Unfair commercial practices in the agri-food supply chain are afflicting farmers, ranchers and processors with increasing pressure that has now reached unbearable levels. Like this:
- on 17.4.19 the EU directive 2019/633 introduced clear rules aimed at rebalancing by law the imbalances of bargaining power between suppliers and customers, production and distribution,
- on 22.4.21 the law 53/2021, the so-called European delegation 2021, introduces the criteria that the Italian government will have to follow in order to implement the aforementioned directive on unfair commercial practices.
However, the rule is belated and prejudicial, in several respects, to the Italian agri-food production chain which it instead aspires to protect. Detailed analysis to follow.
Unfair commercial practices, EU directive 2019/633
The EU directive 2019/633 - as we have seen (1) - has defined a series of rules to combat unfair commercial practices (UTPs, Unfair Trading Practices) within the food chain. Having regard both to the relations between farmers and breeders and industry, and to those between producers, intermediaries, wholesalers and distributors. The dir. 2019/633 therefore establishes:
- one Blacklists of commercial practices that are always prohibited (eg delay in payment over 30-60 days from the supply of perishable and non-perishable foods, cancellation of orders without adequate notice, unilateral modification of essential elements of the contract. Art. 3.1),
- one gray list of prohibited commercial practices unless they have already been agreed in the supply contract (e.g. return of unsold items without payment, charging of logistics and marketing. Article 3.2),
- the obligation for the Member States to entrust to an authority the tasks of supervision and sanctions, ex officio and at the request of operators and their associations (Articles 4-6),
- the faculty for the Member States to maintain or introduce more stringent rules for the protection of the agri-food production chain in national territories (Article 9). As well as promoting alternative dispute resolution systems (Article 7).
European Delegation Law, Article 7
The law of delegation European 2021 delegates the Italian government, among other things, to transpose the directive Unfair Trading Practices (UTPs). In serious delay, since the UTPs directive had to be implemented in the 27 Member States by 1.5.21 to be effectively applied by 1.11.21, while in Italy only the delegation law enters into force on 8.5.21. (2)
The article 7 of the aforementioned law (Principles and guiding criteria for the implementation of Directive (EU) 2019/633, on unfair commercial practices in business-to-business relationships in the agricultural and food supply chain) indicates to the government some specific criteria, set out below with a breakdown by topics and brief notes.
Field of application
The scope of the discipline in question is correctly extended, in Italy, 'to all sales of agricultural and agri-food products, regardless of company turnover'(Law 53/21, art. 7.1.u). Also in order to avoid bullying Big food on public businesses and distribution (3,4).
Contributions to the cooperative they are instead subtracted from the terms of payment and the written form of the contracts (Law 53/21, art. 7.1.e). In this way, the rights of the members who confer in the cooperative are compromised, in addition to establishing unfair competition ex lege of the cooperative system.
The recall to 'good commercial practices of transparency, good faith, fairness, proportionality and reciprocal correspondence of services'(Law 53/21, art. 7.1.e) is instead a false rhetoric. Given that it is precisely the ineffectiveness of the so-called 'supply chain agreements' that necessitated the intervention of the European legislator. (5)
Written form of contracts
The written form, prior to the delivery of the goods, is prescribed for all '' contracts for the sale of agricultural and food products, with the exception of those concluded with the consumer and of the transfers with simultaneous delivery and payment of the agreed price'(Law 53/21, art. 7.1.d).
This obligation, it is specified, he cannot come 'acquitted exclusively by means of equivalent forms according to the provisions
in force'. The government is therefore required to define 'the conditions of application in a timely manner'(Law 53/21, art. 7.1.v).
The lack of requirements essential principles established in the so-called 'single CMO' (Common Organization of Markets. See note 9), in the sales contracts of the products referred to therein, constitutes in any case an unfair commercial practice (Law 53/21, art. 7.1.q) .
Payment terms. Contrast with the UTPs directive
The Italian Parliament - in following up on the shared requests of Federdistribuzione, Confindustria and Coldiretti (5) - it tries to extend the payment terms beyond measure. However, the law conflicts with the specific provisions of the directive and must therefore be disapplied. Indeed:
- the EU directive 2019/633 establishes that perishable products must be paid for within 30 days, other commodities within 60 days. From the date of delivery (i.e. from that 'in which the amount to be paid is established, depending on which of the two dates is later'. Article 3.1.a),
- law 53/21, in article 7.1.c, instead refers to the payment terms indicated in article 62 of law 27/2012. That is to say the 'end of the month' after 30-60 days have elapsed from delivery or from invoicing, which in fact is systematically postponed to the beginning of the following month. Between the 'end of the month' and the 'invoice date', it should be noted, up to 60 days of financial charges to be borne by the suppliers.
