AGCM dismisses allegations against the “formula club system” in the Italian patented seedless grapes market

The proceeding was initiated on the basis of several conducts contested by the Puglia Association of Growers, the Confederazione Italiana Agricoltori Puglia and the Comitato Liberi Agricoltori e Commercianti Pugliesi e Lucani to breeders active in the cultivation and marketing of patented seedless grapes in Italy and concerned, in particular:

1. The subordination by the breeders of the licensed supply of grape varieties to the growers to the conferral of the relevant production of seedless grapes to the distributors identified by the breeders themselves;
2. The high margin of discretion which the distributors indicated by the breeders would have enjoyed, both in accepting the harvest and in the subsequent determination of the price;
3. The application to farmers of a price lower than the costs incurred for the relative production;
4. The impossibility for farmers to sell to other distributors the crop that may have been rejected by the breeders by reason of poor quality;
5. The power of control and inspection, deemed at first sight abusive, over land and facilities used by the farmers;
6. The discriminatory conduct exercised by the breeders against certain growers who are members of certain producer organizations in Southern Italy.

The AGCM dismissed the above allegations raised against the table grape breeders, mainly based on the erroneous conviction that the breeders had in practice established a “formula club system”, allowing them to control all aspects of the supply and licensing of their proprietary table grape varieties from the provision of planting material, the granting of sub-licenses and the supply of fruit to the market through the breeders’ own distribution channels.

Moreover, the AGCM also concluded for the absence of economic imbalance between breeders and individual growers, which constitutes an indispensable requisite for the application of Article 62 of Decree Law n. 1 /2012.

Indeed, the evaluation carried out by the Authority concluded, that, contrary to what was stated by the complainants, only 35% of the table grapes produced in Italy are seedless grapes. Within this market share, which represents in itself already a minority compared to the production of traditional grapes, the AGCM stated that "68% refers to seedless grapes not patented or patented by breeders other than the companies against whom the allegations were raised". Consequently, the breeders involved in the proceeding at stake only hold a 30-35% market share of the seedless grape market. Therefore the breeders involved in the investigation do not constitute obligatory partners for growers, who maintain numerous alternatives (both with regard to other seedless grape varieties and with regard to grapes not protected by patents) in the event that they are not satisfied with the contractual conditions proposed by the breeders in question.

The AGCM therefore dismissed the case, absent the prerequisites allowing the application of Article 62 of Decree Law n. 1/2012.

The decision at stake may also constitute the last one based on this provision, as a new legislative measure, Law n. 53/2021, transposing the EU Directive 2019/633 on unfair trading practices in business-to-business relationships in the agricultural and food supply chain entered into force on 8 May 2021 and will become applicable as of 1 November 2021. Under this new legislative framework, the AGCM lost its enforcement powers over the commercial practices at stake, with the Italian Central Inspectorate for the protection of quality and repression of frauds of agri-food products (ICQRF) becoming the new competent authority.

The AGCM judgment (in Italian) is available at the following link.

For an overview of the implementation of the EU Directive 2019/633, please refer to our alert (in Italian) available here.

For further information, please contact Federico Marini Balestra and Lucia Antonazzi.