Egle Dagilyte is a Senior Lecturer in Law at Buckinghamshire New University and a PhD Candidate at The Dickson Poon School of Law, King’s College London. The author is thankful to Stefanie Ripley for comments that were incorporated in this article.
As Easter is approaching, not all consumers in Europe will hit stores to buy chocolate eggs and bunnies. While these do sound like a treat (especially for children), there is a very old and strong tradition in Central and Eastern European countries to decorate real eggs, which are sprinkled with holy water at a church ceremony during Święconka in Poland; made into 'kraslice' to be gifted in Slovakia and the Czech Republic; or played with in Lithuania.
On 19 July 1999 the European Union adopted Directive 1999/74, which lays down minimum standards for the protection of laying hens (the hens that are kept for production of eggs not intended for hatching: Article 2(2)). There are three types of hen-keeping systems outlined in the Directive - alternative, unenriched cage and enriched cage - and the detailed requirements for each are set out in Articles 4-6. The Directive also provides implementation deadlines for each of the systems: enriched cages (where laying hens have at least 750 cm² of cage area per hen) must comply with the requirements set out in the Directive from 1 January 2002 (Article 6); alternative systems (also known as non-cage systems with nests) - from 1 January 2007 (Article 4(2)); while the use of unenriched cages (where hens have at least 550 cm² of cage area per hen) is prohibited from 1 January 2012 (Article 5(2)).
The purpose of the new rules is to replace the barren battery cages with enriched cages, which provide "more space and height, a nesting area, scratching area and perches for the hens." The requirements must be implemented by companies or persons engaged in the business ('establishments') that have 350 or more laying hens. Member States have an obligation to ensure that the owners and holders of laying hens apply the above EU rules (Article 3 of the Directive) and "are registered by the competent authority and given a distinguishing number which will be the medium for tracing eggs placed on the market for human consumption" (Article 7).
Despite the long 12 years implementation period (normally EU directives have to be implemented within two years), 13 EU Member States currently face formal warnings from the European Commission for failing to fully implement the Directive. The Directive came into full force on 1 January 2012, which in practice meant that eggs from hens kept in barren battery cages were no longer eligible for export or retail sales, even though they were allowed for industrial use.
The practical problem with late implementation of the Directive is not so much about the pacta sunt servanda ("agreements must be kept") principle under Art 4(3) TEU on the behalf of Member States, but about its direct impact on consumers, i.e. European citizens. It is reported that in Lithuania egg prices have risen by about 20% since the beginning of 2012, in Bulgaria - 40% during the first week in March 2012, while in France they shot up by 75% between October 2011 and February 2012; also affecting the cost of pastries, cakes and even sweet brioche bread.
Why are the prices rising?
The good: implementation of the Directive is followed by increase in prices
Lithuania has complied with the Directive: the country's hen farms invested in infrastructure to improve the welfare of hens. It was clearly understood that eggs, which were not produced in the new way, could not be exported abroad or sold inside the country.
One of the reasons for the current price rise in Lithuania is the need to cover the expenses incurred by investing in the new infrastructure. Because of the required reorganisation, the local production reduced by 20% and Lithuanian consumers saw an influx of foreign eggs at higher prices (in the third quarter of 2011 the price was 2.4 times higher, as compared to the same time in 2010). Based on the European Commission’s socio-economic report, a barn egg (enriched-cage) costs 1.3 Eurocents more to produce than a battery egg (battery-cage). In 2007 the Compassion in World Farming (CIWF) estimated that the increased costs could be met by a combination of government support and consumers paying a little more for eggs ("just a few eurocents per week"). Unfortunately, not all Member States are willing to support their farmers financially during difficult economic times and the EU funding under capital costs of change under the Common Agricultural Policy’s Rural Development Regulation 1698/2005 is also not widely available. Thus, the financial burden is experienced mainly by consumers.
Re-organisation is only one of the reasons why egg prices increased in the EU. Another cause for rising prices is the changing pattern of supply and demand in the internal market. The 'good' Lithuanian producers are now exporting their production to other Member States, where many farmers have not yet complied with the Directive (and cannot sell their production). These include the neighbouring countries Latvia and Poland, and Bulgaria is also under consideration. Therefore, while Lithuanian eggs are exported, the local market suffers from the lack of production. This combination of lack of supply and increased demand before Easter drives egg prices up.
