Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Council Regulation (EC) No 1234/2007 as regards contractual relations in the milk and milk products sector
Date: 2010-12-09
Institutions: European Commission
Subjects: European Commission, common organisation of markets, exchange of information, intervention policy, milk, milk product

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EUROPEAN COMMISSION 

Brussels, 9.12.2010 
COM(2010) 728 final 

2010/0362 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

amending Council Regulation (EC) No 1234/2007 as regards contractual relations in the 
milk and milk products sector 

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EXPLANATORY MEMORANDUM 

After  the  Health  Check  decisions  in  November  2008,  the  milk  sector  went  through  a  deep 
crisis due to a shift in demand away from dairy products following exceptionally high prices 
in  2007.  To  overcome  the  crisis,  safety  net  tools  proved  their  efficiency  in  crisis  situations. 
The crisis also showed some shortcomings in the market orientation of the milk sector. The 
Commissioner  for  Agriculture  and  Rural  Development  therefore  decided  to  create  a  High 
Level Experts' Group on Milk (HLG) to work on a regulatory framework to be put in place 
for the medium and long term, which can contribute to stabilising the market and producers' 
income  and  enhance  transparency,  while  respecting  the  outcome  of  the  Health  Check.  The 
HLG met at ten meetings from October 2009 till June 2010 and produced a report on 15 June 
2010 accompanied by 7 recommendations. 

The HLG has made a thorough evaluation of all the questions and aspects that the proposal 
seeks to address. The HLG was composed by representatives of all EU Member States, was 
chaired by the Director-General  for  Agriculture and Rural Development of the Commission 
with the attendance of an observer from the European Parliament's secretariat. It obtained oral 
and written input from major European stakeholder groups in the dairy supply chain: COPA-
COGECA, European Milk Board, European Coordination Via Campesina (each representing 
farmers),  European  Dairy  Association  (dairy  processors),  EUCOLAIT  (dairy  traders), 
EUROCOMMERCE  (retailers)  and  BEUC  (consumers).  Further,  the  HLG  received 
contributions  from  invited  academic  experts,  third  country  representatives  (from  the  USA, 
New  Zealand,  Australia  and  Switzerland),  National  Competition  Authorities  and  the 
Commission's services (DG COMP and DG AGRI). A dairy stakeholder conference was also 
held on 26 March 2010 allowing a wider range of actors in the supply chain to express their 
views. 

The  report  and  recommendations  issued  by  the  HLG  were  examined  by  the  Council  and 
Presidency  conclusions  were  adopted  at  the  meeting  of  27  September  2010.  Those 
conclusions  urge  the  Commission  to  submit  by  the  end  of  the  year  its  response  to  the  first 
three recommendations of the HLG (contractual relations, bargaining power of producers and 
inter-branch  organisations)  and  to  rapidly  respond  to  the  HLG  recommendation  on 
transparency. 

One of the key aspects of HLG's work focussed on areas which relate to the structure of the 
market  and  the  actors  in  it:  contractual  relations,  bargaining  power,  producer  organisations 
and inter-branch organisations. The current market structure significantly worsened aspects of 
the 2009 milk crisis, reflecting the fact that the reform process started significantly later for 
the  dairy  sector  than  for  other  sectors  –  essentially  only  in  2003.  The  existence  for  a  long 
period of fixed quotas and high institutional prices, with, in effect, guaranteed outlets for dairy 
commodities created rigidities in the market. Structural adaptation was often inhibited, actors 
in  the  production  chain  were  not  stimulated  to  respond  to  market  signals,  including  price 
movements, and there were reduced incentives for innovation or productivity gains. The dairy 
reform  should  mirror  those  in  other  sectors  which  have  aimed  at  much  more  market 
orientation with "freedom to farm". This should lead to efficiency gains and allow for the EU 
sector to take advantage of market opportunities, inside and outside the EU. 

A  number  of  measures  would  seem  to  be  necessary  in  the  medium-term,  leading  up  to  and 
after the expiry of the quota regime. The market structure is very different between and within 
Member  States,  but  often  concentration  of  supply  is  much  lower  than  concentration  at 
processing level. This results in an imbalance in bargaining power between these levels. There 

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are  also  rigidities  in  the  market,  with  farmers  having  little  choice  of  dairy  (or  even  of 
transporters for raw milk). These factors can lead to a serious lack of adaptation of supply to 
demand and unfair commercial practices. In particular farmers often do not know what price 
they will receive for their milk when delivering (which is often fixed much later by dairies on 
a basis wholly out of the farmer's control). On the other hand, for dairies, the volume to be 
delivered is not always well-planned. The distribution of the added value in the chain is not 
balanced,  especially  with  regard  to  farmers,  and  there  is  a  significant  problem  of  price 
transmission along the chain. 

A key problem seems to be between the farmers and the processors and solutions to remedy 
the situation would focus at this level. The proposal provides for optional written contracts to 
be drawn up in advance for deliveries of raw milk by a farmer to a dairy which would include 
the key aspects of price, the timing and volume of deliveries, and the duration of the contract. 
In  order  to  take  into  account  the  specific  nature  of  cooperatives  and  not  to  interfere 
unnecessarily  in  current  structures,  cooperatives  would  not  be  required  to  have  contracts  on 
condition that their statutes provide for rules with the same objective. 

