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Thursday, 19 January 2012 - Strasbourg
Imbalances in the food supply chain

European Parliament resolution of 19 January 2012 on the imbalances in the food supply chain

The European Parliament,

–  having regard to its resolutions of 8 July 2010 on the future of the Common Agricultural Policy after 2013(1), 18 January 2011 on the recognition of agriculture as a strategic sector in the context of food security(2), 23 June 2011 on the CAP towards 2020: Meeting the food, natural resources and territorial challenges(3), 5 July 2011 on a more efficient and fairer retail market(4),

–  having regard to the Commission Communication entitled ‘Better functioning of the food supply chain in Europe’ (COM(2009)0591), and to the various working documents annexed thereto, and to its resolutions of 7 September 2010 on Fair Income for Farmers: better functioning of the food supply chain in Europe(5) and 19 January 2012 on the farm input supply chain(6),

–  having regard to Directive 2011/7/EU on combating late payment in commercial transactions(7),

–  having regard to the Commission Decision of 30 July 2010 establishing the High-Level Forum for a Better Functioning Food Supply Chain(8),

–  having regard to the final recommendations of the High-Level Group on the Competitiveness of the Agro-Food Industry of 17 March 2009 and the conclusions of 29 March 2010 on a better functioning of the supply chain food in Europe,

–  having regard to the Eurostat data on price indices of the means of agricultural production (input costs) and price indices of agricultural products (output prices)(9),

–  having regard to its Declaration of 19 February 2008 on the need to investigate and correct the abuses of power by large supermarkets operating in the European Union(10) and its resolution of 26 March 2009 on food prices in Europe(11),

–  having regard to the 2008 Joint Research Centre report entitled ‘Low input farming systems: an opportunity to develop sustainable agriculture’(12),

–  having regard to the report entitled ‘Agribusiness and the right to food’ of the United Nations Special Rapporteur on the Right to Food,

–  having regard to Rule 115(5) and Rule 110(4) of its Rules of Procedure,

A.  whereas the Commission communication on a better functioning of the food supply chain (COM(2009)0591) identified significant imbalances in bargaining power, which translate into unfair trading practices, such as late payments, unilateral contract modifications, unfair contract terms, restricted access to the market, lack of information on price formation, uneven distribution of profit margins throughout the food chain, abuses of market power by suppliers or buyers, such as cartels and resale price maintenance, and buying alliances, among others;

B.  whereas the level of concentration of very large retailers in the European Union is adversely affecting producers and other suppliers, because it is resulting in growing imbalances of power between contracting parties; whereas agricultural producers and processors are suffering a progressive loss of bargaining power vis-à-vis price levels along the value chain - from primary production, through processing to the final consumer; whereas excessive concentration is leading to a decline in product diversity, cultural heritage, retail outlets, jobs and livelihoods;

C.  whereas farmers' income problems are continuing to worsen and the prices paid by consumers for products is not reflected in the prices paid to farmers for their production, which is undermining farmers' capacity to invest and innovate and might prompt many of them to leave the land;

D.  whereas the loss of bargaining power, the increase in production costs and the impossibility of recovering those costs along the food distribution chain may endanger the survival of agricultural holdings, thereby potentially weakening the long-term productive potential in Member States and exacerbating their dependence on external markets;

E.  whereas balanced commercial relations would not only improve the functioning of the food supply chain, but also benefit farmers, through increased competitiveness, and ultimately also consumers;

F.  whereas recent food and commodity price volatility has raised serious concerns about the functioning of European and global food supply chains and has increased the insecurity of farm incomes and in long-term investments by farmers;

G.  whereas not even consumers are benefiting from low farm-gate prices owing to the progressive loss of bargaining power of farmers in the food chain, particularly as quality requirements, labour rights and environmental and animal welfare standards - which European farmers must observe - are often not applied in the same way to imported agricultural products;

H.  whereas the competition authorities in a number of Member States have found that there are four key areas where the imbalances in the food supply chain are particularly problematical: the unilateral imposition of contractual terms; discounting practices; penalties; and payment terms;

