Unfair trade practices, is directive

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The European Parliament, the Council and the Commission finally reached political agreement on 19.12.18 on the text of the new directive on the unfair trade practices (Unfair Trading Practices, UTPs).

Unfair trade practices in the agribusiness supply chain

Unfair trade practices in the agrifood supply chain remain one of the most serious problems affecting agricultural production, food processing (Europe’s leading manufacturing sector), workers and finally consumers themselves.




Consumers




are victims of the decline in product quality, which is an inevitable consequence of the price battle

imposed by the hegemony of large-scale retailing (GDO). In turn, consumers participate, albeit unknowingly, in the global chain of exploitation.

The former directive, nevertheless, limited its scope to unfair commercial practices carried out by economic operators against consumers. (1) Thus omitting consideration of unfair contracting practices carried out upstream of the final distribution.


Unfair Trading Practices
(UTPs), the new directive

The UTPs directive, Unfair Trading Practices, introduces a set of rules aimed at protecting EU-based farmers and food processors from abuses perpetrated against them by the giants of the GDO and of theecommerce. His proposal was adopted by the European Commission after a dozen years of lively yet fruitless debate. (2)

The scope of the ‘UTPs Directive‘ includes all food and agricultural products-including those with a destination other than food (e.g., ornamental plants)-traded in the Domestic market. When even the buyers, distributors or importers and intermediaries of sorts, are located outside the EU.

The new rules apply to individual producers as well as their organizations and cooperatives on the supplier side. To importers, brokers, wholesale and retail distributors, including online, on the buyers’ side.

The protection of agri-food suppliers operates on the condition that the economic power of the buyer is greater than that of the supplier. For this purpose, 6 turnover classes are identified (0-2, 2-10, 10-50, 50-150, 150-350, >350 million). Each supplier will be protected only if their buyer falls into a higher turnover class. (3)

Member states will have to transpose the new harmonized provisions-which establish a basic system to protect protected rights-by introducing appropriate supervisory and sanction procedures. In implementing these standards, national legislatures may in any case strengthen the level of protection through additional or more restrictive provisions.

UTPs, the prohibited business practices

The eight unfair practices considered by the Commission are divided into:

-4 black practices, which are always prohibited (late payments for perishable products beyond 30 days, unilateral and retroactive changes in supply contracts, cancellation of orders for perishable products on short notice, and payment for spoilage of products already sold and delivered to the buyer),

-4 gray practices, allowed only if subject to a clear and unambiguous direct agreement between the parties (return of unsold products, payments for being able to become a supplier or for other unsolicited services, payments for promotional expenses, payments for advertising expenses).

Eight more ‘
unfair trading practices
‘ were introduced into the directive, thanks to the European Parliament-whose delegation was led by Hon. Paolo De Castro, the proposal’s rapporteur-and the Council. Again, the practices considered are divided into:

-6 mandatory precepts (60-day payment deadline for non-perishable products, prohibition of payment for unreturned services, requirement of written contract where required by the supplier, prohibition of misuse of confidential supplier information by the buyer, prohibition of commercial retaliation-or even the threat thereof-if the supplier makes use of the rights guaranteed by the directive, prohibition of payment by the supplier for handling customer complaints not attributable to its negligence).



-2 prohibited practices ‘unless otherwise agreed’, negotiated transparently and before



of the commencement of the supply agreement (transfer to the supplier of advertising costs in addition to those related to promotion and marketing of its products, payment for handling – e.g., logistics – of the product following delivery).

The new rules, when and how

The text of the 19.12.18 agreement will now be submitted to the Parliament and the Council for formal approval, then forwarded to the relevant offices for publication in the Official Gazette and subsequent entry into force.

Member states-in addition to transposing the directive into their own laws-will have to designate authorities to ensure compliance with the new rules, through investigative activities and penalty measures. Also ensuring the confidentiality of the names of complainants who request it, in order to protect them from possible commercial retaliation.

The European Commission will establish a coordination mechanism among regulators to facilitate the sharing of best enforcement practices. After 4 years of the measure’s enactment, the Commission will finally be asked to evaluate its effectiveness and, if necessary, propose its revision.

Dario Dongo

Notes

(1) See dir. 2005/29/EC, implemented in Italy by the so-called Consumer Code (d.lgs. 205/06).

(2) It dates back to 7.5.08 the EC decision to establish a ‘High Level Group on the Competitiveness of the Agro-Food Industry‘. Followed by ‘the High Level Forum for a Better Functioning Food Supply Chain,’ established following Council decision 30.7.10

(3) NB: This system is bound to cause inequality. Limiting the scope of the directive to only dealings with smaller suppliers means incentivizing large-scale retailers to turn to larger industry groups (thus being able to escape the application of the rules). To the detriment of SMEs but also consortia and medium-sized industries

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Dario Dongo, lawyer and journalist, PhD in international food law, founder of WIISE (FARE - GIFT - Food Times) and Égalité.