To  rebalance  bargaining  power,  it  is  further  proposed  to  allow  farmers  to  negotiate  such 
contract  terms,  including  the  price,  collectively  via  producer  organisations.  Whilst  current 
competition law provides for this to some extent, the possibilities are limited in the absence of 
shared processing facilities and there is a lack of legal certainty. The proposal provides for a 
legal basis in agricultural law to this end. In order not to destabilise the situation in reverse, a 
size limit is proposed. It does not affect dairy cooperatives, to the extent that they consist of 
vertical integration of farmers together with processing facilities. 

A  further  issue  arising  from  the  HLG  is  the  role  of  inter-branch  organisations.  Unlike 
producer organisations which only include farmers, those cover part or all of the supply chain: 
farmers,  processors,  distributors  and  retailers.  They  can  potentially  play  useful  roles  in 
research, improvement of quality, promotion and spreading of best practice in production and 
processing methods. They exist in a few Member States today and carry out these roles whilst 
respecting  EU  law.  Furthermore,  in  sectors  such  as  fruit  and  vegetables,  specific  EU  rules 
provide for such actions, subject to limits, and often Commission scrutiny. It is proposed to 
apply the rules on the objectives of IPOs in the fruit and vegetables sector to the dairy sector, 
with appropriate adaptations, so that hardcore restraints of competition (including price fixing 
and  market  partitioning)  remain  excluded  and  the  agreements  concerned  are  submitted  to 
Commission approval. 

They  would  contribute  to  improving  knowledge and  the  transparency  of  production  and  the 
market,  including  by  publication  of  statistical  data  on  the  prices,  volumes  and  durations  of 
contracts for the delivery of raw milk which have been concluded, and by providing analyses 
of potential future market developments at regional or national level. 

Again  with  the  purpose  of  improving  knowledge  of  production  and  following  of 
developments in the market, it is necessary for the Commission to obtain regular information 
on volumes of raw milk delivered.  

In  order  to  further  enhance  transparency,  joint  meetings  of  the  experts  of  the  Management 
Committee for the Common Organisation of Agricultural Markets together with the Advisory 
Group on Milk will be organised to assess the market situation and prospects, the objective 
being  to  increase  awareness  as  well  as  reinforce  the  responsibility  of  operators  in  the  dairy 
chain to better take into account market signals and adapt supply to demand. 

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The  present  proposal  addresses  all  4  elements:  contractual  relations,  bargaining  power  of 
producers,  inter-branch  organisations  and  transparency  to  the  extent  that  they  need  an 
amendment to present provisions. 

These solutions are quite significant steps, and whilst justified by the current market situation 
and  structure,  they  would  be  temporary  and  subject  to  review.  The  validity  of  the  proposal 
should be limited to the timeframe needed for milk producers to adapt to the context without 
production  quota  and  to  improve  their  organisation  in  view  of  a  more  market  oriented 
environment.  The  intermediate  review  should  in  particular  see  how  the  proposed  provisions 
have operated, whether they should continue to apply for the rest of the period and examine 
ways to encourage farmers to enter into joint production agreements. 

The  proposal  is  based  on  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in 
particular the first subparagraph of Article 42 and Article 43(2) thereof. 

Action  at  EU  level  is  justified  since  in  order  to  realise  the  objectives  of  the  common 
agricultural  policy,  measures  have  to  be  taken  in  that  context  in  order  to  ensure  equal 
implementation throughout the Union, whilst maintaining effective competition on the dairy 
market and ensuring the proper functioning of the internal market. This is particularly the case 
where the application of EU competition law – an exclusive competence of the Union - to the 
common agricultural policy is concerned. However, in view of the differentiated situations in 
the Union as regards contract law, the choice as to whether to make certain elements of the 
proposal (contracts) compulsory is left to Member States. 

EU competition law is an exclusive competence of the Union and individual Member States 
cannot therefore modify its application to the common agricultural policy, which may only be 
done  under  Article  42  TFEU.  As  regards  contractual  relations,  the  proposal  leaves  a  wide 
margin  of  appreciation  to  Member  States.  However  certain  minimum  standards  need  to  be 
laid down in order to allow for the proper functioning of the internal market and the common 
market organisation due to their inherent cross-border nature. 

The EU can achieve the objectives better, since the envisaged objectives on competition law 
cannot  be  achieved  by  individual  Member  States  and  the  necessary  minimum  standards  as 
regards  competition  law  are  needed  to  ensure  the  proper  functioning  of  the  internal  market 
and the common market organisation. 

The  proposal  respects  the  proportionality  principle.  The  approach  to  contractual  relations  is 
voluntary at EU level. It is left to the discretion of the Member States whether or not to opt for 
a compulsory scheme. Only 4 aspects of contracts are regulated at EU level, once a Member 
State  has  opted  for  compulsory  application  on  its  territory  in  order  to  ensure  the  proper 
functioning of the internal market and the common market organisation. 

As regards the provisions on strengthening the negotiating power of dairy farmers, a limit of 
3.5% of EU milk production is proposed which would allow negotiations between producer 
organisations of approximately the same size as major dairy processors. A limit of a certain 
share of national production is also proposed in order to ensure competition in the supply of 
raw milk at national level. The possibility for the relevant competition authorities to intervene 
in  necessary  and  justified  individual  cases  would  prevent  prejudice  to  small  and  medium 
processors of raw milk in its territory. 