1.  Emphasises that the problem of imbalances in the food distribution chain has a clear European dimension, which calls for a specific European solution, given the strategic importance of the agri-food chain to the European Union; points out that the food supply chain, agriculture, the agri-food industry and food distribution account for 7% of total employment in the EU and are worth EUR 1400 billion per year - a figure greater than that for any other manufacturing sector in the EU - and that the share of agricultural value added from the food supply chain dropped from 31% in 1995 to 24% in 2005 in the EU-25;

2.  Draws attention to the ongoing work of the High-Level Forum for a Better Functioning Food Supply Chain, in particular its Business-to-Business platform; asks to be formally and regularly informed about the progress of the work and the decisions taken;

3.  Supports the good work of the Experts' Platform on B2B contractual practices of the High-Level Forum for a Better Functioning Food Supply Chain, in particular in defining, listing and assessing what constitutes a manifestly unfair commercial practice, based on data and concrete examples; calls for strong support for initiatives to foster dialogue between parties on this issue; welcomes the fact that stakeholders have agreed on principles to govern good practices, as presented to the High-Level Forum on 29 November 2011, and urges them to take implementing measures;

4.  Calls on the Commission to propose robust EU legislation - where necessary and without distorting the proper functioning of the markets - to guarantee fair and transparent relationships between producers, suppliers and distributors of food products, and to properly implement the rules already in force, not least because the latest agricultural income figures from Eurostat show that, since 2009, there has been an 11,6% drop in farm incomes at EU level, whilst total input costs for EU farmers increased on average by almost 40% between 2000 and 2010;

5.  Calls on the Commission and Member States to continue urgently to address the problem of unfair distribution of profits within the food chain, especially with regard to adequate incomes for farmers; recognises that in order to stimulate sustainable production systems farmers need to be compensated for their investments and commitments in these areas; emphasises that power struggles must give way to cooperative relationships;

6 Points out that agricultural policy must enable small and medium-sized farmers, including family farmers, to earn a reasonable income, to produce sufficient food of appropriate quality at affordable prices, to create jobs, to promote rural development and to ensure environmental protection and sustainability;

7.  Insists that the Member States should play an active role in supporting existing and in establishing new consultation forums, with proper representation of the actors along the food chain, so as to promote dialogue and establish guidelines to bring about fairer, more balanced relationships; points out that such official consultations help to protect producers and suppliers and ward off retaliatory measures from the distribution sector;

8.  Calls on national and European competition authorities and other regulatory authorities involved in production and commerce to take action against abusive buyer practices on the part of dominant wholesalers and retailers which systematically put farmers in an extremely unequal bargaining position;

9.  Calls strongly for a clear, rigorous and objective definition of abusive and unfair practices, including tighter definitions of concepts and clearer delimitation, in line with the mandate issued to the Commission by its resolution on a more efficient and fairer retail market, so that such practices are subject to specific regulation, supervision and objective sanctions;

10.  Highlights the following as a non-exhaustive list of practices about which producers have raised concerns in relation to the functioning of the food supply chain:

   I) Access to retailers:
   i) Advance payment for accessing negotiation
   ii) Listing fees
   iii) Entry fees
   iv) Shelf space pricing
   v) Imposition of promotions
   vi) Payment delays
   vii) Pricing
   viii) Most favoured client clause
   II) Unfair contractual conditions or unilateral changes to contract terms:
   i) Unilateral and retrospective changes to contractual conditions
   ii) Unilateral breach of contract
   iii) Exclusivity clauses/fees
   iv) Imposition of a ‘forced’ contribution for private brands
   v) Imposition of standard model contracts
   vi) Retaliatory practices
   vii) Non-written contractual agreements
   viii) Margin recovery
   ix) Overriding discounts
   x) Payment delays
   xi) Imposition of payment for waste processing/removal
   xii) Group buying/joint negotiation
   xiii) Inverted auctions
   xiv) Unrealistic delivery terms
   xv) Imposing the use of a (specific) package supplier or packaging material
   xvi) Imposition of the use of a (specific) logistic platform or operator
   xvii) Payment to cover (non-previously agreed) promotions
   xviii) Over-ordering of a product intended for promotion
   xix) Payment for not reaching certain sales levels
   xx) Imposition on suppliers of an extra discount for sales above a certain level
   xxi) Unilateral withdrawal of products from store shelves
   xxii) Imposing unconditional return of (unsold) merchandise
   xxiii) Imposition on suppliers of costs related to product shrinkage or theft
   xxiv) Imposition on suppliers of unreasonable costs related to customers complaints;

