Planet

Unfair trade practices, new directive in sight

October 7, 2018

B2B(business-to-business) unfair trade practices in the agribusiness supply chain will finally find a curb, thanks to the EU directive currently under political consideration.

The ComAgri (Agriculture Committee) of the European Parliament voted almost unanimously, (1) on 1.10.18, for the report of Hon. Paolo De Castro on the draft ‘Unfair Trading Practices Directive‘ (UTPS). The regulatory text aimed at combating, precisely, abusive business practices in the agribusiness supply chain.

Late payments (2) and order cancellations without notice are the first targets in the crosshairs of the European Commission, which aimed to protect SMEs first and foremost. Parliament has raised the bar, proposing to extend protection to all large-scale retail (supermarket) suppliers, whatever the size of their organizations (e.g., consortia, business groups, cooperatives).

Parliament report expands the scope of the new rules. Which must include – in addition to contracts for the sale and supply of goods – the provision of services (e.g. contract processing and packaging, storage, logistics, etc.).

Sales below cost are considered in the De Castro report, which aims to limit transactions not agreed upon in advance between the parties. With a view to ensuring stability and legitimate reliance, suppliers of goods and services in the food chain.

The economic dependence of the supplier on the buyer is also mentioned. With the idea that it should not influence the terms of supply agreements. However, in practice, it will be difficult to establish suitable rules to mitigate ongoing economic imbalances. Imbalances never addressed, moreover, by market supervisors.

The location of the operators outside the EU should not then be a limitation to the application of the new rules. Therefore, the right of European-based suppliers to file complaints in the member state where they are established must be recognized, when unfair business practices are also carried out-formally and/or negotiated- outside the Internal Market.

Table of Contents

Unfair Trade Practices Directive, the commission’s proposal

In April 2018, the European Commission-after a decade of fruitless consultation in a special ‘High Level Forum’ -finally decided to adopt a proposal for binding rules. The UTPS directive, indeed.

The Commission’s outline provides for the prohibition of certain manifestly abusive business practices. Such as late payments, cancellation ‘last-minute‘ of orders, unilateral and/or retroactive changes to contracts, and chargeback of waste to the supplier. A minimal list, which Parliament proposes to reconsider.

Member states should designate a national authority with responsibility for overseeing the effective implementation of the new rules. With powers to investigate-even ex officio-and to impose proportionate and dissuasive sanctions in cases of proven violations.

Confidentiality andanonymitywillhave to be guaranteed to the authors of the complaints. In turn, the Commission will need to coordinate among national authorities, including to share good practices for the consistent implementation of the directive.

Mandatory rules at the EU level
will complement those in place in member states, as will the code of conduct theoretically already applied on a voluntary basis (
Supply Chain Initiative
). However, member states will still be able to take such further measures as they see fit.

Unfair Trade Practices Directive, the position of the Council

The Special Committee on Agriculture of the Council adopted its position on the proposed UTPS directive, 1.10.18. Expressing, in the first instance, a similar view to that of the Commission. In the sense of limiting the scope of the new rules to only those contracts concluded by SMEs with large-scale retailers.

However, delegations from several member countries-Italy, Greece, Portugal, Croatia, Hungary, Slovenia, Bulgaria and Romania-disagreed with this approach. Instead, calling for protection to be extended to all suppliers in the agribusiness supply chain in the negotiations to come. Delegations from Spain, France and Slovakia aligned themselves with this demand.

The Council then moved closer to Parliament’s position on some key points:

– Extension of the rules to all agricultural products (including non-food, e.g., floriculture),

– possibility for member states to introduce more restrictive rules,

– extraterritoriality. That is, possibility for suppliers to bring an action before the competent authority in their own member state, regardless of where the unfair practice took place.

Unfair trade practices, next steps

The Council, by its vote on 1.10.18, has already given a mandate for the negotiations to follow (in trilogue, between Parliament, Commission and Council). The position of the European Parliament, on the other hand, will have to be confirmed at the next plenary assembly (scheduled for Oct. 22.10.18, in Strasbourg).

The first trilogue meeting, under the Austrian chairmanship of the Council, is scheduled for 10/24/18. With the goal of reaching an interinstitutional agreement by the end of the year and concluding the legislative process, possibly, by March 2019.

Dario Dongo

Notes

(1) The De Castro report was approved, on 1.10.18 in ComAgri in the European Parliament, with 38 votes in favor, 4 against and 2 abstentions

(2) Payment terms shall not exceed 30 days for perishable agricultural and food products, 60 days for perishable food products, starting from the end of the month date of delivery or receipt of invoice. In line with what has already been established in Italy, at theArticle 62 Of Law 24.3.12 no. 27. For more details, see the author’s ebook ‘

‘Article 62, a revolution

‘, free download at

https://ilfattoalimentare.it/scarica-gratis-libro-articolo-62-pagamenti-commercio.html