Striking a balance: New EU rules against unfair trading “to stop bullying by the big players”

14 Mar 2019 --- The European Parliament has announced new EU rules to protect farmers against unfair trading practices (UTP) by buyers. The new rules, supported by 589 votes in favor and 72 against (with nine abstentions) blacklist practices, such as late payments for delivered products, late unilateral cancellations or retroactive order changes, refusal by the buyer to sign a written contract with a supplier and the misuse of confidential information.

This action seeks to improve the trading conditions for the 11 million farmers and 293,000 producers in Europe, as well as for many more suppliers outside the EU, when selling their products on the European market. 

In December 2018, draft rules were revealed by the European Parliament to better protect farmers against buyers’ UTP. The provisional deal, in line with Parliament’s demands, broadens the scope of the proposed draft law to cover trade of agricultural products and ancillary services, on top of foodstuffs.

In 2016, the European Parliament called for EU action to do away with unfair trading practices. The Agriculture Committee demanded an EU law against UTPs also in its 2017 position on the so-called Omnibus proposal. MEPs also discussed the matter with several EU agriculture ministers and agreed with them that an EU law was necessary. The Agriculture Committee approved the draft EP negotiating mandate on 1 October and the Parliament confirmed it on 25 October 2018, when the right the vote, the first trilateral negotiations between the Parliament, the Council and the Commission took place.

FoodDrinkEurope, an organization which seeks to support a fair agri-food chain, has welcomed the announcement.

“FoodDrinkEurope has been promoting a fair food chain for the past decade,” FoodDrinkEurope's Director General, Mella Frewen, tells FoodIngredientsFirst. “The recent increase in retail concentration and the need for more harmonization in the Single Market have raised the issue of an EU-wide approach to fairness, making it a top priority. For the whole agri-food chain to operate successfully, we must ensure that all players are treated fairly.”

Twenty countries have already individually developed legislation on UTPs and according to Frewen, “This shows the extent of the problem.” The EU Directive can improve the situation by providing a harmonized EU legislative base, by addressing the fear factor, increasing business certainty and providing balance throughout the food supply chain, she says. 

“As the Directive provides for minimum harmonization, suppliers in all member states who face unfair trading practices, will be protected.”

“The UTPs Directive was approved by the EP this week, and the Council will formally approve it at the beginning of April. The EU Directive will enter into force a few days after its publication. Once the Council adopts the file, it will be time for the member states to focus on the transposition and implementation of the legislation and the enforcement of the rules (24 months, around April 2021),” explains Frewen.

The Directive brings more certainty and clarity to those buying and selling agri-food products across the chain, according to FoodDrinkEurope. By providing a minimum harmonization level across the EU, policy-makers achieved a significant step in the fight against UTPs in the food supply chain.

Once the file is adopted by the Council, member states are to focus on the transposition and implementation of the legislation and the enforcement of the rules.

Buyers will no longer be allowed to request payments from suppliers for deterioration or loss of products at the buyers’ premises unless caused by the suppliers’ negligence or to make suppliers pay for the cost of examining customer complaints.

Other practices, such as returning unsold products to a supplier without paying for them, forcing suppliers to pay for the advertising of products, charging suppliers for stocking or listing of products, or imposing discount costs onto the supplier, would also be outlawed unless pre-agreed in the supply agreement.

“Fairness, healthier food and social rights have finally prevailed over the unfair trading practices in the food supply chain. For the very first time in the EU history, farmers, food producers and consumers will no longer be bullied by big players,” says rapporteur Paolo De Castro, from Progressive Alliance of Socialists and Democrats in the European Parliament.

Clear complaints procedure
Food suppliers will be allowed to lodge complaints where they are based, even if unfair trading occurred elsewhere in the EU. National enforcement authorities would handle complaints, conduct investigations and ensure solutions.

Threats of retaliation against suppliers, for instance, delisting their products or delaying payments, to punish them for filing complaints, will also be outlawed.

Protecting small and mid-range suppliers
New rules will protect small, medium-sized and mid-range suppliers with an annual turnover below €350 million (US$395 million). These suppliers will be divided into five sub-categories, with turnovers below €2 million (US$2.2million), €10 million (US$11.2 million), €50 million (US$56.4 million), €150 million (US$169.3 million) and €350 million (US$395 million ), with the most extensive protection given to the smallest ones.

Next steps
The anti-UTPs directive needs to be formally endorsed by the Council before it can enter into force. EU states will then have 24 months to introduce it to national laws. New rules should be applied 30 months after entering into force.

By Elizabeth Green