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Commission acts 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 acts for the first time ever to ban unfair trading practices in the food supply chain.

Unfair Trading Practices are practices that deviate from good commercial conduct and are contrary to good faith and fair dealing. They are usually imposed unilaterally by one trading partner on another. The food supply chain is particularly vulnerable to unfair trading practices due to large differences in bargaining power.

This is why the Commission proposed 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.

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 of 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.

This new EU legislation should not lead to price increases for consumers: in the public consultation carried out by the Commission, there was no evidence presented to suggest that prohibiting unfair trading practices would lead to higher prices. The legislation also allows for a report by the Commission on the application of the rules after three years, including on any impact on prices.

The next step is to turn to the issue of market transparency. The Commission will continue to work on this topic and the first results 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.

Source: European Commission

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