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The German national competition authority, the Bundeskartellamt, has made a number of highly controversial recommendations concerning milk supply contracts, within an interim report on its on-going investigation into competition in the German dairy industry.

The investigation is chiefly focusing on Deutsche Milchkontor (DMK) which is a joint cooperative-plc structure and the largest dairy in the country, with over 8,500 suppliers. However the majority of dairies active in Germany have also been asked to supply extensive information on their supply agreements with farmers.

The report criticises a combination of factors within supply agreements, which it believes is limiting competition in the sector and proposes a number of recommendations to loosen the links between farmers and their dairies. Specific areas under review include contract duration lengths, exclusivity of supply and ex post pricing.

These recommendations have no legal weight but are aimed to launch a broad discussion and motivate voluntary change in the sector in Germany.

These proposals have been met with outcry by the German industry. ICOS is in close contact with our German counterparts, the Deutscher Raiffeisenverband (DRV), who are actively opposing the recommendations within this report and providing input to the authority.

As milk supply agreements are provided for in EU law, they are not in breach of competition rules and therefore these recommendations are considered off-point. These agreements are also laid out in cooperatives statutes, based on the democratic decision made by the farmers involved in that cooperative, something that has been ignored within this report. Changing these statutes is at the farmers discretion.

Loosening the links between farmers and their dairies in this way would seriously expose both the producer and the cooperative, particularly given the perishable nature of milk. It is hoped and believed that the final report will be limited in scope to a select few changes.

By Alison Graham                                                                                                                                                            European Affairs Executive

Tags: Bundeskartellamt, German Competition Authority