Agrifood Special CAPitals Brief: The rules against unfair trade practices

The rules against unfair trade practices

This time our tour of the EU focuses on unfair trade practices (UTPs), in the food supply chain, such as late payments or sales below production costs.

Recent protests across Europe by farmers have put the issue back on the political agenda. In 2019, the EU adopted a law against these trade practices. The law is a directive, meaning when member states have transposed it into national law, they often apply stricter rules than the EU.

SPAIN

A pioneer in food chain legislation. The Spanish food chain law dates back to 2013. The law was reformed in 2021 to improve commercial relations between the different stakeholders beyond the minimum protection provided by EU legislation.

The current law prohibits the destruction of value in the food chain and the sale of products below the cost of production. Production costs are also the basis for negotiating written contracts.

The law includes an obligation to formalise the contract in writing in all commercial transactions over €1000. Concerning commercial advertising, the law prohibits misleading agreements on the price and image of products, as well as transactions that damage the perception of the quality or value of agricultural and food products.

The list of prohibited unfair commercial practices has been extended to prevent possible abuses. A digital register of food contracts has been created.

The Food Information and Control Agency (AICA), which reports to the Spanish Ministry of Agriculture, Fisheries and Food, monitors compliance with the law and the digital register of contracts, and coordinates control with the regional autonomous authorities, which also have powers in this area.

AICA publishes the sanctions for serious infringements. Last April, the Spanish government announced the conversion of AICA into a state agency and a reinforcement of its resources. The announcement was one of the 43 measures promised to agricultural organizations in response to the demostrations of Spanish farmers.

(Mercedes Salas/EFEAGRO)

ITALY

Stringent rules. Under strong pressure from agricultural organisations, Italy adopted particularly stringent rules on combating unfair trade practices with the legislative decree of 8 November 2021 implementing EU Directive 2019/633.

Since 2022, the Inspectorate for Quality Control and Fraud Repression (ICQRF), which reports to the Ministry of Agriculture and Food Sovereignty, has had control over unfair trade practices.

The Italian law provides a blacklist of prohibited unfair commercial practices, such as payment terms for perishable goods of no more than 30 days, no cancellation of orders for perishable goods with less than 30 days’ notice. In addition, the law stipulates that contracts between farmers and companies in the agri-food chain must be based on transparency, fairness, proportionality, and reciprocity of performance; must be in writing; and must have a minimum duration of 12 months (with some exceptions concerning seasonal activities).

One of the cases with the widest media coverage was the one involving the French giant Lactalis. On 22 February, the Ministry of Agriculture imposed a penalty of €74,144.89 on Italatte, Lactalis’s subsidiary in Italy, for abuse of a dominant position, as required by law.

The government included new provisions on unfair commercial practices in the Agriculture decree approved on 6 May by the Council of Ministers and signed on 15 May by the President of the Republic, Sergio Mattarella.

To make the regulations more effective, the government has strengthened controls, allowing the directors of general markets (the markets scattered throughout Italy where negotiations between farmers and companies take place) to report the lack of transparency in negotiations to the ICQRF.

In addition, the government allocated approximately EUR 9 million for the Institute of Agricultural Food Market Services (ISMEA), a public body under the control of the Ministry of Agriculture, to certify the average production costs of individual agricultural products.

(Simone Cantarini|Euractiv.it)

GREECE

Clampdown on time of payments. The Unfair Trade Practices directive regarding food chains was transposed into the Greek legislation under the law n. 4792/2021. Last February, one related clause was passed into a new law by the Ministry of Agriculture in an effort to regulate food market in the midst of high inflation.

The 2021 law regulates the trade of agricultural and food products between suppliers & buyers, who are separated into six categories depending on their annual turnover.

It also includes a number of provisions that correct the significant imbalances in bargaining power between suppliers and buyers of agricultural and food products, in particular large supermarkets.

Deadlines for payments – 30 days for perishable products, 60 days for other agricultural products – are among the most remarkable provision in the law, aimed at correcting a market failure. Payments from big chains, in fact, were found to be delayed for more than six months.

For the implementation of the regulations and the enforcement of the relative prohibitions, a five-member “Committee to Combat Unfair Trade Practices” has been established by the Ministry of Rural Development and Food, while the National Competition Committee has also taken up increased competences regulating a number of stages in the trade process.

The Minister of Rural Development and Food, Lefteris Avgenakis, has recently stressed the need for an update of the legislation both at national, and EU level.

(Maranthi Pelekanaki / Euractiv.gr)

POLAND

Facilitating direct sales. Poland adopted regulations against unfair trade practices in the food supply chain a few years before the EU directive on UTPs.

On December 15, 2016, the Polish parliament passed the Act on counteracting unfair use of contractual advantage in trade in agricultural and food products.