Public supplies, payment terms. Contrast with the UTPs directive
Public supplies of alimony to school and health administrations, in the imagination of the Italian Parliament, would be excluded from the field of application of the discipline. In these cases therefore 'the parties may agree, as long as expressly, a term for payment not exceeding sixty days'(Law 53/21, art. 7.1.f)
Again an attempt is made to load suppliers with a financial burden not envisaged by EU directive 2019/633, where:
- perishable foods must always be paid for within 30 days from the date of delivery,
- 'public authorities (…) should be bound to respect the same rules when purchasing agricultural and food products'(Cons. 11).
Shafts online double discount, and more
Ettore Prandini, president of Coldiretti, boasts of having finally obtained the ban on electronic double-discount auctions. (6) A useful clarification, although most of the operators of the GDO (Large Organized Distribution) had already adopted the Code of Ethics which excludes such practices, on 28.7.17 at the MiPAAF. (7) The problems are quite different, when referring to auctions or tenders online even millionaires, managed by private individuals, which for some candidate suppliers may be worth significant shares of the annual turnover.
Who controls the correctness and transparency of the IT platforms with which the auctions are managed? Who controls the possible exclusion from auctions of suppliers with one certification (eg FSSC 22000 v. 5.1) rather than another (eg IFS), although both recognized as consistent with the standards shared globally? (8) What criteria guarantee the fair admission of competitors, the effective comparability of the products offered by them, the consistency of the award?
Unfair trading practices and underselling
Article 7.1.h of law 53/2021 - in addition to prohibiting double-discount auctions - includes unfair commercial practices'the sale of agricultural and food products carried out at such a level that it determines excessively burdensome contractual conditions, including that of selling at prices clearly below production costs'. The government must therefore define 'in a timely manner, conditions and areas of application, as well as the usability limits of electronic commerce'.
Sales below cost - beyond the generic provision above, difficult to interpret beyond the extreme cases - are subject to a strict threshold, an unrealistic limit and a safe conduct:
- fixation by the buyer of 'a price 15% lower than the average production costs resulting from the elaboration of the Institute of Services for the Agricultural Food Market - ISMEA ' which is considered 'control parameter for the existence of the unfair commercial practice'(Law 53/21, art. 7.1.q),
- 'selling below cost of fresh and perishable food products' must come 'admitted only in the case in which unsold product is registered at risk of perishability or in the case of commercial operations planned and agreed with the supplier in writing, except in any case for the prohibition to unilaterally impose on the supplier, directly or indirectly, the loss or the cost of selling below cost'(Law 53/21, art. 7.1.r),
- they are in any case 'without prejudice to contractual conditions, including those relating to prices, which are defined in the context of national framework agreements concerning the supply of products agricultural and foodstuffs stipulated by professional organizations more representative at national level'(Law 53/21, art. 7.1.s).
Draconian sanctions
The penalties 'effective, proportionate and dissuasive'must be introduced'within the maximum limit of 10% of the turnover achieved in the last financial year preceding the assessment'(Law 53/21, art. 7.1.m). In hindsight, the maximum pecuniary sanction is equivalent to that established for the violation of the rules on agreements that distort competition and abuse of dominant position (TFEU, articles 101,102. Law 287/90, articles 2,3).
The intent it is undoubtedly appreciable and yet lacks any reference to the criteria for determining the extent of the sanction, beyond the general principles provided for by law 689/81 (article 11). The authority responsible for imposing the sanctions therefore has a wide margin of discretion which should follow specific procedures, in the wake of the guidelines drawn up by the Italian Competition Authority.
Authority designated for controls and sanctions
The Central Inspectorate of the protection of the quality and the repression of fraud of agri-food products (ICQRF) is designated as'national law enforcement authority responsible for supervising the application of the provisions in question 'and the application of the relative sanctions, in compliance with the procedures referred to in law 24.11.81, n. 689. To this end,
the Inspectorate can make use of the Carabinieri, and in particular the Command for the protection of food and agriculture, as well as the Finance Police, without prejudice to the provisions regarding the powers of assessment of the officers and judicial police agents' (Law 53/21, art. 7.1.p).
