FoodDrinkEurope, representing the EU food and drink industries, believes that the proposal for a Directive on Unfair Trading Practices (UTPs) has the potential to create a minimum harmonisation across the EU level. However, to efficiently tackle UTPs in the food chain, the legislation needs to have an impact on all commercial relations among the different actors of the chain – farmers, processors, retailers and retail alliances.
The extension of the scope to all players in the food chain is the key priority for the food and drink industry, in order to support the good functioning and the competitiveness of the whole agri-food supply chain. Indeed, UTPs do not discriminate by size of supplier. Unless the entire food supply chain is addressed, UTPs will continue to affect SMEs, farmers and therefore thousands of workers. The supply chain is an interdependent system – inefficiencies or challenges in one part of that system have a ‘domino effect’ on the whole chain.
All manufacturers regardless of size, can be very dependent on a limited number of retailers. For a manufacturer, a contract to supply a retailer may represent a large proportion of its business, whilst conversely, one contract for a retailer will represent only a small fraction of its overall business, creating a very one-sided relationship.
Moreover, the imbalance in the food chain has become stronger with the growth of retail alliances, composed of the largest European retailers. The size of these alliances gives them further bargaining power that jeopardizes the contractual freedom of the other party and its ability to refuse unfair conditions.
Moreover, as indicated by the Commission in the explanatory memorandum, there is a wide-spread consensus that UTPs occur throughout the food supply chain, The Commission acknowledges that “UTPs can put operators’ profits and margins under pressure” and adds that, in 2011, “manufacturers participating in a survey reported that UTP-related costs amounted to 0.5% of turnover, which would be equivalent of €4.4 billion per year of overall food industry”.
In addition, 20 EU Member States have UTP legislation (EC Impact Assessment, April 2018) – but not one existing legislative instrument treats some players in the supply chain and not others. Out of 20 Member States, none focuses on SME-only legislation.
The coordination among national bodies is another important element of the proposal, in particular, regarding cooperation on specific cross-border cases. The EU Directive needs to ensure efficient cooperation between enforcement authorities. In cross-border cases, it should be clear which national enforcement authority is competent.
Finally, the EU Directive needs to allow the continuation of national approaches which work efficiently, without generating additional complexity.
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