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Rules  on  inter-branch  organisations  are  largely  inspired  by  those  existing  for  the  fruits  and 
vegetables  sector  and  are  merely  aimed  at  ensuring  legal  certainty  for  the  actions  of  those 
organisations. 

The addition of an explicit legal basis for Member States to collect information on raw milk 
deliveries on a monthly basis concerns data in the hands of operators and should not impose a 
significant burden either on dairy processors or Member States. 

In  order  to  further  improve  supply  concentration,  producer  organisations  would  also  be 
encouraged, as recommended in the Commission Communication on a better functioning food 
supply  chain  in  Europe.  The  current  provision  to  support  the  setting  up  and  administrative 
operation  of  producer  groups,  which  is  already  available  for  all  sectors  in  the  new  Member 
States  under  Rural  Development  Policy,  should  be  extended  to  also  cover  the  EU-15. 
However, the possibility to support producer groups in the fruit and vegetable sector should 
not be allowed as possibilities to support their activities are available under Article 103b-103g 
of the single CMO. The modification of the relevant provisions is part of the exercise to adapt 
the basis agricultural regulations to the Lisbon Treaty. 

As far as the rest of the recommendations of the HLG are concerned, the issue of "place of 
farming" discussed by the HLG would be treated as part of the so-called "quality package". 
Under this new framework, a legal basis for compulsory labelling of place of farming will be 
introduced  for  all  sectors.  This  will  allow  the  Commission,  following  appropriate  impact 
assessments  and  on  a  case  by  case  basis,  to  adopt  delegated  acts  concerning  possible 
mandatory  labelling  on  place  of  farming  at  the  appropriate  geographical  level  in  order  to 
satisfy the consumers' demands for transparency and information. One of the first sectors to 
be  examined  will  be  the  dairy  sector.  The  results  of  the  discussions  in  the  Council  and 
Parliament on the Commission proposal for a regulation on the provision of food information 
to consumers [COM(2008) 40] will be taken in to account. 

Possible  changes  to  market  instruments,  research  and  innovation  would  be  addressed  under 
the  initiative  CAP  post  2013,  in  order  to  broaden  the  discussion  to  the  wider  context  of  all 
agricultural products and have a coherent approach. 

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2010/0362 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

amending Council Regulation (EC) No 1234/2007 as regards contractual relations in the 
milk and milk products sector 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty on the Functioning of the European Union, and in particular the 
first subparagraph of Article 42 and Article 43(2) thereof, 

Having regard to the proposal from the European Commission1, 

After transmission of the draft legislative act to the national Parliaments, 

Having regard to the opinion of the European Economic and Social Committee2, 

Acting in accordance with the ordinary legislative procedure3, 

Whereas: 

(1) 

Successive  reforms  of  the  common  market  organisation  covering  milk  and  milk 
products,  now  contained  in  Council  Regulation  (EC)  No  1234/2007  of  22  October 
2007  establishing  a  common  organisation  of  agricultural  markets  and  on  specific 
provisions  for  certain  agricultural  products  (Single  CMO  Regulation)4,  have  been 
aimed at market-orientation (i.e. letting price signals guide the decisions of farmers in 
terms of what and how much to produce) so as to strengthen the competitive situation 
of the dairy sector and its sustainability in the context of globalised trade. By Council 
Regulation  (EC)  No  72/2009  of  19  January  2009  on  modifications  to  the  Common 
Agricultural Policy  by amending  Regulations (EC) No  247/2006, (EC)  No 320/2006, 
(EC) No 1405/2006, (EC) No 1234/2007, (EC) No 3/2008 and (EC) No 479/2008 and 
repealing  Regulations  (EEC)  No  1883/78,  (EEC)  No  1254/89,  (EEC)  No  2247/89, 
(EEC) No 2055/93, (EC) No 1868/94, (EC) No 2596/97, (EC) No 1182/2005 and (EC) 
No 315/2007 5, ("Health Check" reform of 2008-2009) it was therefore decided that it 
was necessary to increase quotas gradually in order to ensure a smooth transition to the 
end of the milk quota system in 2015.  

(2) 

In 2007-2009, exceptional developments took place in milk and milk products sector 
markets. Initially, extreme weather conditions in Oceania brought about a significant 

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OJ C , , p. . 
OJ C , , p. . 
OJ C , , p. . 
OJ L 299, 16.11.2007, p. 1. 
OJ L 230, 2.9.2009, p. 6. 

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decline  in  supplies,  leading  to  a  rapid  and  significant  increase  in  prices.  Yet  while 
world  supplies  had  started  their  recovery,  and  prices  had  started  to  return  to  more 
normal  levels,  the  subsequent  financial  and  economic  crisis  negatively  affected  EU 
dairy  producers,  aggravating  price  volatility.  Initially  feed  and  other  input  costs 
including  energy  increased  significantly  as  a  result  of  higher  commodity  prices. 
Subsequently,  a  drop  in  worldwide,  as  well  as  EU,  demand,  including  for  milk  and 
milk products, whilst EU production was stable led to a collapse in EU prices, down to 
the lower safety net level. This sharp decline in dairy commodity prices failed to fully 
translate into lower dairy prices at consumer levels, generating a widening in the gross 
margin  of  the  downstream  sectors  for  most  milk  and  milk  sector  products  and 
countries, and preventing demand for them to adjust to low commodity prices, slowing 
down price recovery and exacerbating the impact of low prices on milk producers.  

