Food supply: towards a more favourable value chain for farmers?

Friday 20 April 2018

Last Thursday, April 12th, The European Commission published a proposal for a directive against so-called unfair trade practices affecting the agri-food chain in the EU. The proposal follows the conclusions of a working group on these practices and a 2016 resolution of the European Parliament. Faced with this phenomenon, the Commission has proposed that Member States assign to a public authority the task of enforcing the prohibition of several practices considered unfair. Without waiting for the European proposal, the French government had already introduced a bill at the national level at the end of January 2018.

Causing tensions between farmers and supermarkets for a long time, the issue of the balance of trade relations in the food sector has been addressed by the European Commission with a proposal for a directive. It defines unfair commercial practices as deviating grossly “from good commercial conduct, […] contrary to good faith and fair dealing and […] unilaterally imposed by one trading partner on its counterparty.” Small operators, including farmers, have a weak bargaining power vis-à-vis major retailers.[1]  "It is unacceptable that farmers get only 20% of the price of a steak when they do the majority of the work to produce it," said Pekka Pesonen, Secretary General of COPA-COGECA, the largest European federation of farmers and cooperatives.

In particular, the Commission's legislative proposal would prohibit[2]:

- last minute order cancellations

- the obligation for suppliers to repay wasted products

- unilateral changes in sales contracts by the buyer

- the payment of perishable foodstuffs beyond 30 days after delivery

Member States will have to, according to the proposal, designate a public authority to enforce the new rules by imposing "dissuasive and proportionate" sanctions on the perpetrators of abuses.

For the European Commission, the interest of taking ownership of the issue can be justified by the transnational dimension of these unfair practices: 70% of the annual exports of agricultural products of the Member States are destined for other Member States.[3] The proposal presented on April 12th is also far too shy according to French MEP Eric Andrieu:

"The regulatory proposals are only intended to ensure that national authorities can act to enforce the proper performance of contracts, while it should address the causes of these imbalances and the direct and indirect remedies to be made. [...] "The text of the European executive does not answer the major question of hyper-concentration in distribution, agribusiness and agro-supply. Similarly to the acquisition of Monsanto by Bayer validated by the same European Commission, this hyper-concentration is a problem with respect to the integrity of the global food system."[4]

Without waiting for a European action, the French Minister of Agriculture, Stéphane Travert, presented on 31 January 2018 in the Council of Ministers his bill for the balance of commercial relations in the agricultural and food sector and a healthy and sustainable food.[5]  This project was a follow-up to the Etats Généraux de l'Alimentation [6] and to the massive below cost selling of Nutella spreads in several stores, something prohibited in France except during sales.[7]  In particular, the bill plans to reverse the construction of prices at which farmers sell their products based on their production costs, to raise the resale threshold at a loss of 10% and to strengthen the mediation role attributed to agricultural inter-branch organizations. According to the Minister, the project should be adopted by September 2018.[8]  As stated by the Commissioner for Agriculture and Rural Development, Phil Hogan, Member States may have stricter legislation than the Commission’s proposal, which will soon be discussed by the Council and the European Parliament.



[1] Inception impact assessment - Ares(2017)3735471, pp. 2-3 http://ec.europa.eu/info/law/better-regulation/initiatives/ares-2017-3735471_fr

[2] http://www.lalibre.be/economie/conjoncture/bruxelles-s-attaque-aux-pratiques-commerciales-deloyales-des-industriels-et-de-la-grande-distribution-5acf419acd709bfa6b525940

[3] Inception impact assessment - Ares(2017)3735471, p.4 http://ec.europa.eu/info/law/better-regulation/initiatives/ares-2017-3735471_fr

[4] Press release of Eric Andrieu : “Unfair practices: Europe at a crossroads”: http://www.eric-andrieu.eu/pratiques-deloyales-leurope-a-un-carrefour/

[5] http://www.lemonde.fr/economie/article/2018/01/31/guerre-des-prix-dans-l-alimentation-le-gouvernement-presente-son-projet-de-loi_5249672_3234.html

[6] Round tables of farmers, producers, processors to deal with the distribution of value in the food chain. See official page: https://www.egalimentation.gouv.fr/     

[7] https://www.lesechos.fr/industrie-services/conso-distribution/0301333748326-nutella-intermarche-aurait-revendu-a-perte-2155747.php

[8] https://www.terre-net.fr/actualite-agricole/politique-syndicalisme/article/le-gouvernement-tente-d-apaiser-les-relations-commerciales-205-134591.html

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