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Structural agreement concerning sugar beets

27. august 2003

Journal nr. 3/1120-0100-0809 3/1120-0301-0284/FI/CHE The Council meeting 27. August 2003

Danisco is the only sugar producer in Denmark. The production is based on sugar beets delivered by 6.000 Danish beet growers.

Beet delivery rights are historically tied to the growers land and are not tradable between beet growers according to a prohibition in the general agreement between Danisco and the association Danish Sugar-Beet Growers. The delivery rights are transferred to the grower who buys the land.

Danisco and Danish Sugar-Beet Growers have agreed upon an amendment to the above mentioned agreement. The amendment is a structural agreement which gives the beet growers the opportunity to buy and sell their delivery rights with effect only in 2003. The purpose of the agreement is to make the sugar beet production more effective and to reduce the growers cost of transportation by moving the sugar beet production closer to the sugar factories. The aim is to move a certain amount of the sugar beet production on Zealand and Møn firstly to the areas west of the Great Belt and secondly to the Nakskov-area of Lolland.

A number of farmers’ associations representing sugar beet growers on Zealand and Møn have complained over the structural agreement. They are discontented with the agreement because they won’t get the same possibilities to buy beet delivery rights as growers situated west of the Great Belt and in the Nakskov-area of Lol-land. Consequently they won’t be able to expand their production and thus make it more effective.

Despite the fact that the structural agreement as an exception allows beet growers to trade delivery rights the agreement constitute a violation of the prohibition in section 6 (1) in the Danish Competition Act. The beet growers on Zealand and Møn only get to buy delivery rights when certain quotas for the growers west of the Great Belt and in the Nakskov-area have been fulfilled. These growers will not have the same possibilities to rationalize and make their production more effective and thus improve their earning power and competitiveness. The impact of these re-strictions could be amplified if the EU sugar regulation as expected will be liberalized.

Though the structural agreement is aimed at promoting efficiency the Competition Council did not find that the conditions required to grant an individual exemption according to section 8 (1) in the Danish Competition Act were fulfilled. The Coun-cil did not find that the agreement allowed the consumers a fair chair of the result-ing benefits. Furthermore the council found that the agreement impose restrictions which are not indispensable.

A complete abolition of the prohibition against trade of sugar beet delivery rights is on the long view desirable. The Danish Competition Authority will therefore con-tinue the examinations of the general agreement between Danisco and Danish Sugar-Beet Growers with a view to a more extensive liberalization in form of an abolition of the prohibition.