The European Commission (“Commission”) issued its first opinion regarding the compatibility of a sustainability agreement with competition rules for the agricultural sector on July 14. The Commission’s opinion is a milestone in the intersection of sustainability objectives and competition law in the European Union (“EU”). Through the opinion, the Commission approved a French wine sector agreement that establishes indicative pricing for organic and Haute Valeur Environnementale (“HVE”) wines, a French certification system for farms and vineyards that demonstrates a high level of commitment to environmental protection. The Commission’s landmark opinion provides guidance on how agricultural producers can collaborate on sustainability initiatives through a specific exemption to EU competition law requirements, but it raises important considerations regarding antitrust compliance for other sectors and other jurisdictions.
Key Features of the Sustainability Agreement and the French Wine Sector
The approved sustainability agreement addresses the challenging economics facing sustainable wine production in France’s Occitanie region. The French wine sector is currently experiencing significant oversupply, changing consumer preferences, and increased consumer price sensitivity linked to inflation, creating financial pressures that threaten to drive producers away from sustainable practices.
Accordingly, the sustainability agreement, which involves both wine producers and buyers in the supply chain, aims to incentivize the producers to keep producing sustainably by setting orientation prices at a level covering the costs of producing in accordance with one of the two relevant sustainability standards (organic or HVE), in addition to a profit margin of up to 20% of such costs. The orientation prices will be set on an annual basis for each standard for six grape varieties. The agreement will be in place for two years.
Article 210a CMO Regulation
Typically, sustainability agreements that involve an element of price fixing are likely to run afoul of the prohibition on anti-competitive agreements and practices under Article 101(1) of the Treaty on the Functioning of the European Union (“TFEU”). Typically, exceptions to Article 101(1) may be made if the sustainability benefits meet the cumulative conditions set out in Article 101(3) of the TFEU, in particular that a sustainability agreement “allow[s] consumers a fair share of the resulting benefit” of the agreement.
Here, however, the Commission’s positive opinion relies on Article 210a of Regulation (EU) 1308/2013 (the Common Organization of Markets in Agricultural Products or “CMO Regulation”), which exempts restrictions of competition in agreements in the agricultural sector that are indispensable to achieving sustainability standards higher than EU or national mandatory standards. This provision, introduced in December 2021 by EU Regulation 2021/2117, creates a specialized exemption for agricultural sector sustainability agreements, which is significantly more permissive than general EU competition law exceptions. Guidelines were subsequently published by the Commission on how producers in the agri-food sector can design joint sustainability initiatives in line with Article 210a.
In order to qualify for the exemption, the following must be true:
- The agreement must involve agricultural producers
- The agreement must relate to trade in agricultural products
- The agreement must aim to contribute to sustainability objectives beyond mandatory legal requirements; and
- Any competitive restrictions must be indispensable to achieving sustainability standards
Looking Forward – Diverging Approaches
The Commission’s first Article 210a opinion establishes important precedent for agricultural sustainability cooperation while highlighting the complex intersection of environmental objectives and competition law. As regulatory frameworks continue evolving across jurisdictions, companies must carefully navigate this patchwork of approaches to achieve sustainability goals while maintaining legal compliance.
While the agricultural sector now benefits from clearer guidance, broader questions remain about balancing competition policy with sustainability imperatives across other industries. This intersection will remain a dynamic area requiring close monitoring as regulatory frameworks continue to develop, as demonstrated by the diverging approaches taken by the EU, U.K., and U.S. highlighted below:
- EU Position: The agricultural sector benefits from Article 210a’s specialized exemption, while broader sustainability agreements must meet traditional Article 101(3) requirements, including demonstrating consumer benefits.
- U.K. Position: The Competition and Markets Authority (“CMA” – the United Kingdom’s primary competition and consumer protection regulator) introduces a more permissive approach with regard to the exemption for climate change agreements, whereas the Commission recognizes only the benefits accruing to consumers in the relevant market. The U.K.’s Green Agreements Guidance allows consideration of totality of benefits to the U.K. population for climate change agreements.