While Lithuanian shoppers saw their national production exported, Bulgarian producers that complied with the Directive felt at ease speculating the egg price, as long as the farmers who have not yet implemented the Directive interrupted their production. In other words, some saw a business possibility for larger profits, while their competitors were in the process of re-arranging infrastructure, as required by the Directive.
This behaviour, in addition to the rising cost of hen feed, meant that the Bulgarian government had to interfere to stop this free market behaviour. The Farming Minister Miroslav Naydenov talked with Poland's Marek Sawicki, Minister of Agriculture and Rural Development, in order to encourage Polish producers that complied with the Directive to import eggs into Bulgaria.
Meanwhile in France, a country which is also under the scrutiny of the Commission, the lack of 'EU-approved' eggs caused supply shortages and a rise in prices. According to the statement of the French National Union of Egg Industries and Professionals (SNIPO), "cake and brioche manufacturers may soon be forced to shut down production and temporarily lay off workers if shortages continue" (1 March 2012).
On 26 January 2012, The European Commission issued a letter of formal notice requesting information to 13 Member States that did not implement the Directive in time. These include Belgium, Bulgaria, Cyprus, France, Greece, Hungary, Italy, Latvia, the Netherlands, Poland, Portugal, Romania and Spain.
The Commission's press release outlines the current problems of lack of quality-compliant production and rising prices in the market: "Member States who don't fulfil their legal obligations not only create consequences on animal welfare but can also cause market distortions and unfair competition." Therefore, the 13 Member States are required to respond to the Commission's letter of formal notice within two months. If they fail to react satisfactorily, the Commission will send a Reasoned Opinion; the failure to comply with the latter within two months would result in the Member State being taken to the Court of Justice. Next to the Commission's action, national competition authorities are also keeping an eye on the current situation, in case there are cartel agreements, which are illegal under EU competition law.
While enforcement from public authorities is likely to work, what might the impact of greater compliance be for businesses? Maybe the 'bad' egg manufacturers could be motivated to raise their profile by trying to achieve the “Good Egg Award”. In 2011 it was given to such retailers as Les Fermiers de Loué (France) and Mulino Bianco (Italy). Unfortunately, businesses that produce or buy eggs for manufacturing other products from many of the countries featured on the Commission's 'black list' are not listed for the awards in 2011 (these include Bulgaria, Cyprus, Greece, Hungary, Latvia, Poland, Portugal and Romania).
While changing the infrastructure may seem like an expensive step for businesses, one must remember that depreciation of inventory over time means it has to be replaced anyway. The 12-year implementation period allowed plenty of scope for such business-planning. Those farms that did not comply with the EU Directive, it seems, have only themselves to blame and are suffering from non-production at the moment. On the other hand, the farms that did implement the new rules find that the investments made can pay off in time not only selling at their national markets, but in other EU Member States as well, often with the help of their governments (Bulgaria and Poland) in order to regulate prices.
There is, of course, the positive impact on the welfare of hens, but do consumers benefit? In the short term, the answer seems to be a negative one, as the internal market is in the process of setting new prices. In the long term, the improved conditions for keeping egg laying hens means that the eggs produced will be of a higher quality. One should remember, however, that this change may come at a greater price, directly experienced by consumers in many European countries.
Is this all bad news before Easter?
As the Commission's data in CIWF's report shows, European consumers prefer free-range eggs over any other type (whether produced in unenriched or enriched cages). While these may come at a higher price from establishments that have 350 or more laying hens, they may not be as expensive as the ones bought from a local market, where small and medium-size farmers' production is sold. It is still quite common in Eastern and Central European countries to find people who keep 10-15 laying hens in their home farms. Given that hens are 'in the mood' of laying eggs at this time of year, we will be able to have plenty of this nutritious product on the table.
So if you do worry about buying eggs this Easter, maybe it is time to walk past the supermarket and pay a visit to your local market instead.