The possibility to involve the Guardia di Finanza - as the writer has always invoked, since the time of Legislative Decree 1/2012 (4) - represents a great step forward. Without prejudice to the question of whether the coordination of supervision and the interaction with the corresponding authorities of the other Member States should be hinged on an under-staffed body already assigned to other, no less important controls. All the more so in conditions of financial invariance, according to the style clause reproduced in the delegation law 53/2021 in the second paragraph of article 7.
Dario Dongo
Footnotes
(1) Dario Dongo. Unfair commercial practices, the EU directive 2019/633. GIFT (Great Italian Food Trade), 4.5.19 https://www.greatitalianfoodtrade.it/mercati/pratiche-commerciali-sleali-la-direttiva-ue-2019-633
(2) Law 22.4.21, n. 53. Delegation to the Government for the transposition of European directives and the implementation of other European Union acts - European Delegation Law 2019-2020. (21G00063). In Official Gazette 23.4.21 n. 97, https://www.normattiva.it/uri-res/N2Ls?urn:nir:stato:legge:2021;53
(3) Dario Dongo. Unilever, abuse of dominant position. GIFT (Great Italian Food Trade). two. https://www.greatitalianfoodtrade.it/consum-attori/unilever-abuso-di-posizione-dominante
(4) Dario Dongo. Coca-Cola - Intermarché, blackmail. Abuse of dominant position? GIFT (Great Italian Food Trade). 8.1.20/XNUMX/XNUMX, https://www.greatitalianfoodtrade.it/mercati/coca-cola-intermarché-il-ricatto-abuso-di-posizione-dominante
(5) Dario Dongo. Unfair commercial practices, double-discount supply chain agreement. GIFT (Great Italian Food Trade). 7.3.21/XNUMX/XNUMX, https://www.greatitalianfoodtrade.it/mercati/pratiche-commerciali-sleali-accordo-di-filiera-al-doppio-ribasso
(6) Nicoletta Cottone. Prandini (Coldiretti): "Stop the double-down halter auctions that strangle farmers". The sun 24 hours. 22.4.21, https://www.ilsole24ore.com/art/prandini-coldiretti-stop-aste-capestro-doppio-ribasso-che-strangolano-agricoltori-AEedL2C
(7) Marta Strinati. Stop the double-discount auctions in the agri-food sector, the Code of Ethics arrives. GIFT (Great Italian Food Trade). 28.6.17/XNUMX/XNUMX, https://www.greatitalianfoodtrade.it/progresso/stop-alle-aste-al-doppio-ribasso-nell-agroalimentare-arriva-il-codice-etico
(8) See GFSI Benchmarking requirements, version 2020. GFSI (Global Food Safety Initiative). two. https://mygfsi.com/news-and-resources/?_news_topics=benchmarking
(9) EU Reg. 1308/2013, establishing a common organization of the markets in agricultural products. V. Article 168 (Contractual relations), paragraph 4: 'Each contract or contract offer referred to in paragraph 1:
a) is stipulated before delivery;
b) is stipulated in writing; And
c) includes, inter alia, the following elements:
i) the price to be paid on delivery, which:
- is fixed and established in the contract, or
- it is calculated by combining various factors established in the contract, which may include market indicators reflecting changes in market conditions, quantities delivered and the quality or composition of agricultural products delivered;
(ii) the quantity and quality of the affected products that can and / or must be delivered and the timetable for such deliveries;
iii) the duration of the contract, which can be determined or indefinite, with termination clauses;
iv) details regarding payment deadlines and procedures;
v) the methods for the collection or delivery of agricultural products e
vi) the rules applicable in the event of force majeure '.
(10) AGCM Resolution 22.10.14, n. 25152. Guidelines on how to apply the criteria for quantifying administrative pecuniary sanctions imposed by the Authority in application of article 15, paragraph 1, of law no. 287/90. https://www.agcm.it/chi-siamo/normativa/dettaglio?id=cbb9e335-a9ca-4efb-97ac-71dbd831c491&parent=Concorrenza&parentUrl=/chi-siamo/normativa/index
Dario Dongo, lawyer and journalist, PhD in international food law, founder of WIISE (FARE - GIFT - Food Times) and Égalité.
