Brussels faces pressure for tighter definition of unfair trading practices

By Katy Askew contact

- Last updated on GMT

Brussels faces pressure for tighter definition of unfair trading practices
The European Commission is facing calls for a tougher approach to Unfair Trading Practices (UTPs) as it looks at proposals for a directive to promote more equitable relationships in the food supply chain.

The EC’s Special Committee of Agriculture (SCA) met this week with, among other things, UTPs on the agenda.

According to an EU source, the SCA has received a “compromise text on the draft directive​” from the EU presidency. Two sticking points, in particular, have been identified: scope and burden of proof.

Scope and burden of proof

Concerning scope, the presidency suggested maintaining the current scope, as proposed by the Commission, with the possibility for Member States to maintain or introduce stricter national rules.

The UTP proposal – which is expected to enter into force in 2020 – aims to introduce a minimum standard of protection. It provides a list of prohibited UTPs that are classified into two groups: firstly, practices that are simple unfair and, secondly, practices that may be acceptable if clear prior agreement is reached.

Four trading practices that fall into the first group would be prohibited: 

  1. a buyer pays a supplier for perishable food products later than 30 calendar days;
  2. a buyer cancels orders of perishable food products at short notice; 
  3. a buyer unilaterally and retroactively changes the terms of the supply agreement; 
  4. a supplier has to pay for the wastage of food products on the buyer's premises not caused by the negligence or fault of the supplier.

A further four trading practices would be prohibited unless agreed in clear and unambiguous terms in the supply agreement: 

  • returning unsold food products to the supplier; 
  • charging the supplier for stocking, displaying or listing their products by the buyer; 
  • charging the supplier for the promotion of products sold by the buyer; 
  • charging the supplier for the marketing of products by the buyer.

- Source: ERS Briefing: Unfair Trading Practices in the Supply Chain

The Visegrad Group, representing Czech Republic, Hungary, Poland and Slovakia, alongside Bulgaria, Croatia, Romania and Slovenia, argued that the scope of UTCs should be enlarged for buyers only.

“The Directives proposal only offers limited protection to agri-food suppliers, that are SMEs, against buyers, that are large companies, which might lead to further disproportions within the food supply chain,"​ they wrote in documents seen by FoodNavigator.

"The protection of all agricultural producers, no matter their size and legal entity, needs to remain a priority. Agricultural producers are the first most important part of the food supply chain and due to their often weaker economic position they have a lower bargaining power, which is why they suffer the most due to the application of UTPs by economically larger operators.”

On burden of proof, the presidency is considering whether the buyer should have responsibility for proving that the terms and conditions of supply agreements are “clear and unambiguous”​, the EU source told FoodNavigator.

However, the source suggested that legislators are not currently leaning towards broadening the definition of what constitutes an unfair trading practice. “So far the presidency seems to work more in the direction of clarifying Article 3 [which includes the list of UTPs] rather than widening it.”

Food sector calls for clarity

Ahead of the SCA meeting, representatives of the European food sector spelled out the need for clarity regarding the definition of unfair trading.

“We call for a clear definition of what is an unfair trading practice: the essence of an unfair trading practice is the transfer, unilaterally, of excessive risk and unexpected costs on a supplier, by taking advantage of the buyer’s position as market gatekeeper. Without such a definition the Directive risks leaving significant gaps which will be exploited by those who intend to,”​ six organisations representing different actors in the food sector said in a joint statement.

The letter was signed by the European Farmers Association (Copa-Cogeca); European Brands Association (AIM); EFFAT (European Federation of Food, Agriculture and Tourism Trade Unions); Fair Trade Advisory Office (FTOA); FoodDrinkEurope, and IFOAM EU.

“Unfair is unfair, regardless of the size of businesses: all actors in the food supply chain should be protected from unfair trading practices. Without this basic principle enshrined in EU law, any actor may be faced, directly or indirectly, with the effects of unfair trading practices,”​ they wrote.

The food sector organisations suggested that the future directive should be revised every three years to reflect the “rapidly evolving”​ market.

Shifting stance

The latest proposals represent something of a shift from the EC’s initial approach.

Back in April, the Commission indicated it could move to prohibit the ‘more damaging’ UTPs to ensure fairer treatment for small and medium sized food and farming businesses. However, in July, a draft report presented to members of the European Parliament’s Agriculture and Rural Development Committee by Italian Social Democrat MEP Paolo De Castro, called for more stringent measures covering the entire food chain.

The Social Democrats are pushing for a common European legal framework to combat unfair trading practices. This should include a minimum common standard of protection across the EU in order to harmonise the different national regulations and prohibit unfair trading practices across the bloc, the political group said.

Related topics: Policy

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