Food: protecting farmers and small firms from unfair trading practices

Farmers and small food businesses are vulnerable to unfair trading practices. MEPs vote this week on new rules to help protect them.

 

Unfair trading practices occur in all sectors, but are especially problematic in the food supply chain, as agricultural producers may be put under undue economic pressure.

On Tuesday 12 March, MEPs vote on a new EU directive that aims to ensure fairer treatment for farmers and small and medium sized food businesses who are vulnerable to unfair treatment by their big business partners, such as supermarkets or retailers. Smaller suppliers often lack bargaining power in negotiations with large purchasers and may not have alternatives buyers.

What are unfair trading practices?

Unfair trading practices are business-to-business practices that grossly deviate from good commercial conduct and are contrary to good faith and fair dealing. They are typically imposed unilaterally, by a stronger party on a weaker one.
They can happen at all stages of the contractual relationship: during negotiations, throughout the implementation of the contract or in the post-contractual phase.

The impact of unfair trading practices

Unfair trading practices can:

• threaten the survival of smaller food producers;
• discourage smaller businesses from accessing new markets or investing in new products and technologies;
• generate unexpected costs or lower than expected revenues for the weaker trading partner;
• lead to overproduction and cause food waste.

What the new rules will change

The new rules set minimum protection standards prohibiting specific unfair practices in order to protect companies with a turnover below €350 million. This applies to producers, cooperatives, food processors and retailers. The rules also apply to non-EU suppliers.

The rules will ban:

• late payments for perishable food;
• last-minute cancellations;
• unilateral or retroactive changes to contracts;
• forcing the supplier to pay for the wastage of products;
• refusal of written contracts.

Other practices, such as the return of unsold products to suppliers, will only be permitted if clearly pre-agreed by both parties.

More information

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Briefing (2015)

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