Joint activity by agro-food producers can have a number of beneficial effects. Farmer cooperatives, for example, have the potential to serve pro-competitive purposes and to increase efficiency. Joint activity can nonetheless generate significant harm to consumers when it focuses on price-or quantity-setting and there is relatively little competition from close substitutes. In these cases, the joint activity can constitute cartel behaviour. At times, governments are partially responsible, despite the harm to consumers from the high prices that result from limiting production. Buyer power is a common concern. It can generate harm to consumers, but this is unlikely unless the buyer also has market power as a seller. Some standards set by producers can result in limiting output. In such cases, standards setting may serve anti-competitive purposes and merit review by a competition authority. Competition authorities have a beneficial role to play in the agro-food sector. There are three common areas of activity: prosecuting bid-rigging among buyers, challenging anticompetitive mergers and advocating against over-inclusive selling co-operatives, and potentially prosecuting price-fixing by producers. Elimination of competition law exemptions for the agro-food sector would increase the role of markets and generally benefit consumers. This document comprises proceedings in the original languages of a Roundtable on Monopsony Buying and Joint Selling in Agriculture which was held by Working Party N°2 of the Competition Committee in June 2004.
Competition and Regulation in Agriculture: Monopsony Buying and Joint Selling