The act entered into force in mid-2017. It was aimed at eliminating unfair practices in the conclusion and performance of contracts binding entities from the supply chain of agricultural raw materials and food, i.e. unfair use of contractual advantage.

From 1 January 2022, in the framework of the larger economic reforms package called the “Polish Deal,” the government facilitated direct food sales to prevent unfair trade practices.

There are approximately 11,000 farmers across the country who engage in this form of trade, according to the authorities.

The aim of the adopted regulation was to strengthen the position of producers in the supply chain and enabling selling food at local markets and bazaars without paying a market fee.

Under the new law, communes are obliged to designate commercial places that are exempt from market fees in order to facilitate farmers selling their crops. The place designated for food sale should be located close to an attractive tourist point, in the centre of the commune or town or another point that is easy to reach.

The main body in charge of implementing competition and consumer protection policies in Poland is the Office of Competition and Consumer Protection (UOKiK).

It is a central governmental, independent authority. Its members are nominated by the prime minister from amongst the persons selected by way of an open and competitive contest.

The mission of UOKiK is to increase consumer welfare through effective protection of consumers’ interests and to promote the development of competition while respecting the principles of openness and dialogue with market participants, as stated at the office’s website.

(Aleksandra Krzysztoszek | Euractiv.pl)

CZECH REPUBLIC

Expanding the scope of legislation

In Czechia, the EU directive on unfair trade practices was transposed in the national legislation and came into effect in 2023.

The original national legislation affected the 12 largest companies, the amended law now potentially affects up to 800 entities.

The new rules categorize buyers and suppliers into five revenue bands, determining significant market power based on annual turnovers. For example, a buyer with over €2 million in annual revenue dealing with a supplier earning less than this amount will be considered to have significant market power.

Unfair practices now have more precise definitions, reducing legal uncertainty for buyers. Examples of unfair practices include canceling perishable food orders less than 30 days before delivery, imposing unreasonable payment terms, and requiring suppliers to bear promotion costs without prior written agreement.

However, critics pointed out that some provisions of the law may also result in a worsening of the situation of smaller farmers and other suppliers.

The Office for the Protection of Competition (ÚOHS) is responsible for enforcing the law and can impose fines up to €400,000 or 10% of the buyer’s annual turnover. They also provide guidelines to help businesses understand and comply with the new regulations.

(Aneta Zachová / Euractiv.cz)

BULGARIA

More efforts needed for transparency in the food chain

In an interview with Euractiv the former Minister of Agriculture, Kiril Vatev, who held the position in the government until mid-April 2024, told that the “The most common illegal trade practices in the food chain are smuggling and tax evasion.”

Vatev added that the other major problem is related to unfair trade practices throughout the European Union, where unfair distribution of added value along the supply chain is common.

According to Vatev, to tackle the issue for constant monitoring of prices and control of trade from producers to retailers is needed.

The data show that Bulgaria has a serious problem related to unfair commercial practices in the food trade. In 2023, the Commission for Consumer Protection registered 452 violations during a total of 471 inspections of food pricing in the commercial network. This means that practically every inspection has shown some kind of violation.

The most common unfair practices are misleading advertisements that a product is at a promotional price only on a certain day, when in fact it is the regular price.

Discrepancies have been identified between the product’s label price and the actual price. Some supermarkets display goods in their advertising brochures that are not in the stores and cheat on the weight of the food.

(Krasen Nikolov / Euractiv.bg)

ROMANIA

The first significant UTP cases in 2024. The national law on unfair commercial practices in the agricultural and food supply chain, which transposes the 2019 European Directive into Romanian law, entered into force in 2022. The Ministry of Agriculture and Rural Development oversees the enforcement of this law and monitors cases of unfair commercial practices. The Competition Council also plays a crucial role, detecting and imposing sanctions.

In 2024, the first two cases falling under this law emerged.

A Romanian company that produces Magiun of Topoloveni, a traditional plum-based spread with Protected Geographical Status from the EU since 2011, disclosed a conflict with a major German retailer (Metro). The retailer stopped purchasing plum products from a Romanian company, citing insufficient delivery volumes. The owner of the company claimed that it is illegal for a retailer to refuse to carry a food product listed in national and/or European quality schemes, due to low volumes or seasonality.

Similar reasons were given for the removal of ice cream from several supermarkets due to low delivery volumes.

On 16 May, Agriculture Minister Florin Barbu announced that he would discuss these cases with the parties involved. He also denounced the fact that there was an unfair commercial practice, so that “many Romanian products have a very high mark-up, while the imported products have a very low mark-up”.

However, the Ministry of Agriculture has opted for a normative approach rather than inspections to tackle these alleged unfair practices, and plans to introduce limits on mark-ups for traditional products through a possible law to be adopted in the autumn.

(Catalina Mihai / Euractiv.ro)

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