Unfair trading practices regulation: Overview
- The regulation strengthens farmers’ bargaining power in cross-border disputes
- It improves enforcement of existing EU unfair trading rules
- Authorities gain stronger powers for cross-border regulatory cooperation
- Food and agriculture faces greater risks from supplier power imbalances
- Retailers may face increased scrutiny and easier enforcement actions
In food and agriculture, farmers and smaller companies are often dwarfed by the might of larger players such as manufacturers and retailers. In the face of this imbalance, they can have significantly less bargaining power.
Larger companies can exploit this difference, implementing unfair trading practices.
The EU’s new unfair trading practices regulation (Regulation (EU) 2026/697) aims to increase the bargaining power of these small players, particularly farmers, when it comes to cross-border disputes. It aims to build on the earlier unfair trading practices directive.
The regulation came into force earlier this year and will be applicable from 10 September 2027.
What are unfair trading practices?
The regulation aims to protect smaller market players from unfair trading practices. These can come about due to the imbalance of bargaining power between smaller market players, particularly farmers, and larger companies.
Unfair trading practices include those such as delaying payments to suppliers, cancelling orders for perishable goods at short notice, and charging suppliers for costs unrelated to the supply of the relevant products, explains Gerard McElwee, partner at the law firm Squire Patton Boggs.
The European Commission itself describes unfair trading practices as those that “deviate from good commercial conduct” and are “contrary to good faith and fair dealing”.
How does the regulation aim to prevent them?
In 2019, the EU adopted the unfair trading practices directive. The directive bans 16 trading practices: 10 outright, and six unless the buyer and supplier agree.
A directive leaves far more details up to EU Member States than a regulation.
Trading practices banned by unfair trading practices directive
10 trading practices banned outright:
- Payments later than 30 days for perishable agri-food products
- Payments later than 60 days for other agri-food products
- Short-notice cancellations of perishable products
- Unilateral contract changes by the buyer
- Payments not related to a specific transaction
- Refusal of written confirmation of supply agreement by the buyer, despite request from supplier
- Risk of loss or deterioration transferred to supplier
- Commercial retaliation by the buyer
- Misuse of trade secrets by the buyer
- Transferring costs of examining customer complaints to the supplier
6 trading practices banned unless supplier and buyer agree:
- Return of unsold products
- Payment of supplier for stocking, display and listing
- Payment of supplier for promotion
- Payment of supplier for advertising
- Payment of supplier for marketing
- Payment of supplier for staff of the buyer, or fitting out premises
The upcoming regulation aims to make enforcement of these restrictions more effective when there is a cross-border element, explains McElwee. The regulation “increases cross-border coordination and enforcement among authorities in cases where the buyer is located in a different Member State to the supplier”.
Due to the principle of territoriality, which means that a state’s sovereignty is confined to its national borders, enforcement authorities were finding it difficult to enforce the directive’s rules when buyers were established in a different EU Member State. The directive relied on the cooperation between enforcement authorities, the EU suggests, meaning that enforcement could be uneven. The regulation aims to rectify this.
The main purpose of the regulation, therefore, is to make the rules laid out in the directive easier to enforce across borders.
The regulation empowers enforcement authorities to take investigative measures on behalf of other such authorities, providing these take place within their own borders, and places restrictions on the ability of these authorities to refuse cooperation cross-border.
Why is it focused on food and agriculture?
The regulation is focused prominently on food and agriculture, rather than trade as a whole.
This, says Squire Patton Boggs’ McElwee, is due to the bargaining power imbalance between farmers and large companies such as manufacturers and retailers. Such imbalances may exist in other sectors, he says, but are “not as stark”.
Furthermore, many food products are perishable, making them more vulnerable to unfair trading practices such as last-minute changes or cancellations.
Finally, given food’s vulnerability to climate change and disease, its products need special protection.
How will key stakeholders be impacted?
Farmers are the main beneficiaries of the regulation, says McElwee. It should benefit their bargaining position, making complaints against buyers in other Member States easier to handle.
Ingredients suppliers and food manufacturers can act as buyers or sellers. They may benefit or lose out from the regulation, McElwee suggests, although the larger they are, the more likely they are to be impacted negatively.
Retailers are the “main losers from the regulation”, he says.
Improving enforcement cross-border
The directive is already in place, and is already being enforced, as seen in Bulgaria, where the Bulgarian Commission on Protection of Competition (CPC) recently imposed a €76m fine on Kaufland Bulgaria EOOD & Co KD, a major food retailer.
Indeed, many unfair trading practices have been found since the directive was introduced, with roughly one-third of investigations discovering infringements (a total of 754, according to the EU) and implementing penalties.
However, the new regulation serves a different purpose: it will make the directive easier to enforce cross-border.
Companies must check the terms of their supply agreements, says McElwee, ensuring that they comply with the regulation, as well as the underlying directive.
While the actual restrictions on unfair trading practices will not change, the regulation will make these easier to enforce. If companies want to comply with these restrictions, it is more important than ever that they become familiar with its provisions.
