Monitor 2021 in this blog.

On 20 October 2022, the ACM published its third Agro-Nutri Monitor. In this monitor, the ACM deals specifically with price formation in the agriculture and food supply chain, from farmer to Dutch supermarket. Again, the ACM focused on a number of specific products: ware potatoes, onions, pears, tomatoes, mushrooms, daily fresh milk and pork. The ACM's main conclusions are as follows:

The ACM also commissioned a number of additional studies. For example, a research into supermarkets' strategies to encourage more sustainable purchasing behavior by consumers. Supermarkets make their assortment more sustainable by gradually replacing regular products with sustainable products. The scale at which this happens depends very much on the type of product (fresh products are ahead of processed, preserved or frozen products). What is striking in this context, the ACM believes, is that supermarkets apply almost no strategy to encourage consumers to actually buy these sustainable products. This choice is left to the consumer.

The ACM also did a case study in Denmark. Since sustainability in Denmark has taken off more rapidly than in the Netherlands, the ACM looked into the reasons for this. According to the ACM, the government in Denmark played an active role in increasing sustainability early on, by (i) stimulating the supply and demand of sustainable products (marketing), (ii) securing the strict requirements of the Danish organic (sustainability) label (trust), (iii) targeting both supermarkets and the hospitality industry (awareness) and (iv) encouraging sustainable consumption within the government (example). Furthermore, there is a lot of cooperation within the supply chain in Denmark, consumers are more willing to pay a higher price for sustainable products, and only one well-known sustainability label is used.

Based on its conclusions from the monitor and the additional studies, the ACM makes a number of concrete recommendations to the Minister. These recommendations are in line with the findings of Johan Remkes' report released in October 2022. The ACM calls on the Minister to:

With these recommendations, the ACM makes it clear that it is now up to the legislature to take the sustainability of the agriculture and food supply chain to the next level. In this context, the ACM advises the Minister to appoint a institution/agency that will push forward the aforementioned recommendations.

Following the recommendations, the ACM calls for the creation of one unified sustainability label for Dutch products. This is necessary to stimulate sustainable consumption. Demand for sustainable products is now too low, according to Martijn Snoep, ACM chairman, since "consumers sometimes can no longer distinguish between all sustainability labels."

The label should apply in both supermarkets and restaurants and be recognized abroad (benchmarking). The ACM thus calls for the Danish example to be followed. Although the ACM does not discuss in the press release whether this new sustainability label should replace all current sustainability labels, it is certainly clear that the number of sustainability labels must, according to the ACM, be reduced considerably.

In competition law terms, this appeal is interesting. A uniform sustainability label that is widely used will potentially qualify as a recognition scheme. While recognition schemes have important economic benefits, there may also be a downside. As the sustainability label becomes more widely used, producers who do not meet the requirements of the label will be excluded from the market. For this reason, a sustainability label may violate the cartel prohibition in Article 6 of the Competition Act ("Mw") and Article 101 of the TFEU. The ACM Guideline on Cooperation between Competitors explains the cumulative conditions under which a label is compatible with the cartel prohibition:

If the ACM's call for a unified label will be heard in the agri-food sector, the label will have to meet the above conditions. For more information on recognition schemes, read this blog.

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ACM puts the ball in the legislator’s court with agro-nutri monitor 2022: will there be a single sustainability label? - Lexology

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