Competitive functioning of the agricultural equipment sector: the Autorité de la concurrence issues its opinion to the Economic Affairs Committee of the French Senate

Tractors, the mainstay of the agricultural equipment sector

As the leading country in the European Union by utilised agricultural area, and second only to Spain in terms of cultivated area, France is the largest agricultural equipment market in Europe and ranks fourth or fifth worldwide, depending on the year.

The agricultural equipment sector encompasses a wide range of equipment, used for both agricultural work and the upkeep of green spaces. This wide diversity, combined with the variety of farming production systems and practices, makes it difficult to analyse the agricultural equipment sector as a whole.

Nevertheless, among all the agricultural equipment used across the main agricultural sectors, almost all farmers appear to own at least one tractor (between three and four on average per farm). Tractors also account for a significant share of production costs for French farms, with traction representing the largest item of mechanisation expenses, which account for around a quarter of farmers’ operating costs. Lastly, in value terms, tractors are the main category of agricultural equipment produced in France (approximately 40%).

A sharp rise in prices explained by a combination of factors

The Autorité concurs with the Senate Economic Affairs Committee’s finding that tractor prices have risen sharply since 2020. According to the French Chambers of Agriculture (Chambres d’agriculture France), the average price of a 170-horsepower four-wheel-drive tractor rose from €100,200 in 2020 to €130,000 in 2024.

While this rise reflects a broader inflationary context, it may also be attributable to other sector-specific factors, such as farmers’ growing needs (notably in terms of tractor power and connected services) and the adoption of new standards.

The competitive functioning of the tractor sector

High concentration in tractor manufacturing

The upstream market for the manufacture and marketing of tractors is oligopolistic, with a high level of concentration around four main players (AGCO, John Deere, CNH and CLAAS), which together account for almost 90% of market share. It is also characterised by high barriers to entry, linked in particular to the scale of investment required, both for the technological development of machinery and for establishing a sufficiently dense distribution and after-sales service network to provide effective nationwide coverage. Moreover, no new operator has entered this market since Kubota in 2008.

The Autorité also notes that this market is relatively transparent, as the French National Agency for Secure Documents (Agence nationale des titres sécurisés) provides information on tractor registrations, which third-party operators may use to supply statistics to manufacturers or operators in the downstream distribution market. In its opinion, the Autorité recalls the rules governing the exchange of commercially sensitive information.

Tractor distribution and repair markets shaped by the need for proximity between dealer and buyer

In the downstream tractor distribution and repair markets, the Autorité notes that there is a strong need for proximity between customers and their dealers, who typically provide after-sales services. The Autorité estimates that, on average, a farmer will choose a dealer located less than 40 km from their farm (i.e. about an hour by tractor).

The tractor distribution market: generally satisfactory inter-brand competition, limited intra-brand competition

Tractor distribution is organised by manufacturers through networks of generally exclusive dealers. Only the distributor is authorised to sell tractors of a given brand within an area defined in the dealer agreement, meaning that intra-brand competition is very limited. Moreover, while inter-brand competition appears generally satisfactory, as manufacturers’ distribution networks cover most of mainland France, certain areas may remain insufficiently covered, with the number of operators in some local areas limited or even reduced to just one.

This market is also characterised by high barriers to entry, such as the need for an operator to secure a dealer agreement, to have substantial financial capacity to purchase or lease premises, and to recruit qualified technicians, among other requirements.

Limited competition in the tractor repair market

The Autorité notes that competition is even more limited in the tractor maintenance and repair market. Competition from third-party repairers or dealers of other brands may be constrained due to the advantages held by authorised dealers, who have direct access to original parts, technical software, diagnostic tools and maintenance manuals for the licensed brand, and whose staff are specifically trained to repair this brand’s tractors. As a result, customers tend to use authorised dealers. Moreover, these dealers generally benefit from territorial exclusivity, which limits customers’ ability to choose between different members of the network.

Relationship between manufacturers and dealers

These limits to inter-brand competition could, to some extent, be offset by the level of intra-brand competition. However, by its very nature, the tractor distribution model, which is generally based on territorial exclusivity clauses between manufacturers and dealers, restricts intra-brand competition and is therefore likely to influence tractor pricing. This system is also likely to affect related markets, in particular those for spare parts distribution and tractor maintenance and repair services.

Given the potential significance of intra-brand competition for the sector’s competitive dynamics, the Autorité took a closer look at the relationship between manufacturers and dealers, both with regard to collusion and abuse of economic dependence.

With regard to collusion

The Autorité notes that various clauses in dealer agreements may restrict intra-brand competition, which is already very limited due to territorial exclusivity clauses. Some clauses, for example, require dealers to purchase exclusively from the supplier, while others limit their ability to hold shares in companies marketing competing brands. With regard to sales outside the contractual territory, although agreements do not formally prohibit passive sales, such sales may be restricted by certain indirect measures, such as notifying the distributor in the relevant area of passive sales or not taking such sales into account in the amount of rebates granted to dealers.

With regard to abuse of economic dependence

The Autorité notes that the combination of various contractual and organisational mechanisms may raise questions about distributors’ effective economic independence from their suppliers. Single-branding obligations, which require distributors to sell only the tractor brand of the manufacturer with which they have entered into a dealer agreement, combined with supply exclusivity, significantly restrict distributors’ ability to diversify away from the manufacturer to which they are contractually bound. Some manufacturers may also require their distributors to market a wide range of their products. Moreover, the contractual clauses are based on standard contracts, and it has not been demonstrated that distributors can negotiate their scope to any significant extent. Lastly, these obligations make alternative solutions all the less likely for distributors, insofar as they are implemented by most of the manufacturers consulted.

In addition, several manufacturers include obligations which, by restricting their distributors’ ability to diversify, are likely to reinforce their economic dependence, whether through clauses prohibiting shareholdings in companies marketing competing brands or through listing obligations.