Ensuring that the food supply chain works for everyone and combatting any Unfair Trading Practices must be our common goal; greater market orientation requires responsible action by all operators in the chain.
Before arriving on our plates, food travels on an interesting journey. In order for all of us to enjoy our favourite food and drink products every day, a chain of actors needs to work together in harmony: the food supply chain. Within this complex chain, Unfair Trading Practices can often be observed. These unfair practices impose a serious threat to the established partnerships in the chain and are ultimately detrimental to all operators along the chain from farmer to consumer.
The European Commission’s proposal to tackle Unfair Trading Practices (UTPs) in an EU-wide framework is definitely a step in the right direction. It is an important contribution to fundamentally improving the functioning of the food supply chain, and ultimately the position of farmers.
Putting in jeopardy good commercial conduct and fair dealing, puts pressure on companies’ profits and margins, which then impairs their incentive to invest, their ability to create more jobs and to deliver a large variety of foodstuffs to consumers. This domino effect in the supply chain can then lead to price pressure up the chain to farm level and a decline in innovation, due to the climate of uncertainty created by UTPs imposed by buyers.
FoodDrinkEurope agrees with the Commission that small players, farmers and SMEs processors, often face UTPs, but they are far from being the only ones! There are more than 2,500 companies, employing 2 million employees, left outside the scope that are regularly exposed to unfair trading practices and threatened with retaliation in case of reporting it. Delisting threats to obtain unjustified advantages, unilateral and retroactive changes to certain contract provisions, no respect of confidentiality of contracts and trade secrets are part of the daily life of all processors.
An unfair trading practice is unfair, whatever the size of the supplier affected and EU rules should protect all suppliers in the chain, including non-SME operators, and apply to all buyers. Unless the entire food supply chain is addressed, the domino effect of UTPs will continue to impact SMEs and farmers and therefore millions of workers in the agricultural and manufacturing sector.
In its impact assessment, the Commission explains that “SME operators negatively affected in their bottom line by the exercise of UTPs in the food supply chain are unlikely to be able to simply absorb such costs”. But, the same can apply to larger companies. Isn’t it time to clearly prohibit unfair practices in the first place? The Directive needs to apply to all suppliers, irrespective of their size. The supply chain is an interdependent system – inefficiencies or challenges at the processor’s level will always have an impact upstream in the chain. Additionally, independent expert assessment confirms that the Commission’s proposal can be extended to also protect suppliers larger than SMEs without challenging its legal basis.
Twenty Member States have already developed laws to combat UTPs and these typically cover businesses of all sizes, not just SMEs. This demonstrates that combatting UTPs is a concrete and real issue that public authorities have tried to tackle for a long time. Moreover, it is interesting to note that Member States with stricter rules seem to enjoy lower food prices increases than Member States with less stringent UTP rules, according to facts presented by the Commission in its impact assessment.
Nowadays, thanks to the Single Market, supplier-buyer dealings are increasingly transnational and national laws cannot govern this international dimension. An EU-wide legal framework is fundamental in helping to ban unfair practices across the EU. Together with minimum enforcement mechanisms, it has the potential to move things forward to a fairer and more sustainable food supply chain for the benefit of all actors.
To grow sustainably, the food and drink industry relies on well-functioning and balanced food supply chains. With a central role in the chain, in order to operate efficiently, food and drink companies rely on an enabling policy framework that allows them to effectively tackle the challenges and seize the opportunities. This will be of immense importance for the sector’s contribution to the success of the EU growth and jobs agenda.