In  October  2009,  in  light  of  this  difficult  market  situation  for  milk,  a  High  Level 
Expert  Group  on  Milk  ("HLG")  was  set  up  with  the  purpose  of  discussing  mid-term 
and long-term arrangements for the milk and milk products sector, given the expiry of 
dairy quotas in 2015. While respecting the outcome of the Health Check, the HLG was 
to work on a regulatory framework to be put in place, to contribute to stabilising the 
market and producers' income and enhance its transparency.  

The HLG obtained oral and written input from major European stakeholder groups in 
the  dairy  supply  chain  representing  farmers,  dairy  processors,  dairy  traders,  retailers 
and  consumers.  Further,  the  HLG  received  contributions  from  invited  academic 
experts,  third  country  representatives,  National  Competition  Authorities  and  the 
Commission's  services.  A  dairy  stakeholder  conference  was  also  held  on  26  March 
2010 allowing a wider range of actors in the supply chain to express their views. The 
HLG delivered its report on 15 June 2010, which contained an analysis of the current 
situation of the dairy sector and number of recommendations. 

The  HLG  noted  that  the  dairy  producing  and  processing  sectors  are  highly 
differentiated  between  Member  States.  There  is  also  a  highly  variable  situation 
between  operators  and  types  of  operators  within  individual  Member  States.  But 
concentration of supply is low in many cases with a resulting imbalance in bargaining 
power  in  the  supply  chain  between  farmers  and  dairies.  This  imbalance  can  lead  to 
unfair  commercial  practices;  in  particular,  farmers  do  not  know  what  price  they  will 
receive for their milk when delivering because the price is often fixed much later by 
dairies  on  a  basis  of  the  obtained  added  value,  which,  for  non-cooperatives,  is  often 
outside of the farmer's control.  

There is a problem of price transmission along the chain, in particular as regards farm-
gate prices. Conversely, during 2009 the supply of milk did not react to lower demand. 
Indeed,  in  some  large  producer  Member  States,  in  reaction  to  lower  prices,  farmers 
produced  more  than  in  the  previous  year.  Value-added  in  the  chain  has  become 
increasingly concentrated in the downstream sectors, notably with dairies. 

For dairies, the volume which will be delivered during the season is not always well 
planned.  Even  for  dairy  co-operatives  (owned  by  farmers  which  posses  processing 
facilities,  by  which  58%  of  EU  raw  milk  is  processed)  there  is  a  potential  lack  of 
adaptation of supply to demand: farmers are obliged to deliver all their milk to their 
co-operative and the co-operative is obliged to accept all the milk. 

(3) 

(4) 

(5) 

(6) 

(7) 

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(8) 

(9) 

The  use  of  formalised,  written  contracts  even  containing  basic  elements  made  in 
advance  of  delivery  is  not  widespread.  However,  they  could  increase  awareness  and 
reinforce  the  responsibility  of  the  operators  in  the  dairy  chain  to  better  take  into 
account  the  signals  of  the  market,  improve  price  transmission  and  adapt  supply  to 
demand, as well as help avoid certain unfair commercial practices. 

In the absence of EU legislation on such contracts, Member States may, within their 
own contract law systems, make the use of such contracts compulsory provided that in 
doing  so  EU  law  is  respected  and  in  particular  that  the  proper  functioning  of  the 
internal market and the common market organisation is respected. Given the diversity 
of  situations  across  the  EU  in  this  context,  in  the  interests  of  subsidiarity,  such  a 
decision should remain with Member States. However, to ensure appropriate minimum 
standards  for  such  contracts  and  good  functioning  of  the  internal  market  and  the 
common  market  organisation,  some  basic  conditions  for  the  use  of  such  contracts 
should be laid down at EU level. Since some dairy co-operatives may have rules with 
similar  effect  in  their  statues,  in  the  interests  of  simplicity  they  should  then  be 
exempted from a requirement for contracts. In order to ensure that any such system is 
effective where intermediate parties collect milk from farmers to deliver to processors, 
it should apply equally in such a case.  

(10)  Article 42 of Treaty on the Functioning of the European Union (TFEU) provides that 
EU rules on competition shall apply to production of and trade in agricultural products 
only to the extent determined by the European Parliament and the Council within the 
framework of Article 43(2) TFEU, which itself provides for the adoption of a common 
market organisation for agricultural products. 

(11) 

In  order  to  ensure  the  rational  development  of  production  and  so  to  ensure  a  fair 
standard of living for dairy farmers, their bargaining power vis-à-vis processors should 
be  strengthened  which  should  result  in  a  fairer  distribution  of  value-added  along  the 
supply chain. Therefore, in order to realise these objectives of the common agricultural 
policy, a provision should be adopted pursuant to Articles 42 and 43(2) TFEU to allow 
producer  organisations constituted  by  dairy  farmers  or  their  associations  to  negotiate 
contract terms, including price, jointly for some or all of its members' production with 
a dairy. In order to maintain effective competition on the dairy market, this possibility 
should  be  subject  to  appropriate  quantitative  limits.  Such  producer  organisations 
should therefore also be eligible for recognition under Article 122 of Regulation (EC) 
No  1234/2007.  The  Commission  should  be  empowered  to  adopt  delegated  acts  in 
accordance  with  Article  290  TFEU  in  respect  of  the  conditions  for  approval  of 
associations of producer organisations. 

