The European Commission has proposed to ban the “most damaging” unfair trading practices in the food supply chain to ensure “fairer treatment” for small and medium sized food and farming businesses.

The proposal, presented to the European Parliament’s Committee on Agriculture and Rural Development this morning, details effective enforcement provision measures – including sanctions that can be imposed by national authorities where infringements are established.

The white paper highlights that smaller operators in the food supply chain – including farmers – are vulnerable to unfair trading practices employed by partners in the chain where they often lack bargaining power and alternatives to get their products to consumers.

The unfair trading practices to be banned include:
  • Late payments for perishable food products;
  • Last-minute order cancellations;
  • Unilateral or retroactive changes to contracts;
  • Forcing the supplier to pay for wasted products.

EU Commission Vice-President, Jyrki Katainen, who is 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,” he said.

Eliminating ‘fear factor’

EU Commissioner for Agriculture and Rural Development 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.

Commissioner Hogan stated that 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,” he said.

In addition to the soon to be outlawed practices mentioned above; other practices will only be permitted if subject to a clear and unambiguous upfront agreement between the parties.

This will include:
  • 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;
  • And a supplier paying for the promotion or the marketing of food products sold by the buyer.

Food products covered include: agricultural products; products processed from agricultural products; and fishery products.

The proposal applies to anyone involved in the food supply chain – be it a retailer, a food processor, a wholesaler, a cooperative or producers’ organisation, or a single producer who would be engaging in any of the unfair trade practices identified.

Enforcement body

The commission’s proposal also requires member states to designate a public authority in charge of enforcing the new rules.

In the case of proven infringement, the responsible body will be competent to impose a proportionate and dissuasive sanction.

It is envisaged that 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 also 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 will have the flexibility to 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 European Council – where member states’ governments are represented.