European Commission to tackle unfair practices in the food supply chain
The European Commission has today adopted a communication encouraging Member States to look for ways to improve protection of small food producers and retailers against the unfair practices of their sometimes much stronger trading partners.
Before a food product reaches the consumer, many different market players (producers, processors, retailers, etc.) in the supply chain add to its quality and value. Due to developments, such as increased market concentration, there are very different levels of bargaining power in the relations between the players in the supply chain, it says, and while differences in bargaining powers are common and legitimate in commercial relationships, these imbalances can in some cases lead to unfair trading practices (UTPs).
Commission Vice-President for Internal Market and Services Michel Barnier said: “As consumers, we may all shop at our local retailers but the food supply chain clearly has a European single market dimension. There needs to be a level and fair playing field between SME food suppliers and retailers on one side and large multinational manufacturers and supermarkets on the other side. Unfair trading practices jeopardise this.
“The industry has already made important and valuable efforts to address unfair behaviour and should continue doing so. Member States should ensure that they have effective and consistent regulatory frameworks in place to build on and complement self-regulatory initiatives.”
Unfair trading practices (UTPs) include:
- avoiding or refusing to put essential commercial terms in writing
- retroactive unilateral changes in the cost or price of products or services
- transfer of unjustified or disproportionate risk to a contracting party
- deliberately disrupting a delivery or reception schedule to obtain unjustified advantages or
- unilaterally terminating a commercial relationship without notice, or subject to an unreasonably short notice period and without an objectively justified reason.
The food supply chain is not only crucial for the daily life and well-being of consumers but is also important for the economy as a whole, employing more than 47 million people in the EU, many in SMEs, and representing about 7% of the EU gross value added. The total market size of EU retail trade in food-related products is estimated at €1.05 trillion. The food supply chain has a strong international dimension and particular importance within the EU Single Market.
Cross border trade among EU Member States accounts for about 20% of total EU food production. Estimates suggest that at least 70% of the total annual exports of agricultural products of EU countries go to other EU Member States.