Tackling unfair trading practices in the agricultural and food supply chain

The EU will soon have more effective tools to tackle unfair trading practices (UTPs) in the agri-food chain, and to prevent the weaker bargaining position of small and medium-sized farmers from being exploited by larger operators, such as major processors and retailers.

The Council today adopted a directive on unfair trading practices in business-to-business relationships in the agricultural and food supply chain. The directive will ban the most obvious unfair trading practices and provide member states with more effective ways of tackling abuses.

The new rules will cover micro enterprises, small and medium-sized enterprises (SMEs) and mid-range enterprises that have an annual turnover lower than EUR 350 million. In order to do that, the directive adopts a dynamic approach, according to which smaller operators are only protected against unfair trading practices in cases where these originate from larger businesses. This means for instance that micro enterprises will be protected against SME buyers and small and medium-sized suppliers will be protected against mid-range buyers and buyers larger than that.

The objective is threefold: to protect only those who really need it, to safeguard the smallest suppliers, but also to prevent that costs caused by abuses of medium-sized operators are being passed on to primary producers.

Unfair trading practices such as late payments for perishable products, last minute order cancellations, unilateral or retroactive changes to supply agreements, the misuse of confidential information, and the retaliation or threat of retaliation against the supplier will be completely banned, while other practices will only be permitted if they are provided for in a clear and unambiguous previous agreement between the parties. Examples are: a buyer returning unsold food products to a supplier, a supplier paying for the promotion or the marketing of food products sold by the buyer, and costs for stocking, displaying or listing agri-food products.

Member states will have twenty-four months after the entry into force of the directive to transpose it into national law, and six more months to apply its provisions.

Background

An “Agricultural Markets Task Force” was set up by the Commission in 2015 with the aim of improving the situation of farmers in the food chain, and delivered its report in mid-November 2016. One of its recommendations for tackling UTPs was to establish a baseline regulatory framework at EU level.

Following the Task Force report, the Council adopted conclusions in December 2016 on strengthening the position of the farmers in the food supply chain and tackling UTPs, calling on the Commission to “undertake, in a timely manner, an impact assessment with a view to proposing an EU legislative framework or other non-legislative measures to address UTPs”.

Following the Commission proposal for a directive in April 2018, the Council agreed its negotiating position on 1 October, and reached an agreement with the European Parliament on 19 December.

Currently a majority of member states already has in place specific national rules protecting suppliers against UTPs.