Small farmers and medium-sized producers in the agri-food sector will soon be able to count on stronger protection against abuses coming from their bigger trading counterparts, such as processors and retailers.
The Austrian presidency of the Council and European parliament representatives today reached a provisional political agreement on a directive on unfair trading practices (UTPs) in business-to-business relationships in the agricultural and food supply chain.
Out with unfair trade practices in the agri-food chain, and with retailers and operators using their size to bully their smaller counterparts. We want farmers to get a fair price for what they produce and to be acknowledged for the crucial role they play in our society. These new rules give a voice to producers who previously did not have one, and empowers member states to go the extra mile to defend them.
Elisabeth Köstinger, Austrian Federal Minister for Sustainability and Tourism and President of the Council
The agreement now needs to be endorsed by member states in the Special Committee on Agriculture (SCA).
The objective of the agreed rules is to set up a common European framework granting a minimum level of protection for farmers and other suppliers of agri-food products against the most obvious UTPs. The agreed measures will complement those already existing in member states, which will be able to take further measures in the future.
These are the main features of the agreed directive:
Scope: once transposed into national legislation, the directive will cover certain unfair trading practices which occur in relation to the sales of agricultural and food products and, to a certain extent, services in the agri food-chain. The protected suppliers will be micro enterprises, SMEs and mid-range enterprises that have an annual turnover that is smaller than EUR 350 million. In order to widen this protection, the directive will cover buyers that are established both in the EU and in third countries.
List of UTPs: the unfair trading practices that will be completely banned are for example 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.
Other practices will only be permitted if they are subject to a clear and unambiguous previous agreement between the parties, notably: 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.
Enforcement authorities: member states will have to designate one or more public authorities in charge of enforcing the new rules. In the case of several enforcement authorities present in the same country, member states will have to select a single contact point. Such enforcement authorities will be able to initiate investigations on their own initiative or on the basis of a complaint, and to impose fines.
Competent enforcement authority: suppliers will be able to chose whether to lodge a complaint in their own member state or in the member state where the buyer may have engaged in a prohibited trading practice.
Voluntary alternative dispute mechanism: member states will have the possibility of promoting the voluntary use of effective and independent alternative dispute resolution mechanisms such as mediation.
Transposition: 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 and next steps
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 having a baseline regulatory framework at EU level.
In the light of the Task Force report, the Council adopted in December 2016 unanimous conclusions on strengthening the position of the farmers in the food supply chain and tackling UTPs, calling on the COM 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.
The agreement will be submitted for endorsement by the SCA. Parliament and Council will then be called on to adopt the proposed directive at first reading.