(12)  Rules have been introduced at EU level for interbranch organisations in some sectors. 
These organisations can play useful  roles in allowing dialogue between actors in the 
supply  chain,  and  in  promoting  best  practice  and  market  transparency.  Such  rules 
should  equally  be  applied  in  the  milk  and  milk  products  sector,  along  with  the 
provisions clarifying the position of such organisations under competition law whilst 
ensuring that they do not distort competition or the internal market or affect the good 
functioning of the common market organisation. 

(13) 

In  order  to  follow  developments  in  the  market,  the  Commission  needs  timely 
information  on  volumes  of  raw  milk  delivered.  Article  192  of  Regulation  (EC)  No 
1234/2007  provides  a  basis  for  the  exchange  of  information  between  the  Member 

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States  and  the  Commission.  However,  provision  should  be  made  to  ensure  that 
processors  deliver  such  information  to  the  Member  States  on  a  regular  basis.  The 
Commission should be empowered to adopt delegated acts in accordance with Article 
290 TFEU in respect of the scope, content, format and timing of such declarations.  

(14)  The  measures  set  out  in  this  Regulation,  are  justified  in  the  current  economic 
circumstances of the dairy market and the structure of the supply chain. They should 
therefore be applied for a sufficiently long duration (both before and after the abolition 
of  milk  quotas)  to  allow  them  to  have  full  effect.  However,  given  their  far-reaching 
nature,  they  should  nevertheless  be  temporary  in  nature,  and  be  subject  to  review  to 
see how they have operated and whether they should continue to apply. This should be 
dealt with in Commission reports on the development of the milk market, and covering 
in  particular  potential  incentives  to  encourage  farmers  to  enter  into  joint  production 
agreements, to be submitted by 30 June 2014 and 31 December 2018.  

(15)  The  Commission  should  have  the  power  to  adopt  delegated  acts  in  accordance  with 
Article 290 TFUE in order to supplement or amend certain non-essential elements of 
measures  set  out  in  this  Regulation.  The  elements  for  which  that  power  may  be 
exercised should be defined, as well as the conditions to which that delegation is to be 
subject. 

(16) 

In order to guarantee a uniform application of measures set out in this Regulation in all 
Member States, the Commission should be empowered to adopt implementing acts in 
accordance  with  Article  291  TFUE.  Save  where  explicitly  provided  otherwise,  the 
Commission should adopt those implementing acts in accordance with the provisions 
of Regulation (EU) No [xxxx/yyyy] of the European Parliament and the Council on…. 

(17)  Regulation (EC) No 1234/2007 should therefore be amended accordingly, 

HAVE ADOPTED THIS REGULATION: 

Article 1 
Amendments to Regulation (EC) No 1234/2007 

Regulation (EC) No 1234/2007 is amended as follows: 

(1) 

A new Article 4a is inserted: 

"Article 4a  

Adoption of delegated and implementing acts 

Where  powers  are  conferred  upon  the  Commission,  it  shall  act  in  accordance  with 
the  procedure  referred  to  in  Article  196a  in  the  case  of  delegated  acts,  and  in 
accordance  with  the  procedure  referred  to  in  Article  196b  in  the  case  of 
implementing acts, save where explicitly provided otherwise in this Regulation." 

(2) 

In point (a) of the first paragraph of Article 122, the following point is inserted after 
point (iii): 

"(iiia)  milk and milk products;" 

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(3) 

In Article 123, the following paragraph is added : 

"4.  Member States may also recognise inter-branch organisations which: 

(a) 

(b) 

(c) 

are made up of representatives of economic activities linked to the production 
of, trade in, or processing of products of the milk and milk products sector; 

are formed on the initiative of all or some of the representatives referred to in 
point (a); 

carry out one or more of the following activities in one or more regions of the 
Union, taking into account the interests of consumers: 

(i) 

improving knowledge and the transparency of production and the market, 
including  by  publication  of  statistical  data  on  the  prices,  volumes  and 
durations  of  contracts  for  the  delivery  of  raw  milk  which  have  been 
previously  concluded,  and  by  providing  analyses  of  potential  future 
market developments at regional or national level; 

(ii)  helping  to  coordinate  better  the  way  the  products  of  the  milk  and  milk 
products  sector  are  placed  on  the  market,  in  particular  by  means  of 
research and market studies; 

(iii)  drawing up standard forms of contract compatible with Union rules; 

(iv)  providing  the  information  and  carrying  out  the  research  necessary  to 
adjust  production  towards  products  more  suited  to  market  requirements 
and consumer tastes and expectations, in particular with regard to product 
quality and protection of the environment; 

(v) 

seeking  ways  of  restricting  the  use  of  animal-health  products  and  other 
inputs; 

(vi)  developing methods and instruments for improving product quality at all 

stages of production and marketing; 

(vii)  exploiting the potential of organic farming and protecting and promoting 
such  farming  as  well  as  designations  of  origin,  quality  labels  and 
geographical indications; and 

(viii)  promoting 

integrated  production  or  other  environmentally  sound 

production methods." 

