After farmers’ protests German Monopolies Commission warns against premature market intervention

9 months ago 46

In the wake of the farmers’ protests, the German government tried to pin the blame on supermarkets, but now the German Monopolies Commission has concluded that there are indeed imbalances, although it warns against hasty political decisions.

Economy Minister Robert Habeck (Greens) tasked the country’s Monopolies Commission with analysing the food chain for imbalances in market power. For the German Green party, it is not the EU’s environmental proposals that are to blame for the farmers’ precarious situation but the dominant pricing behaviour of food retailers.

A preliminary report by the Monopolies Commission concluded that “the structures of the food supply chain in Germany show signs of potential issues in terms of competition and of market power.”

However, the advisory body explicitly warned against hasty political reactions.

“Special regulations already exist today that smaller producers of agricultural products can use to strengthen their bargaining power,” Jürgen Kühling, chair of the Monopolies Commission, told Euractiv.

He urged caution, however, saying that “these possibilities naturally carry risks, such as agricultural businesses that are not involved being squeezed out of the market.”

Utilise existing opportunities first

The preliminary report recommends that “interventions in agricultural markets or food supply chains to strengthen the market position of farmers should only be undertaken cautiously and on a clear factual basis.”

The market structures should first be thoroughly analysed to assess the risk of unwanted distortions of competition, also to the detriment of farmers.

When announcing the investigation, German Agriculture Minister Cem Özdemir wanted to review unused EU regulations – such as Article 148 of the EU’s Common Market Organisation (CMO), which could introduce a contractual obligation for raw milk deliveries.

Although this would give dairy farmers planning security, according to the MEG Milch Board, it would only apply to around 30% of them, as the majority are organised as cooperatives, and the regulation would not apply to them.

Other available measures would be “For example, various forms of cooperation in the production and marketing of agricultural products that are not permitted in other sectors,” says Kühling.

At the beginning of the year, farmers in Germany took to the streets to protest against a planned cut in diesel subsidies that would cause them financial hardship, blocking several motorways and city centres. This culminated in a rally of 30,000 farmers and 5,000 tractors in Berlin in January.

However, the government saw little room for manoeuvre to back away from the planned cuts, as savings in the federal budget were necessary to plug a €17 billion gap in the budget after the Constitutional Court declared the proposed budget unconstitutional.

Other approaches were therefore sought to support the agricultural sector, with parts of the government quick to blame the pricing policies of supermarket chains.

The German Farmers’ Association (DBV) did not comment on using the already available option despite being asked several times by Euractiv.

Preliminary investigation

The Monopolies Commission’s report points out that “due to the highly internationally organised supply chains and the common organisation of agricultural markets by the EU,” such discussions would not only affect Germany, as similar problems also affect other European countries.

The problem of buyer market power in the food chain is not new. “There is now a broad consensus in economic research that food markets are often not fully functioning competitive markets,” the report reads.

In Germany, there has “historically been a high level of market concentration in the food retail sector, which has increased further since 2011. In some cases, high market concentrations can also be seen at the processing level.”

A look at the farmers also shows that the share “of sales revenue from end products has fallen steadily in recent decades.”

“Overall, even based on this preliminary analysis of the food supply chain, potential indications of existing market power can be identified, which could be to the detriment of farmers.”

Next steps

The Monopolies Commission itself sees sufficient evidence of market power within the supply chain to warrant a more in-depth investigation planned for early 2025. It is also considering “recommending a sector inquiry by the Federal Competition Authority”, according to the report.

According to the Federal Ministry for Economic Affairs and Energy (BMWK), further steps are being discussed in close dialogue with various players in the food supply chain. The aim is to examine “whether and, if so, where there is a need for legal adjustments,” a BMWK spokesperson told Euractiv.