‘Absence of a ban on below cost selling a major flaw’

The absence of a ban on below cost selling is a major flaw in combating unfair trading practices, according to IFA President Joe Healy.

Healy was speaking at an IFA event today which looked at methods to regulate the retail landscape for suppliers, which was attended by farmers as well as representatives from the agri-food industry and the retail sector.

The failure to implement a ban on below cost selling has a long-term negative impact on primary producers and diminishes the value of food to consumers, Healy said.

“The farming and the agri-food sector, which is Ireland’s largest productive sector, has been a key driver in in Ireland’s economic recovery.

However, the recovery is not being felt by those of us who produce food. We are not fairly rewarded for our work and investment.

“The reality is that primary producers are not getting fair play in the food supply chain and our viability is being seriously challenged, both in domestic and European markets.”

Healy believes the fact that 20 Member States have now introduced some form of voluntary or statutory legislation with regards to unfair trading trading practices is recognition of the seriousness of the problem.

Imbalance of power in the Food Supply Chain

According to the IFA President, it is widely recognised and accepted that there is a major imbalance of power in the food supply chain across Europe.

As price setters, retailers are at the top of the chain, and primary producers as price takers are at the bottom.

“This imbalance of power has resulted in a situation where farmers are sometimes compelled to accept unreasonable conditions and prices that do not cover their costs or provide an economic return.”

The food supply chain in Ireland and across Europe is characterised by the concentration of buying power in the hands of a small number of very large and powerful retail groups with significant market share, he said.

Here in Ireland, the retail market is characterised by the concentration of 95% of buying power in the hands of five retail groups, Tesco, Supervalu, Dunnes, Aldi and Lidl.

Meanwhile, the Grocery Goods Regulations were signed into law last February in an effort to re-balance relationships in the food supply chain and to prevent unfair trading practices.

These regulations contain some safeguards for suppliers including, ensuring contracts in writing, payment within 30 days and the prohibition on a requirement to pay for promotions.

Wholesalers and retailers will have to step up to the mark and comply with the new legislation, which provides for payment within 30 days as a standard provision, the IFA President said.

“There is no justification for these players to insist on contractual terms longer than the standard 30 days, especially for short shelf-life products such as meat, fruit, vegetables, milk and other fresh products.”

Alongside these regulations, the IFA is also calling for an independent Ombudsman to be appointed to police the retail sector.

“The appointment of a retail Ombudsman in Ireland, who can take up complaints and grievances of suppliers over mistreatment by retailers, remains a key objective of the IFA,” Healy said.

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