11.  Calls for the establishment of a framework to effectively control these practices, first by launching a full-sector inquiry, through administrative or judicial means, and then by introducing a system of evaluation and monitoring operated by the Member States and coordinated by the Commission, with dissuasive sanctions applied effectively and in good time;

12.  Calls, with regard to contractual conditions and abusive commercial practices, for the introduction of better means to ensure that payment deadlines are complied with, taking into account the provisions of the Late Payments Directive, and for new instruments to be put in place to minimise and to harmonise at European level the length of time between delivery and the moment at which payment is actually received by suppliers; stresses, in this context, that solutions are urgently required to deal with the specific problems encountered by producers of perishable goods with short shelf-lives, who face major cash flow difficulties;

13.  Notes the measures in the Commission's draft proposals for the reform of the CAP which are intended to strengthen the position of farmers in the food supply chain through the provision of support to producer organisations and inter-branch organisations and by promoting short chains between producers and consumers, such as markets for local produce; believes that strengthening the position of farmers through better internal organisation and a more professional approach will help to ensure that they receive a fairer share of the added value;

14.  Welcomes the Commission's recommendation on cooperation between the Member States concerning exchanges of best practices on notification of contractual practices, and the preparation of sets of standard contracts;

15.  Calls on the Commission to improve the European Price Monitoring Tool and develop a user-friendly, transparent and multilingual interface which allows consumers and stakeholders to compare prices of basic foodstuffs within a certain Member State and between different Member States at each stage in the food supply chain and which also takes into account differences in costs of living in the Member States;

16.  Calls on the Commission to clarify the application of competition rules in agriculture, with the aim of providing farmers and their inter-branch organisations with tools that will make it possible to improve their negotiating position; calls for an assessment of and changes to existing EU competition law, with a view to ensuring that greater account is taken of the harmful effects of vertical concentration on the entire food supply chain, instead of there being a narrow focus on the relative positions of various companies on the market and distortions of competition being viewed solely on the basis of their detrimental effect to consumers;

17.  Calls on the Commission better to coordinate the work of its various services, so as to be able to play a more effective role in price monitoring throughout the food chain and in monitoring retail dynamics and relative market shares throughout the EU; calls for the creation of an independent Food Trading Ombudsman to liaise with the relevant trade and competition authorities and with national food trading Ombudsmen in each Member State, in order to coordinate and share information; considers, furthermore, that the European Ombudsman and the various national Ombudsmen should be responsible for ensuring compliance with the relevant legislation and recommending timely and appropriate sanctions;

18.  Calls on the Commission to conduct an in-depth study into the differences in approach between the 27 national competition authorities and policies and to encourage solutions which involve all partners in the food production chain and prevent abuses of dominant positions in one or a restricted number of parts of the input or output chain, which often occur at the expense of the agricultural producer;

19.  Believes that an EU-wide information campaign informing farmers of their contractual rights and of the most common illegal, unfair and abusive contractual and commercial practices, as well as of the means available to them to report abuses, should be prioritised;

20.  Considers that the solution to tackling the imbalances in the food distribution chain includes self-regulation but also requires regulation and adjustments to competition law; stresses that Member States should promote the development of best practices and/or codes of conduct in partnership with all stakeholders, bringing together producers, industry, suppliers, retailers and consumer representatives, and making the best possible use of existing synergies;

21.  Instructs its President to forward this resolution to the Council and Commission.

(1) OJ C 351 E, 2.12.2011, p. 103.
(2) Texts adopted, P7_TA(2011)0006.
(3) Texts adopted, P7_TA(2011)0297.
(4) Texts adopted, P7_TA(2011)0307.
(5) OJ C 308 E, 20.10.2011, p. 22.
(6) Texts adopted, P7_TA(2012)0011.
(7) OJ L 48, 23.2.2011, p. 1.
(8) OJ C 210, 3.8.2010, p.4.
(10) OJ C184 E, 6.8.2009, p. 23.
(11) OJ C 117 E, 6.5.2010, p. 180.

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