Food supply chain: deal on new rules to clamp down on unfair trading
- Supporting food producers against unfair trade practices imposed by big players
- Putting a stop to late payments and short notice cancellations of orders
- Food producers to have the right to request a written supply contract
New draft rules to better protect farmers against buyers’ unfair trading practices were agreed by Parliament and Council’s negotiators on Wednesday.
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.
New rules should protect:
- all micro suppliers (annual turnover below €2 million) against bigger than micro buyers
- all small suppliers (annual turnover below €10 million) against bigger than small buyers
- all medium-sized suppliers (annual turnover below €50 million) against bigger than medium-sized buyers
- all mid-range suppliers (with annual turnover below €350 million) against bigger than mid-range enterprises.
Inside the category of mid-range suppliers, it was agreed to have two subcategories:
a) a “lower subcategory” for mid-range suppliers with annual turnover higher than €50 million and below €150 million, and
b) an “upper subcategory” for mid-range suppliers with annual turnover higher than €150 million and below €350 million.
Taking account of the particular nature of agricultural businesses, which regularly require a higher number of employees compared to other types of business, it was agreed that the relevant EU provisions on the maximum number of employees for micro, small and medium-sized enterprises will not apply for this directive.
The provisionally agreed blacklist of unfair trading practices (UTPs) includes:
- payments made later than 30 days for perishable agricultural and food products and later than 60 days for non-perishable products, counting from the end of delivery period or the date of establishment of the payable amount, whichever is the later date;
- unilateral cancellation of an order of perishable products less than 30 days from the agreed delivery date;
- unilateral and retroactive changes of the supply agreement terms imposed by a buyer concerning for instance the frequency, place, timing, volume, quality standards, method of delivery, terms of payment and the price;
- when a buyer requires the supplier to pay for deterioration or loss of a product that occurs on the buyer's premises or in the buyer´s ownership and that is not caused by the negligence or fault of the supplier;
- when a buyer refuses to confirm in writing the terms of a supply agreement agreed with the supplier, who would now have a newly established right to request it;
- when a buyer shares or misuses confidential information, relating to the supply agreement;
- when a buyer attempts to obtain from a supplier some kind of benefit without providing any compensation or service in return and if this benefit is clearly disproportionate to the value of the compensation or service provided;
- when a buyer, in order to obtain better delivery conditions or to punish a supplier for e.g. filing a complaint, retaliates or threatens to retaliate commercially against the supplier, by for instance delisting of products, delaying payments, unilateral deductions or blocking promotions;
- obliging supplier to pay for storage of or manipulation with the products or for the cost of examining customer complaints.
The new law would also outlaw following practices unless pre-agreed in the supply agreement:
- return of unsold products from buyer to the supplier without paying for them or for their disposal;
- charging a supplier for stocking, displaying or listing of products;
- imposing part or all of the costs of discount as a way of promotion on supplier;
- making a supplier pay for marketing or advertising of supplied products.
Clear complaints procedure
To make life easier for food producers, they could lodge complaints where they are established, even if UTPs occurred elsewhere in the EU. National enforcement authorities would be handling complaints and, following an investigation, imposing penalties.
“Our farmers and food producers have always been in the weakest position and now, with this agreement, we are for the first time bringing more fairness and transparency in the agri-food supply chain, to make sure they, as well as we as consumers, no longer suffer the effects of these long-standing unfair trading practices. The European Parliament has been for years calling for an EU law that would introduce more fairness into the food supply”.
“Today, I can proudly announce that we have managed to deliver that. This agreement empowers our farmers and food producers against their buyers and while it outlaws the worst unfair trading practices, it also gives Member States powers to go further if need be, to make sure that no unfairly treated farmer in any corner of our Union is left behind”, said rapporteur Paolo De Castro (S&D, IT).
The provisionally agreed text now needs to be confirmed by the Agriculture Committee before it can be submitted to the plenary to seek Parliament’s green light. Once approved by the Parliament, it will have to be formally rubberstamped by the Council too.
Parliament called in 2016 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, when, right after the vote, the first trilateral negotiations between the Parliament, the Council and the Commission took place.