EN 

10 

   EN 

(4) 

In Chapter II of Title II of Part II, the following Section IIa is inserted : 

"SECTION IIA 
PRODUCER ORGANISATIONS IN THE MILK AND MILK PRODUCTS SECTOR 

Article 126a 
Contractual negotiations in the milk and milk products sector 

1. 

Contracts for the delivery of raw milk by a farmer to a processor of raw milk, 
or  to  a  collector  within  the  meaning  of  the  second  subparagraph  of  Article 
185f(1),  may  be  negotiated  by  a  producer  organisation  in  the  milk  and  milk 
products sector which is recognised under Article 122, on behalf of its farmer 
members for part or all of their joint production.  

2. 

The negotiation by the producer organisation may take place: 

(a)  whether  or  not  there  is  a  transfer  of  ownership  of  the  raw  milk  by  the 

farmers to the producer organisation, 

(b)  whether  or  not  the  price  negotiated  is  the  same  as  regards  the  joint 

production of some or all of the farmer members, 

(c) 

provided that the total volume of raw milk covered by such negotiations 
by a particular producer organisation does not exceed: 

(i) 

3.5% of total Union production, and 

(ii)  33%  of  the  total  national  production  of  any  particular  Member 
State  covered  by  such  negotiations  by  that  producer  organisation, 
and 

(iii)  33%  of  the  total  combined  national  production  of  all  the  Member 

States covered by such negotiations by that producer organisation, 

(d)  provided  the  farmers  concerned  are  not  members  of  any  other  producer 
organisation which also negotiates such contracts on their behalf, and 

(e) 

provided that the producer organisation notifies the competent authorities 
of the Member State or Member States in which it operates. 

For the purposes of this Article, references to producer organisations shall also 
cover associations of such producer organisations. In order to ensure that these 
associations may be appropriately monitored, the Commission may, by means 
of  delegated  acts,  adopt  rules  on  the  conditions  for  recognition  of  such 
associations. 

For  the  purposes  of  applying  point  (c)  of  paragraph  2,  the  Commission  shall 
publish,  by  the  methods  it  considers  appropriate,  the  amounts  of  raw  milk 
production  in  the  Union  and  the  Member  States  using  the  most  up-to-date 
information available. 

3. 

4. 

EN 

11 

   EN 

5. 

By  way  of  derogation  from  paragraph  2(c)(ii)  and  (iii),  even  where  the 
threshold of 33% is not exceeded, the competition authority referred to in the 
second subparagraph may decide in an individual case that the negotiation by the 
producer  organisation  may  not  take  place  if  it  considers  that  this  is  necessary  in 
order  to  prevent  competition  being  excluded  or  in  order  to  avoid  serious 
prejudice to SME processors of raw milk in its territory. 

The  decision  referred  to  in  the  first  subparagraph  shall  be  taken  by  the 
Commission  by  means  of  implementing  acts  without  the  assistance  of  the 
Committee  referred  to  in  Article  195(1)  for  negotiations  covering  the 
production of more than one Member State. In other cases it shall be taken by 
the national competition authority of the Member State the production of which 
is covered by the negotiations.  

The decisions referred to in the first and second subparagraphs shall not apply 
earlier than the date of their notification to the undertakings concerned. 

6. 

For the purposes of this Article: 

(a) 

(b) 

a  "national  competition  authority"  shall  be  the  authority  referred  to  in 
Article  5  of  Regulation  (EC)  No  1/2003  on  the  implementation  of  the 
rules on competition laid down in Articles 81 and 82 of the Treaty6; 

a "SME" shall mean a micro, small or medium-sized enterprise within the 
meaning of Commission Recommendation 2003/361/EC of 6 May 2003 
concerning 
small  and  medium-sized 
enterprises7." 

the  definition  of  micro, 

(5) 

In  Article  175  the  words  "subject  to  Articles  176  to  177  of  this  Regulation"  are 
replaced by the words "subject to Articles 176 to 177a of this Regulation". 

(6) 

The following Article 177a is inserted: 

"Article 177a 
Agreements and concerted practices in the milk and milk products sector 

1. 

Article  101(1)  TFEU  shall  not  apply  to  the  agreements,  decisions  and  concerted 
practices of recognised interbranch organisations with the object of carrying out the 
activities referred to in Article 123(4)(c) of this Regulation. 

6 
7 

OJ L 1, 4.1.2003, p. 1. 
OJ L 124, 20.5.2003, p. 36. 

EN 

12 

   EN 

                                                 
2. 

Paragraph 1 shall apply only provided that: 

(a) 

the  agreements,  decisions  and  concerted  practices  have  been  notified  to 
the Commission; 

(b)  within  three  months  of  receipt  of  all  the  details  required,  the 
Commission,  by  means  of  implementing  acts  without  the  assistance  of 
the  Committee  referred  to  in  Article  195(1),  has  not  found  that  the 
agreements, decisions or concerted practices are incompatible with Union 
rules. 

3. 

4. 

The  agreements,  decisions  and  concerted  practices  may  not  be  put  into  effect 
before the lapse of the period referred to in paragraph 2(b). 

