More competition elements to be included in animal welfare initiative “Initiative Tierwohl” – Bundeskartellamt achieves abolishment of compulsory premium

Due to competition concerns raised by the Bundeskartellamt, the animal welfare initiative “Initiative Tierwohl” has decided to abolish, as from 2024, the current compulsory premium payable by buyers to participating farmers (“animal welfare surcharge”). The Bundeskartellamt appreciates the initiative’s plan to introduce instead a non-binding recommendation on how to fund the additional costs incurred through observing animal welfare criteria.

Andreas Mundt, President of the Bundeskartellamt: “‘Initiative Tierwohl’ has established itself in the market; the revised financing model will reflect this fact. A standard premium for animal welfare doesn’t appear indispensable for implementing the initiative and observing animal welfare criteria. The abolishment of the standard premium and the introduction of a recommendation-based system show that it is possible to find a balanced solution for including more competition elements in the funding of additional costs at the interface between sustainability and competition. We welcome this step.“

“Initiative Tierwohl” is a project based on an agreement between the agricultural, meat production and food retail sectors and wishes to reward livestock owners for improving the conditions in which animals are kept. The initiative is mainly financed by the four largest food retailers EDEKA, REWE, Aldi and the Schwarz Group (Lidl, Kaufland). A key component forming part of the initiative until the end of 2023 is paying participating livestock owners a standard premium per kilogramme of meat sold (“animal welfare payment”). The initiative covers the production of poultry meat, beef and pork.

The Bundeskartellamt has provided guidance to “Initiative Tierwohl” since 2014 and in the past years has especially achieved improvements regarding product labelling, thus making it easier for consumers to identify the meat on offer that actually comes from a participating farm with improved standards. Despite certain competition concerns, the Bundeskartellamt had tolerated a standard premium during the roll-out phase of the initiative but had already requested the initiative to include more competition elements in the structure of its financing model in the next project phase (see Bundeskartellamt press release of 18 January 2022).

Since 7 December 2021 the legal framework for assessing initiatives to implement sustainability standards in the agricultural sector has changed at European level with an amendment of the Common Market Organisation (CMO). Pursuant to Article 210a CMO, restrictions of competition that aim to apply a sustainability standard higher than mandated by European or national law and that are indispensable to the attainment of that standard may enjoy a special exemption from competition law.

In the Bundeskartellamt’s view, it is doubtful that the standard premium can be considered indispensable, given that “Initiative Tierwohl” has since established itself in the market, has a high level of adoption and there exist competing labels which do not rely on compulsory price elements.

“Inititative Tierwohl” has also informed the Bundeskartellamt that it intends to maintain its “piglet fund”, a fund which food retailers and slaughterhouses pay into. This model is supposed to encourage more pig producers to observe the animal welfare criteria and enable continuous identification from sow farming to piglet fattening. The Bundeskartellamt will continue to tolerate this solution as well.

Background information

So far it has been primarily the national competition authorities’ task to consider the provision of Article 210a CMO in their overall assessments. From the end of 2023 onwards it will also be possible to request an opinion from the European Commission concerning the application of the exemption rule of Article 210a CMO once the Commission has issued its final guidelines on the application of this Article. The Bundeskartellamt does not wish to pre-empt such a procedure. Many complicated questions regarding the interpretation of Article 210a CMO are yet to be clarified; the European Commission is currently consulting on guidelines on this provision.