It will prohibit the ‘more damaging’ UTPs to ensure fairer treatment for small and medium sized food and farming businesses.
Nine groups said the move has the potential to create a minimum harmonisation at EU level without endangering existing systems in some Member States.
However, UEAPME, IFOAM EU, FoodDrinkEurope, Fair Trade Advocacy Office, EFFAT, Copa and Cogeca, CLITRAVI, CEJA and AIM expressed concern with its limited scope as it covers only SME suppliers.
“A successful approach to combating UTPs needs to be applicable to all players in the supply chain, regardless of their size, as it would therefore impact all commercial relations,” they said.
National authorities can impose fines
The proposal includes enforcement so financial sanctions can be imposed by national authorities when there are infringements. It requires Member States to designate a public authority to initiate investigations either of its own initiative or based on a complaint.
Food covered includes agricultural products and items processed from such products. Fishery products are included as agricultural goods. The rules also apply to non-EU suppliers.
Fair Trade Advocacy Office and Banana Link reaction
Sergi Corbalan, Fair Trade Advocacy Office said: “The EU must ensure that the most vulnerable actors in the supply chain have access to a complaint mechanism and allow complaints against all companies importing food into the EU.”
Jacqui Mackay, Banana Link national coordinator, said: "This will be welcome news for the plantation workers and small-scale producers we work with, who, for many years have suffered the consequences of the power of supermarkets in pushing down the prices they pay for bananas, negatively impacting working conditions and threatening livelihoods.”
The EC said smaller operators, including farmers, are vulnerable to UTPs used by partners in the chain and often lack bargaining power and alternatives to get products to consumers.
It added there was no reason why the legislation should lead to price increases for consumers.
Vice president Jyrki Katainen, responsible for jobs, growth investment and competitiveness, said unfair business conduct undermines economic viability of operators in the chain.
"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,” he said.
“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.”
UTPs to be banned are late payments for perishable food products, last minute order cancellations, unilateral or retroactive changes to contracts and forcing the supplier to pay for wasted products.
Others will only be permitted subject to an agreement between the parties: a buyer returning unsold food products to a supplier; a buyer charging a supplier payment to secure or maintain a supply agreement on products; a supplier paying for the promotion or marketing of items sold by the buyer.
The proposals build on an existing voluntary code of best practice known as the Supply Chain Initiative (SCI).
Agriculture and rural development commissioner Phil Hogan said any chain is only as strong as its weakest link.
“[The] 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,” he said.
“We are looking to eliminate the ‘fear factor’ in the food supply chain, through a confidential complaints procedure."
The European Parliament and European Council will soon discuss amendments to the proposal and should adopt them by the end of the year to allow for negotiations on the final text before elections in May 2019.
Oxfam and FOE Europe reaction
Carina Millstone, executive director of Feedback, said: “This legislation is an important and overdue step towards protecting the people who grow our food from unfair dealing which undermine their livelihoods and encourage overproduction to meet capricious supermarket demand, leading to vast amounts of waste.
“We urgently need a fairer food system that treats farmers with respect and that values the precious natural resources such as water and land that goes into growing food and tackling unfair trading practices is an important step in the right direction.”
Oxfam, FTAO, IFOAM-EU and FOE Europe said supermarkets’ poor practices lead to insecurity among suppliers, which impacts the most vulnerable in the value chain.
Oxfam’s EU economic justice policy lead, Marc-Olivier Herman, said the proposal could help farmers get a fairer deal for their produce.
“Nobody should suffer to stock our supermarket shelves, yet too many small farmers in poor countries producing food for European supermarkets are struggling to make ends meet,” he said.
“Women farmers in precarious conditions are worst affected by unfair trading practices, including low wages, irregular work, unsafe working conditions and lack of social protection.
“The proposal enables small and medium-sized food producers, wherever they are based, to anonymously complain about abusive practices of large European buyers.”
Friends of the Earth Europe’s food and agriculture campaigner, Stanka Becheva, said a small number of retailers control big parts of the food market in Europe.
“Although we welcome a legal framework to strengthen the position of farmers, we want to see complementary measures to support direct sales and short food supply chains, which bring the most for farmers, consumers and the environment.”