AGRAVIS information and dialogue event: Cooperatives and competition

“Cooperatives, Management and Competition – Opportunities and Rules”: This is the name of an information and dialogue event organised by AGRAVIS Raiffeisen AG in Hanover. Andreas Mundt, the country’s top competition regulator, gave a talk on this subject to some 160 representatives of main and primary cooperatives (Haupt- und Primärgenossenschaften). The President of the German Federal Cartel Office began his speech by acknowledging and making a clear commitment to the cooperative system.

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The Chairman of the Supervisory Board of AGRAVIS, Franz-Josef Holzenkamp (left) thanked panel members Christoph Kempkes, Andreas Rickmers, Andreas Mundt, Dr Clemens Große Frie, Prof. Klaus Josef Lutz and Dr Ludger Schulze Pals (from left) for their lively contributions to the discussion about: “Cooperatives, Management and Competition – Opportunities and Rules”.AGRAVIS information and dialogue event: Cooperatives and competition
The Chairman of the Supervisory Board of AGRAVIS, Franz-Josef Holzenkamp (left) thanked panel members Christoph Kempkes, Andreas Rickmers, Andreas Mundt, Dr Clemens Große Frie, Prof. Klaus Josef Lutz and Dr Ludger Schulze Pals (from left) for their lively contributions to the discussion about: “Cooperatives, Management and Competition – Opportunities and Rules”.

He said that it has a special kind of authority and is able to improve the position of relatively small, underdog market participants. “But cooperatives must also abide by competition rules,” emphasised Mundt. “Cooperatives have no special privileges.”

Mr Mundt made it unmistakably clear that, although the law allows agricultural producers and farming communities to make agreements about the production and sale of agricultural products within narrow parameters, more wider-ranging arrangements regarding prices and sales regions are nevertheless a no-no. The regional principle frequently cited in connection with cooperatives therefore does not really exist from a legal standpoint. “Cooperatives are just ordinary competitors.” This applies to dealings between primary cooperatives (Primärgenossenschaften) just as much as to their relationship with main cooperatives (Hauptgenossenschaften) if they are operating at the same market level. This obviously also applies to dealings between main cooperatives.

Supra-regional markets in agricultural trading

On the wholesale side of agricultural trading, Mr Mundt regards markets as being supra-regional, sometimes even transcending national boundaries, whereas field crops were gathered at harvest time in spatially small-scale markets. In his explanations, the President of the Cartel Office picked up on several cases that had attracted widespread publicity. He said that the merger of Edeka and Kaiser’s/Tengelmann, which had initially been blocked by the Cartel Office but was subsequently allowed by ministerial approval, was not ideal from a competition perspective. “It is leading to further concentration in food retail and will not make life any easier for suppliers.”

The interests of agriculture must be met

The representatives of cooperatives in the audience also listened attentively to what Mr Mundt had to say about reviewing the terms of delivery for raw milk. Mr Mundt stated that investigations are underway to determine whether the combined net effect of 100%-compulsory pools, long-term contracts and notice periods, as well as reference price systems and the way that milk payments are paid out might be restricting competition to an inadmissible extent. “The Federal Cartel Office is looking for a solution that meets the interests of agriculture.”

Competition rules for cooperatives

Mr Mundt’s statements were examined in greater detail and vigorously debated during a panel discussion chaired by Dr Ludger Schulze Pals (Editor in Chief of top agrar). The former Chairman of the Managing Board of AGRAVIS, Dr Clemens Große Frie, criticised the potentially long time periods that are under investigation by the Cartel Office. Große Frie said that, of course, cooperatives abide by competition rules but, because the time periods involved are so long, they have to be given a chance to learn more about them. In reply to Große Fries, Mr Mundt stressed that the Cartel Office obviously does not intend to put pressure of any kind on key witnesses by applying the so-called bonus arrangement, that their statements would always be critically scrutinised and that there is a need to ensure that possible fines do not push companies into insolvency.

Innovative, efficient, affordable solutions

Große Fries’s successor, Andreas Rickmers, emphasised the advantages of the cooperative association. “We aim to offer agriculture innovative, efficient, affordable solutions.” He said that a two-tier structure is the right model for achieving this. Prof. Klaus Josef Lutz, Chairman of the Managing Board of Baywa AG, reminded the audience of the origins of the cooperative system. It was born of an act of solidarity and the need to organise regionally in order to cope with famine and expand people’s own businesses. “This created regional business structures that were delineated along lines that no longer have any significance nowadays.”

Christoph Kempkes, Chairman of the Managing Board of RWZ Rhein-Main eG, bemoaned the prevailing sense of insecurity and uncertainty in the world of cooperatives. “Nobody really knows what’s allowed and what’s not.” He said he would welcome any clarification regarding competition law in the form of practical guidelines relating to day-to-day actions.

On the subject: Federal Cartel Office

The Federal Cartel Office is based in Bonn; its main tasks include merger control, anti-trust proceedings, e.g. in the event of agreements involving prices, customers and regions, and abuse proceedings of the kind that are currently taking place in the digital economy in particular. The Federal Cartel Office enforces German and European anti-trust law. The fines levied in the event of anti-trust violations vary greatly from year to year, they totalled 1 billion euros in 2014. The Federal Cartel Office was set up in 1958, employs around 350 staff and has an annual budget of around 30 million euros.

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