European Commission working to ban unfair trade practices

by Holly Demaree-Saddler
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BRUSSELS, BELGIUM — The European Commission is targeting damaging unfair trade practices to grant farmers and small and medium sized businesses greater certainty and less need to manage risks over which they have little or no control.

The European Commission is proposing 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.

Jyrki Katainen, Vice President of the European Commission
Jyrki Katainen, vice-president, responsible for Jobs, Growth Investment and Competitiveness.
Photo courtesy of E.U. Commission. 
 
“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,” said Jyrki Katainen, vice-president, responsible for Jobs, Growth Investment and Competitiveness. “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.”

The European Commission has been working toward a fairer and more balanced food supply chain since December 2016, the European Council called on the European Commission to undertake an impact assessment with a view to proposing an E.U. legislative framework or other non-legislative measures to address unfair trading practices. In 2016 the Commission set up the Agricultural Markets Task Force (AMTF) to assess the role of farmers in the wider food supply chain and make recommendations on how it can be strengthened. On the basis of these recommendations, the Commission launched an inception impact assessment and a public consultation on the improvement of the food supply chain in 2017, which in turn helped identify the specific unfair trading practices covered by the directive.

A recent E.U.-wide opinion poll published in February 2018 shows that a great majority of respondents (88%) consider that strengthening farmers’ role in the food supply chain is important. Ninety-six percent of the respondents to the 2017 public consultation on the modernization of the CAP agreed with the proposition that improving farmers’ position in the value chain including addressing UTPs should be an objective of the E.U.’s Common Agricultural Policy.

Phil Hogan European agriculture and rural development commissioner
Phil Hogan, European agriculture and rural development commissioner.
Photo courtesy of E.U. Commission. 
 
“Any chain is only as strong as its weakest link,” said Phil Hogan, European agriculture and rural development commissioner. “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 only will 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 toward 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.

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