Unfair trading practices explained
Unfair trading practices (UTPs) in business-to-business relationships deviate from good commercial conduct and are contrary to good faith and fair dealing. The food supply chain is vulnerable to UTPs due to stark imbalances between small and large operators. Often farmers and small operators in the food supply chain do not have sufficient bargaining power to defend against UTPs.
Combatting unfair trading practices
To improve farmers’ and small and medium sized businesses’ position in the food supply chain, the European Union (EU) has adopted legislation that bans certain unfair trading practices.
These include (but are not limited to)
- late payments for perishable food products
- last minute order cancellations
- unilateral changes to contracts
- refusal to enter into a written contract
- returning unsold or wasted products
- payment for buyer’s marketing
Each EU country has to designate a competent authority to enforce these rules and these authorities must have the power to both launch investigations and fine operators who break the rules.
The directive was adopted on 30 April 2019. EU countries now have two years to transpose the Directive into their national laws.
The Directive is accompanied by an impact assessment report based on a public consultation as well as targeted consultations of stakeholders.
This is part of a wider governance agenda, which aims at achieving a more efficient and fairer food supply chain, and which also includes producer cooperation (addressed in the Omnibus regulation) and planned measures to enhance market transparency. This policy agenda is following up on the proposals made in the November 2016 report of the Agricultural Markets Task Force, a high-level group initiated by Commissioner Hogan.
Agricultural Markets Task Force
The European Commission’s efforts to strengthen farmers’ position in the food supply chain draws on the work of the Agricultural Markets Task Force (AMTF).
This group of 12 high-level experts on the food supply chain under the chairmanship of Cees Veerman met between January and November 2016 to discuss a wide range of issues affecting agricultural markets and, in particular, the role of farmers. The AMTF’s report on how to enhance the position of farmers in the food supply chain can be found here
Other European Commission initiatives designed to improve the functioning of the food supply chain include the High Level Forum on the Better Functioning of the Food Supply Chain established in 2010, and the voluntary Supply Chain Initiative it helped launch.