- U.S. Position: U.S. antitrust laws provide no exemption or “safe harbor” for climate-related activities, and collaborations could give rise to antitrust risk even when their objectives are consistent with scientific and public policy priorities. The current federal administration and various individual states take an increasingly adversarial stance toward ESG (environmental, social, and governance) cooperation, particularly where it is perceived in potential conflict with U.S. antitrust laws.
Prospects for EU-type sustainability agreements in American Viticulture
The stark contrast between EU accommodation and U.S. skepticism toward anti-competitive sustainability agreements raises important questions about the viability of similar cooperation in American wine regions. The French wine agreement’s orientation pricing model would face significant legal obstacles under current U.S. antitrust law.
Most notably, the Sherman Act broadly prohibits anticompetitive agreements and unilateral conduct that monopolizes, or attempts to monopolize, the relevant market, with agreements among competitors to fix prices or wages, rig bids, or allocate customers, workers, or markets, being criminal violations. A sustainability agreement establishing “orientation prices” similar to the French model would likely be viewed as horizontal price-fixing (where competitors on the same level artificially set or maintain prices at a certain level), which is illegal per se under U.S. law.
The American approach: Lessons from the wine industry
Despite operating under more restrictive antitrust laws than their European counterparts, American wine regions have achieved remarkable sustainability leadership through innovative organizational structures that emphasize individual company excellence, comprehensive certification programs, and industry-wide standards. U.S. wine producers have navigated Sherman Act limitations by developing sophisticated sustainability frameworks that maximize industry cooperation through certification, education, and standard setting, while carefully avoiding the market coordination mechanisms and pricing coordination that could trigger U.S. antitrust violations. This individual-focused strategic approach has enabled extensive collaboration on sustainability objectives while maintaining compliance with competition law, creating a model that differs markedly from the EU’s more permissive regulatory environment, yet achieves significant environmental and social outcomes.
The American wine sector’s approach presents important lessons for other U.S. businesses seeking to cooperate on sustainability:
- Information sharing: Businesses could share sustainability best practices and research, without coordinating on pricing.
- Standard setting: Industry associations could develop voluntary sustainability standards without mandatory pricing components.
- Cooperative marketing: Joint promotion of sustainable product categories might be permissible under the rule of reason analysis.
- Research consortiums: Collaborative research on sustainable practices could proceed if purely focused on innovation rather than market coordination.
Key takeaways and looking ahead
The Commission’s first Article 210a opinion marks a watershed moment in the evolution of competition law’s treatment of sustainability agreements in the EU, demonstrating how regulatory frameworks can adapt to accommodate environmental imperatives while maintaining competitive oversight. The French wine sector agreement provides a practical blueprint for how EU agricultural producers can collaborate on sustainability pricing within a permissive legal structure designed to incentivize environmental stewardship.
However, the stark regulatory divide between the EU’s accommodating approach (particularly for the agricultural sector) and the U.S.’s restrictive antitrust environment highlights the challenges facing multinational companies seeking to implement global sustainability strategies.
American wine regions have proven that significant environmental progress is achievable through individual excellence and carefully structured industry cooperation, without the need for anti-competitive pricing coordination mechanisms that EU producers can now employ.
As sustainability pressures intensify and climate considerations mount, the divergent approaches between major wine-producing regions will likely influence not only industry practices but also broader policy discussions about competition law’s role in addressing environmental crises. The success of both models—the EU’s collaborative pricing framework and America’s individual-based certification-based approach—suggests that sustainable business practices can thrive under different regulatory paradigms, though the tools available to achieve these goals vary significantly across sectors and jurisdictions, requiring competent analysis and legal counsel to ensure their success.
This legal alert is provided for informational purposes only and does not constitute legal advice. The information contained herein is based on publicly available sources and current law as of the date of publication. Legal requirements and interpretations may vary by jurisdiction and change over time. Companies considering sustainability agreements or initiatives should consult with qualified legal counsel familiar with applicable antitrust, competition, and regulatory laws in their relevant jurisdictions before taking any action. The analysis presented here should not be relied upon as a substitute for professional legal advice tailored to specific circumstances.