The following agreements, decisions and concerted practices shall in any case 
be declared incompatible with Union rules: 

(a) 

(b) 

(c) 

(d) 

(e) 

agreements,  decisions  and  concerted  practices  which  may  lead  to  the 
partitioning of markets in any form within the Union; 

agreements,  decisions  and  concerted  practices  which  may  affect  the 
sound operation of the market organisation; 

agreements,  decisions  and  concerted  practices  which  may  create 
distortions  of  competition  which  are  not  essential  to  achieving  the 
objectives of the common agricultural policy pursued by the interbranch 
organisation activity; 

agreements, decisions and concerted practices which entail the fixing of 
prices; 

agreements,  decisions  and  concerted  practices  which  may  create 
discrimination  or  eliminate  competition  in  respect  of  a  substantial 
proportion of the products in question. 

5. 

If, following expiry of the period referred to in paragraph 2(b), the Commission 
finds that the conditions for applying paragraph 1 have not been met, it shall, 
by  means  of  implementing  acts  without  the  assistance  of  the  Committee 
referred  to  in  Article  195(1),  take  a  Decision  declaring  that  Article  101(1) 
TFEU applies to the agreement, decision or concerted practice in question. 

That  Commission  Decision  shall  not  apply  earlier  than  the  date  of  its 
notification  to  the  interbranch  organisation  concerned,  unless  that  interbranch 
organisation has given incorrect information or abused the exemption provided 
for in paragraph 1. 

6. 

In the case of multiannual agreements, the notification for the first year shall be 
valid  for  the  subsequent  years  of  the  agreement.  However,  in  that  event,  the 
Commission  may,  on  its  own  initiative  or  at  the  request  of  another  Member 
State, issue a finding of incompatibility at any time." 

(7) 

Article 179 is replaced by the following: 

EN 

13 

   EN 

"Article 179 
Implementing powers in respect of agreements and concerted practices 

The  Commission  may,  by  means  of  implementing  acts,  adopt  all  necessary 
measures related to Articles 176a to 178." 

(8) 

In Article 184, the following point is added: 

"(10) to  the  European  Parliament  and  the  Council  by  30  June  2014  and  by  31 
December  2018  on  the  development  of  the  market  situation  in  the  milk  and 
milk products sector and in particular on the operation of point (iiia) of the first 
paragraph  of  Article  122  and  of  Articles  123(4),  126a,  177a,  185e  and  185f, 
covering  in  particular  potential  incentives  to  encourage  farmers  to  enter  into 
joint production agreements together with any appropriate proposals." 

(9) 

The following Articles 185e and 185f are inserted: 

"Article 185e 
Compulsory declarations in the milk and milk products sector 

1. 

2. 

Processors of raw milk shall declare to the competent national authority the quantity 
of raw milk that has been delivered to them each month. 

In  order  to  ensure  the  usefulness  and  timeliness  of  such  declarations  for  market 
management purposes, the Commission may, by means of delegated acts, adopt rules 
on the scope, content, format and timing of such declarations. 

Article 185f 
Contractual relations in the milk and milk products sector 

1. 

If  a  Member  State  decides  that  every  delivery  of  raw  milk  by  a  farmer  to  a 
processor  of  raw  milk  must  be  covered  by  a  written  contract  between  the 
parties, such contract shall fulfil the conditions laid down in paragraph 2. 

In  the  case  described  in  the  first  subparagraph,  the  Member  State  concerned 
shall also decide that if the delivery of raw milk is made through one or more 
collectors,  each  stage  of  the  delivery  must  be  covered  by  such  a  contract 
between  the  parties.  To  this  end,  a  "collector"  means  an  undertaking  which 
transports  raw  milk  from  a  farmer  or  another  collector  to  a  processor  of  raw 
milk or another collector, where the ownership of the raw milk is transferred in 
each case. 

2. 

The contract shall: 

(a) 

be concluded in advance of the delivery, 

(b)  be made in writing, and 

(c) 

include, in particular, the following elements: 

(i) 

the price payable for the delivery, which shall: 

EN 

14 

   EN 

– 

– 

be static and be set out in the contract, and/or 

vary  only  on  factors  which  are  set  out  in  the  contract,  in 
particular  the  development  of  the  market  situation  based  on 
market  indicators,  the  volume  delivered  and  the  quality  or 
composition of the raw milk delivered, 

(ii) 

the volume which may and/or shall be delivered and the timing of 
deliveries, and 

(iii) 

the  duration  of  the  contract,  which  may  include  an  indefinite 
duration with termination clauses. 

3. 

By way of derogation from paragraph 1, a contract shall not be required where 
raw  milk  is  delivered  by  a  farmer  to  a  processor  of  raw  milk  where  the 
processor  is  a  co-operative  of  which  the  farmer  is  a  member  if  its  statutes 
contain provisions having similar effects as those set out in points (a), (b) and 
(c) of paragraph 2. 

4.  All  elements  of  contracts  for  the  delivery  of  raw  milk  concluded  by  farmers, 
collectors  or  processors  of  raw  milk,  including  those  elements  referred  to  in 
paragraph 2(c), shall be freely negotiated between the parties. 

5. 

In  order  to  guarantee  a  uniform  application  of  this  Article,  the  Commission 
may, by means of implementing acts, adopt all necessary measures." 

(10) 

In Chapter I of Part VII, the following Articles 196a and 196b are added: 

"Article 196a 

Delegated acts 

1. 

The powers to adopt the delegated acts referred to in this Regulation shall be 
conferred on the Commission for an indeterminate period of time. 

As  soon  as  it  adopts  a  delegated  act,  the  Commission  shall  notify  it 
simultaneously to the European Parliament and to the Council. 

