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EC policy developments on addressing unfair trading practices

04 March 2013

On 31 January 2013, the EC ‘adopted a European Retail Action Plan and a Green Paper on unfair trading practices in the business-to-business food and non-food supply chain’. The primary focus of this initiative is on improving the functioning of the retail sector within the EU single market. In terms of unfair trading practices (UTPs), the EC’s primary concern relates to the effects they can have on investment and innovation.

In terms of agricultural producers’ interests, the initiative aims to promote ‘fairer and more sustainable trading relationships along the food and non-food supply chain’. The EC’s interest in UTPs can be traced to the 2009 food price spikes, which generated concerns over the functioning of food supply chains. At that time, it was concluded that ‘consumers were not offered sufficiently fair deals in terms of product range and prices’, while ‘intermediaries / food processing industrials / retailers squeezed the margins of agricultural producers’.

An EC Retail Market Monitoring Report published in 2010 identified the lack of rules addressing UTPs, or the lack of enforcement, ‘as one of the major problems of the retail sector’. While agreement was reached on ‘a set of principles and examples of fair and unfair practices in vertical relations in the food supply chain’ in the High Level Forum for a Better Functioning Food Supply Chain (see Agritrade article ‘Report on improving functioning of food supply chain released’, forthcoming), an impasse was reached on the issue of enforcement of these principles. Only 8 of the 11 organisations participating in the forum were able to agree on an enforcement mechanism to address UTPs. These eight organisations, however, ‘announced their intention to launch the implementation of the principles of fair practice on a voluntary basis in early 2013’.

This initiative provides a parallel track to the EC’s Green Paper process aimed at assessing the relative merits of voluntary and regulatory disciplines. Currently, within the EU ‘different approaches exist to address UTPs at national level.’ Where UTPs are addressed, member states vary on whether they adopt a regulatory or self–regulatory approach. Some EU member states, however, rely solely on general competition law.

The Green Paper sets the scene for an EC investigation into ‘the magnitude of unfair trading practices’ and their economic effects. The aim is to examine the ‘effectiveness of self-regulatory and legislative frameworks put in place to address those practices at national level’. Inputs from interested parties are invited, and the consultation is open until 30 April 2013.

The EC’s retail action plan and Green Paper on UTPs has been criticised by the fair-trade NGOs Traidcraft and the Fair Trade Advocacy Office for relying too heavily on a voluntary approach. They maintain that the UK experience shows that a voluntary approach does not work, and argue that unfair contracts result in poorer working conditions for workers and lower returns for farmers in developing countries. They identify a need for the EU to extend initiatives on UTPs to the international level, and call for ‘swift and tough action’ by the EC to end UTPs along food supply chains, along the lines of the UK’s proposed Groceries Code Adjudicator. This, it is argued, should allow ‘anonymous complaints’ that lead to the investigations and, where unfair businesses practices are pursued, fines. 

Editorial comment

In June 2012, a coalition of consumer organisations petitioned the EC for the ‘Code of Practice the Commission has promised to govern food retailers [to] be extended to cover the overseas suppliers’. This delegation included representatives of ACP farmers (see Agritrade article ‘ Sustainability concerns go mainstream in Dutch fruit and vegetable sector’, 29 July 2012). The need for such a code of practice is highlighted by the debate around the distribution of costs and benefits of sustainability certification along fruit and vegetable supply chains and the growing concern over the lack of transparency in price formation in the ACP–EU sugar trade. In recent years there has been considerable variation in contract prices paid for ACP sugar, under different types of marketing arrangements. With an increase in the volume of ACP sugar exports falling within the scope of contracts between sister companies, issues related to the transparency of price formation are likely to come increasingly to the fore.

This consultation offers ACP stakeholders an opportunity to make their concerns related to UTPs known to the European Commission.

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