European Commissioner for Agriculture Phil Hogan will launch his proposals for a directive on Unfair Trading Practices (UTPs) at a meeting of the Parliament’s agriculture committee meeting in Brussels today. These proposals follow the production of a report by a taskforce in 2016 on the position of farmers in the supply chain and this proposal for legislation will seek to implement some of the recommendations of that report.

Outright ban

It is understood that the Commission will propose legislation for the outright banning of certain practices with the scope of the legislation confined to small- and medium-sized businesses. This is the group that is exposed to larger food-buying corporations in the retail and catering sectors who wield the most power in the business negotiations. Delayed payments will be prohibited outright with a payment deadline of 30 days from the date of delivery of the produce or the receipt of the invoice, whichever is the latest.

The legislation will also ban the cancellation of orders for perishable goods at short notice and, similarly, any significant change to the terms of a supply contract unilaterally will be banned. Suppliers having to pay the cost of food waste at the customer’s business will also be banned where the supplier has not been responsible for causing the waste.

In addition to these banned practices, others will have to be clearly provided for in a supply agreement; otherwise, they too will be prohibited. These include suppliers having to accept returns of unsold food products and payments by the supplier to secure or retain shelf space. Any payment from suppliers for promotions will have to be agreed in advance and include duration and frequency of promotions as well as the amount of product that will be involved.

Imbalance in supply chain

The European Commissioner for Agriculture and Rural Development Phil Hogan has made addressing the imbalance in the supply chain an ambition of his term. Bringing forward UTP legislation was made more complex as it is a subject that doesn’t fit neatly into the agriculture portfolio – many would argue that it is more of an issue for the competition commissioner. By securing Commission support for this legislation, Hogan has obviously built the consensus to make it happen.

Of course, the Commission cannot legislate on its own, it will require the support of Parliament to close the deal. By taking his legislative proposals to the agriculture committee of the Parliament for its first outing, the Commissioner is making a strong pitch for their support. That should be achievable because the issue has already had an outing in the European Parliament with current vice-president Mairead McGuinness the rapporteur on a report from the agriculture committee calling for legislation on UTPs back in 2015.

A motion to Parliament in 2016 calling for the Commission to legislate received huge support and was approved by a margin of 600 votes to 48.

History of legislation

This move by the Commission is a first at EU level to tackle the imbalance that is in the supply chain beyond the farm gate. It was considered as far back as 2009 and again in 2014. However, at an EU level, there was a lack of enthusiasm in many member states. Up to 20 already have some sort of domestic legislation in place to address the issues. This initiative by the Commission is intended to put a basic standard in place at an EU level with a recognition that member states can choose to go further if they wish.

Until now, tackling UTPs has been left to each member state. There was a voluntary EU-wide initiative established in 2013, which is a voluntary code of best practice. This was the outcome of a forum on the better functioning of the supply chain and was made up of EU-wide organisations that represented the food and drink sector and was known as the supply chain initiative.

Transparency

One area that was highlighted in the Agricultural Markets Task Force report, which the proposed legislation does not address, is the issue of transparency in the food chain. While the UTP legislation will benefit suppliers, in practice very few – if any – suppliers to supermarkets and food service companies are farmers. It is processors who act as the conduit between farmers and the ultimate customer and many farmers will have as much of an issue with the factories they supply as they have with supermarkets or the catering trade.

A spokesperson for the Commissioner told the Irish Farmers Journal that work on transparency remains a work in progress and that we can expect to see results in the second half of this year. This will be of particular interest to farmers as they see a huge increase in value of the product from it leaving the farm gate until it arrives in the consumer’s basket and there is little knowledge of what costs and profits are incurred in between.