2. 

The delegation of power referred to in paragraph 1 may be revoked at any time 
by the European Parliament or by the Council. 

The  institution  which  has  commenced  an  internal  procedure  for  deciding 
whether to revoke the delegation of power shall endeavour to inform the other 
institution  and  the  Commission  within  a  reasonable  time  before  the  final 
decision  is  taken,  indicating  the  delegated  powers  which  could  be  subject  to 
revocation and possible reasons for a revocation. 

The  decision  of  revocation  shall  put  an  end  to  the  delegation  of  the  powers 
specified  in  that  decision.  It  shall  take  effect  immediately  or  at  a  later  date 
specified therein. It shall not affect the validity of the delegated acts already in 
force. It shall be published in the Official Journal of the European Union. 

EN 

15 

   EN 

3. 

The  European  Parliament  and  the  Council  may  object  to  the  delegated  act 
within a period of two months from the date of notification. At the initiative of 
the  European  Parliament  or  the  Council  this  period  shall  be  extended  by  one 
month. 

If,  on  the  expiry  of  that  period,  neither  the  European  Parliament  nor  the 
Council  has  objected  to  the  delegated  act  it  shall  be  published  in  the Official 
Journal  of  the  European  Union  and  shall  enter  into  force  at  the  date  stated 
therein. 

The  delegated  act  shall  be  published  in  the  Official  Journal  of  the  European 
Union  and  enter  into  force  before  the  expiry  of  that  period  if  the  European 
Parliament  and  the  Council  have  both  informed  the  Commission  of  their 
intention not to raise objections.  

If the European Parliament or the Council objects to a delegated act, it shall not 
enter  into  force.  The  institution  which  objects  shall  state  the  reasons  for 
objecting to the delegated act.  

Article 196b 
Implementing acts 

Where implementing acts are adopted pursuant to this Regulation, the Commission 
shall be assisted by the Committee referred to in Article 195 of this Regulation and 
the  procedure  provided  for  in  Article  [5]  of  Regulation  (EU)  No  [xxxx/yyyy]  shall 
apply." 

(11) 

In Article 204, the following paragraph is added : 

"6.  As regards the milk and milk products sector, point (iiia) of the first paragraph 
of Article 122 and Articles 123(4), 126a, 177a, 185e and 185f shall apply until 
30 June 2020." 

Article 2 
Entry into force 

This Regulation shall enter into force on the third day following that of its publication in the 
Official Journal of the European Union. 

This Regulation shall be binding in its entirety and directly applicable in all Member States. It 
shall apply from […]. 

Done at Brussels,  

For the European Parliament 
The President 

For the Council 
The President 

EN 

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   EN 

 
FINANCIAL STATEMENT 

BUDGET HEADING: 
05 02 12 943.1  

Indic/10/744996(SM/t
m) 
6.142.2010.1 
DATE: 07/10/2010 

APPROPRIATIONS:
Mio € (Budget 2010) 

TITLE:  
Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EC) N° 
1234/2007 (single CMO Regulation) as regards contractual relations in the milk and milk products 
sector. 

LEGAL BASIS:  
Art. 42 and 43 of the Treaty on the functioning of the European Union (TFUE) 
AIMS: 
To rapidly respond to the recommendations of the High Level Group examined by the Council and 
adopted by the Presidency conclusions on 27 September 2010. This proposal concerns essentially 
contractual relations, bargaining power of contactors, inter-branch organisations and transparency. 

1. 

2. 

3. 

4. 

5. 

FINANCIAL IMPLICATIONS 

5.0 

CHARGED TO THE EU BUDGET 

EXPENDITURE 
- 
(REFUNDS/INTERVENTIONS) 
- 
- 

NATIONAL AUTHORITIES 
OTHER 

12 MONTH 
PERIOD 

(EUR million) 
- 

CURRENT 
FINANCIAL 
YEAR 
2010 
(EUR million) 
- 

FOLLOWING 
FINANCIAL 
YEAR 
2011 
(EUR million) 
- 

5.1  REVENUE 

- 

- 

- 

OWN RESOURCES OF THE EU  

- 
(LEVIES/CUSTOMS DUTIES) 
NATIONAL 
- 

5.0.1  ESTIMATED EXPENDITURE 
5.1.1  ESTIMATED REVENUE 
5.2  METHOD OF CALCULATION: 
6.0  CAN THE PROJECT BE FINANCED FROM APPROPRIATIONS ENTERED IN THE 

2012 
- 
- 

2013 
- 
- 

2014 
- 
- 

2015 
- 
- 

YES NO 

RELEVANT CHAPTER OF THE CURRENT BUDGET? 

6.1  CAN THE PROJECT BE FINANCED BY TRANSFER BETWEEN CHAPTERS OF 

YES NO 

THE CURRENT BUDGET? 

6.2  WILL A SUPPLEMENTARY BUDGET BE NECESSARY? 
6.3  WILL APPROPRIATIONS NEED TO BE ENTERED IN FUTURE BUDGETS? 
OBSERVATIONS: 
The proposed measures which can contribute to stabilize the market and producers' income for the medium and 
long term have no direct impact on the EU Budget. 
The changes to Regulation (EC) No 1698/2005 to allow for supporting Producer Organisations in EU-15 were 
already included in COM(2010) 537 

YES NO 

YES NO 

EN 

17 

   EN