Below-cost sales in the agribusiness supply chain garner a green light in the legislative scheme on unfair trade practices.
Italy’s formal notice to Brussels for its delay in transposing theUnfair Trading Practices (UTPs) directive was not enough to ensure compliance (1,2). Brief notes to follow.
Scope of application
The draft legislative decree ‘‘implementing Directive (EU) 2019/633’ excludes from the notion of ‘contracts of sale’‘ – and so, from the special provider protection scheme – ‘contributions of agricultural and food products by farmers and fishermen to cooperatives of which they are members and to producer organizations‘ (Article 2.1.e).
This limitation is incompatible with theUnfair Trading Practices (UTPs) directive because it reduces, rather than strengthens, minimum levels of protection for suppliers. By causing injury to both agricultural enterprises supplying cooperatives and producers’ organizations (POs), as well as to the latter. As analyzed in the case of the Compral Latte cooperative. (see note 3). As well as distorting competition among cooperatives, POs and other production entities.
Sales below cost
1) Delegated law
The European delegation law, in Article 7(Regulation of sales below cost of agricultural and food products), introduced a basic rule and a special criterion for its application:
– RULES. The buyer’s setting of a sales price at least 15 percent below average production costs should be considered as a control parameter for the existence of the unfair trade practice,
– criterion. Average production costs must be processed, and updated monthly, by ISMEA, Institute of Agricultural and Food Market Services (Law 53/21, Art. 7.1.q).
2) Outline of legislative decree
The decree introduces a generic ban on imposing ‘excessively burdensome contractual conditions on the seller, and in particular the sale of agricultural products and foodstuffs at prices manifestly below production costs‘ (Article 5.1.b). A concept quite different from that expressed in the enabling act, which expressly refers to -15%, as well as indefinite.
The ICQRF-designated as the control authority-would thus have the discretion to assess whether sales prices are ‘blatantly below‘ (-15, -20, -30 percent?) production costs, as would result from ISMEA’s monthly processing. Which should be based on ‘public and comparable criteria, taking into account the specificity of each commodity sector‘ (Article 5.5).
If it is found that the rule has been violated, the ICQRF could impose an administrative fine ranging from 0.3 percent to 3 percent of the turnover achieved in the last fiscal year prior to the assessment (Article 10.6).
3) Perishable goods
Parliament had delegated the government should revise the regulations on sales below cost in Presidential Decree 218/01, (4) to limit the sale below cost of fresh and perishable agricultural and food products to only cases of:
– unsold goods at risk of perishability and
– Scheduled business transactions agreed with the supplier in writing,
– made ‘subject,however, to the prohibition of unilaterally imposing on the supplier, directly or indirectly, the loss or cost of selling below cost‘ (Art. 7.1.r).
The aforementioned limits were only partially incorporated into the draft decree in Article 7(regulation of below-cost selling of agricultural and food products). Where it legitimizes undercutting on perishable goods-as long as ‘agreed in writing‘-regardless of losses to the supplier.
With the paltry bit of content, should a loss-making contract signature have slipped through, to recalculate the price on the basis of average production costs surveyed by ISMEA (if available. Otherwise based on the average price charged for similar products in the relevant market).
Dario Dongo
Cover image, ‘Suicide dans le monde agricole,’ 2013, Canal Blog
Notes
(1) Member states should have published national rules implementing the directive by 1.5.21 and effectively implemented them by 1.11.21 (EU dir. 2019/633, Article 13). See also paragraph ‘Justice or revolt,’ in the above article https://www.greatitalianfoodtrade.it/mercati/pastori-sardi-e-pratiche-commerciali-sleali-sanzioni-irrisorie-dell-antitrust-a-f-lli-pinna-e-altri-5-caseifici
(2) Dario Dongo. Unfair trade practices and the European delegation law, a critical analysis. GIFT (Great Italian Food Trade). 4/24/21, https://www.greatitalianfoodtrade.it/mercati/pratiche-commerciali-sleali-e-legge-di-delegazione-europea-analisi-critica
(3) Dario Dongo. Unfair trade practices, Italy tries to exclude cooperatives and producer organizations. GIFT(Great Italian Food Trade). 17.10.21, https://www.greatitalianfoodtrade.it/idee/pratiche-commerciali-sleali-litalia-prova-a-escludere-cooperative-e-organizzazioni-dei-produttori/
(4) Presidential Decree 6.4.01, no. 218. Regulations governing sales below cost, pursuant to Article 15(8) of Legislative Decree March 31, 1998, no. 114. On Normattiva, https://bit.ly/3E4hlzm
Dario Dongo, lawyer and journalist, PhD in international food law, founder of WIISE (FARE - GIFT - Food Times) and Égalité.
