According to a decision dated 6 September 2013 from the Trade and Industry Appeals Tribunal (CBB), the Product Board for Horticulture (PT) was right to revoke the CMO recognition of the cooperative Batavia U.A. Batavia’s recognition had been suspended in the past but the PT ultimately lifted this suspension. Later investigation indicated however that Batavia had been failing to satisfy the recognition requirements for quite some time, which prompted the PT to definitively withdraw recognition.
Batavia is a cooperative for fruit and vegetable growers. In this capacity Batavia was recognised as a producer organisation (PO), also referred to as a grower’s association, in the sense of the Common Market Organisation (CMO) in the vegetable and fruit sector. With the CMO in the vegetable and fruit sector the EU aims to strengthen the sector’s competitiveness and market-orientation. A key role is reserved in this for recognised POs. In order to be eligible for recognition and subsequently remain recognised, a producer organisation must satisfy certain recognition criteria. The most important criterion is that the PO must be in charge of the sales of the products its members grow. This case demonstrated the consequences when a PO no longer satisfies the recognition criteria.
The course of affairs
In a decision dated 16 December 2009, Batavia’s recognition as PO was suspended by the PT with effect from 3 December 2009. The reason for this was that Batavia itself was not setting the prices for some of its members’ products, which meant there was deficient control of sales (and therefore violation of a recognition criterion).
In a decision dated 12 August 2010, after several investigations the PT lifted the suspension of recognition as of 30 July 2010. In this decision the PT announced it planned to check whether Batavia would adhere to the agreed measures and procedures. The PT also announced that during these checks, it would also check whether all the other recognition requirements were being satisfied. These checks were carried out on 5 and 6 September 2011. The PT found during these checks that Batavia did not satisfy the recognition requirements. In a decision dated 10 October 2011, the PT ultimately withdrew Batavia’s recognition as PO definitively with effect from 1 January 2010.
Reasons for withdrawal of recognition
Based on the CBB’s decision, it can be ascertained that a whole laundry list of deficiencies proved fatal for Batavia. Supply forecasts were to a great extent not recorded digitally, for instance. Furthermore, no comparisons were made between the forecasts and the actual production supplied. Batavia also had insufficient knowledge about its members’ production. The sales task with which the director was charged had been outsourced. This outsourcing to brokers had not been recorded in writing, however. So it could not be known whether the sales took place under Batavia’s responsibility. Batavia was consequently unable to demonstrate that it actually performed one of its key functions and its primary duty, being in charge of the sales of its members’ products. The budgetary management was also substandard, according to the PT. The PT further found that Batavia did not have its own sorting, packaging and distribution centre. Nor did Batavia have cold stores, which meant that the production was stored at the members. Although this does not necessarily have to pose a problem in principle, Batavia failed to clarify how its members were able to have access to the necessary facilities. Finally, there was no management evaluation of the sales and grouping of supply and there were no financial statements available for 2010.
The CBB agreed with the PT that because of the deficiencies ascertained, Batavia no longer satisfied the recognition criteria. Contrary to what Batavia had argued, the CBB found that these criteria stated in the CMO Regulation were adequately clear. The CBB’s opinion in this respect is easy to follow.
What makes the case striking in a certain sense is that Batavia’s recognition was first suspended. After this suspension was lifted, the PT discovered further-reaching deficiencies. It is these deficiencies which ultimately proved fatal for Batavia. The PT also withdrew the recognition with retroactive effect from a date prior to the date on which the earlier suspension of recognition had been lifted. After all, the withdrawal of recognition takes effect on the date that Batavia had stopped satisfying the recognition criteria. This retroactive effect is provided for in the CMO Regulation. Because of this, according to the CBB, this retroactive effect has priority over national law and section 3:40 of the General Administrative Law Act (Awb) – which states that a decision does not take effect before it is announced – consequently does not prevent the recognition being withdrawn with retroactive effect.
Consequences of the withdrawal of recognition
The withdrawal of recognition has far-reaching consequences. Batavia had applied for and received a CMO subsidy. As a result of the withdrawal of the recognition, Batavia has to repay the PT, with interest, the CMO subsidies it received after the effective date of the withdrawal of recognition. The CBB upheld this ‘sanction’ as well. Once again this is understandable. Only recognised producer organisations can be eligible for CMO subsidies. If a party is not recognised, it cannot be entitled to these subsidies. If the recognition is withdrawn with retroactive effect, any CMO subsidy already disbursed after the date of withdrawal of recognition has been disbursed unduly. It is therefore logical that any CMO subsidy paid out unduly will have to be repaid with interest.
This case shows that recognised producer organisations must actively ensure that they satisfy the recognition criteria. It is particularly important in this context that they be in charge of the sales. If activities are outsourced, this must be properly arranged not only contractually, but also in terms of policy.