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European Commission to ban unfair trade practices in food supply chain

The European Commission proposes to ban the more damaging unfair trading practices in the food supply chain to ensure fairer treat­ment for small and medium sized food and farming businesses. In addition, the proposal includes effective enforcement provisions: sanctions can be imposed by national authorities where infringements are established.

Smaller operators in the food supply chain, including farmers, are vulnerable to unfair trading practices employed by partners in the chain. They often lack bargaining power and alternatives to get their products to consumers.

Vice-President Jyrki Katainen, responsible for Jobs, Growth Investment and Competitiveness, said: "There are imbalances of bargaining power in the food supply chain and with this proposal the Commission is tackling the unfair trading practices head-on. We act because unfair business conduct undermines the economic viability of operators in the chain. By setting minimum standards and reinforcing the enforcement, the proposal should ensure that these operators are able to compete on fair terms, thereby contributing to the overall efficiency of the chain. This is a clear statement for more fair business conduct."

Agriculture and rural development Commissioner Phil Hogan said: "Any chain is only as strong as its weakest link. An efficient and effective food supply chain is a fair one. Today's proposal is fundamentally about fairness – about giving voice to the voiceless - for those who, through no fault of their own, find themselves the victims of a weak bargaining position. Today's initiative to ban unfair trading practices is about strengthening the position of producers and SMEs in the food supply chain. The initiative is equally about providing strong and effective enforcement. We are looking to eliminate the "fear factor" in the food supply chain, through a confidential complaints procedure."

The unfair trading practices to be banned are late payments for perishable food products, last minute order cancellations, unilateral or retroactive changes to contracts and forcing the supplier to pay for wasted products. Other practices will only be permitted if subject to a clear and unambiguous upfront agreement between the parties: a buyer returning unsold food products to a supplier; a buyer charging a supplier payment to secure or maintain a supply agreement on food products; a supplier paying for the promotion or the marketing of food products sold by the buyer.

The Commission's proposal requires Member States to designate a public authority in charge of enforcing the new rules. In case of proven infringement, the responsible body will be competent to impose a proportionate and dissuasive sanction. This enforcement authority will be able to initiate investigations of its own initiative or based on a complaint. In this case, parties filing a complaint will be allowed to request confidentiality and anonymity to protect their position towards their trading partner. The Commission will set up a coordination mechanism between enforcement authorities to enable the exchange best practices.

The proposed measures are complementary to measures existing in Member States and the code of conduct of the voluntary Supply Chain Initiative. Member States can take further measures as they see fit.

The Commission's proposal will take the form of a European law (directive) and will now be submitted together with an impact assessment to the two co-legislators, the European Parliament and the Council, where Member States' governments are represented.

Next step is market transparency
The next step is to turn to the issue of market transparency, according to the Commission. The Commission will continue to work on this topic and the first results of this work are expected in the second half of 2018. In parallel, the High Level Forum on the Better Functioning of the Food Supply Chain has a work strand dealing with this.

This work has to be seen as being undertaken on top of the transparency measures the Commission has already enacted such as the launch and working of the market observatories managed by DG AGRI.

Publication date: 4/16/2018


 


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