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Unfair commercial practices, proposed EU directive

Unfair trading practices in the food supply chain are still an unsolved problem today. After years of consultations and solicitations, the proposal for a directive adopted on 12.4.18 by the European Commission.

Unfair commercial practices, the context

Unfair commercial practices have been considered - until now - only in the last phase of the supply chain, for the protection of the final consumer. (1) Neglecting the more serious problems, instead caused by the serious imbalance of bargaining power between the production chain - in the food sector fragmented into a plethora of micro-enterprises - and the distribution chain. Beyond the payment terms only in commercial transactions, which Directive 2011/7 / EU (implemented in Italy with Legislative Decree 192/12) has finally set a limit.

During the years successive European Commissions have organized aHigh Level Forum for a better functioning of the food supply chain'With the goal - unfortunately still far away - of tackling the problems mentioned above.

The obvious imbalance however, in the contractual relations between primary agricultural producers and processing companies, on the one hand, and the distribution giants on the other, it has not found a solution. Beyond hypothetical good practices which are themselves unsuitable to solve the problem.

In Italy, a step forward seemed to have been made with the fateful one Article 62 of Law 27 / 12, to which the writer dedicated anspecial monograph. But beyond the good intentions, the exclusive assignment of the application of the aforementioned legislation to the sole care of the Guarantor Authority for Competition and the Market (Antitrust) has in fact excluded its concrete effectiveness. (2)

Unfair commercial practices, the draft directive

The European Commissioner for Agriculture Phil Hogan, given both the persistence of the problem and the impossibility of solving it with tools soft law as voluntary codes of conduct, (3) has finally adopted a proposal for a directive. (4)

The directive scheme UTPs (Unfair Trade Practices) refers specifically to unfair commercial practices in relationships B2B (business-to-business) in the food supply chain. Better late than never, in the face of a series of European Parliament resolutions - in 2010, 20112012, 2016 (5) - and the public consultations organized by Brussels already in the 2013. (6)

Fundamental rights in Europe - crystallized in the CFR, Charter of Fundamental Rights of the European Union - moreover, they include the possibility of running a business. (7) The protection of companies from the overwhelming power of their contractors is therefore a duty also in this respect. As well as to ensure a fair standard of living for farmers, as required by the TFEU (Treaty on the Functioning of the European Union). (8) 

The common agricultural policy (CAP) should in fact guarantee the subsistence of agricultural communities, increase productivity and stabilize markets, ensure the availability of food and ensure reasonable prices for consumers. But its budget, already significantly downsized in the last few decades, will suffer further reductions due to the  Brexit

Unfair commercial practices, the proposed rules

The directive applies to certain unfair commercial practices - an example of which is given - in relation to sales of food products by SMEs (9) to commercial buyers based in the EU, which are not SMEs (Article 1).

Prohibited Business Practices. Member States must prohibit the following practices:

payment of perishable goods (10) beyond 30 days of invoice or delivery,

order cancellation of perishable food at such short notice 'that a supplier cannot reasonably expect to find an alternative to market or use these products’,

unilateral and retroactive amendment, by the buyer, of theconditions of the supply contract relating to the frequency, timing or volume of supply or delivery, quality standards or prices of food products’,

- charging the supplier of the costs of the waste of food products, not attributable to his faults, which occurs in the buyer's premises.

Practices 'under scrutiny'. Member States shall ensure that the following commercial practices are prohibited, 'unless they are agreed in clear and unambiguous terms at the conclusion of the supply contract":

returns unsold food products,

listing fees ('a buyer charges a payment to the supplier as a condition for the supplier's storage, display or listing of food products')

promotional contributions. ‘Before a promotion and if such a promotion is initiated by the buyer, the buyer must specify the promotion period and the expected quantity of food items to be ordered'

Member States they must incorporate the above into mandatory provisions of law, for the express purpose of prohibiting the relative prohibitions and conditions from being circumvented by contractual clauses (article 3). 

Procedures to protect SMEs

Producer organizations and their associations, in addition to individuals, will be able to consult the designated authority in each country to implement the directive in terms of supervision and sanctions.

Absolute confidentiality the identity of the complainant, if required, must be maintained by enforcement authority. To prevent the risk of commercial or other retaliation. The complainant will in any case have the right to be informed about the outcome of the procedure, even in the event that the authority decides not to proceed (Article 5).

The designated authority the powers of:

- initiate and conduct investigations, on their own initiative or following a complaint,

- require buyers and suppliers to provide all information necessary to investigate prohibited commercial practices,

- take decisions affirming the violation of the prohibitions and order the immediate interruption of the prohibited practices,

- refrain, on the other hand, from adopting such decisions, if this involves the risk 'to disclose the identity of a complainant or to disclose any other information in relation to which the complainant believes that disclosure is harmful to his interests',

- to inflict financial penalties on the perpetrators of the infringement. 'The sanction must be effective, proportionate and dissuasive taking into account the nature, duration and gravity of the infringement’,

- publish the above decisions,

-publish annual reports on its activities (number of complaints received and investigations carried out. In relation to each investigation, brief description of the issue and result). (Article 6).

International cooperation effective will have to be guaranteed, between the designated authorities in the various Member States, with duties of mutual assistance in the investigations ofcross-border dimension'. Annual meetings will be established in view of updates which the Commission itself should provide on a specific website (art. 7).

Member States can introduce national rules other than the rules provided for by the directive, provided that they are compatible with the rules on the functioning of the internal market '(Article 8). Italy could therefore correct the fateful article 62, attributing the powers of initiative, control and sanction to the Guardia di Finanza. The Antitrust Authority has done nothing in six years, thus completely nullifying a legislation that was developed with appreciable criteria.

The elephant and the mouse 

The metaphor of the pachyderm alongside the small rodent it recurs in the whole affair. The Brussels elephant has given birth to a mouse, a handkerchief so microscopic that it allows any giant to walk around it and continue to squeeze the rights of the guinea pigs. 

The list of prohibited practices it is certainly useful, but it must be much broader. Above all, the list must be understood as an open list, of illustrative rather than exhaustive value.

And it is curious note the bipolarity of this Commission which, while offering crumbs to local mice, invites otters and beavers from other continents to participate in the banquet. Freezeopers in global distribution will have more reasons to source agricultural raw materials and food.

The elephants of global distribution will have more reasons to source agricultural commodities and food in North America thanks to CETA e in South America with MerCoSur. In addition to that fifty of countries whose goods access our market without duties, thanks to the EBA system (Everything But Arms) still lacking any clauses for the protection of our supply chains, Italian rice (in primis).

Dario Dongo

Footnotes

(1) See Dir. 2005/29 / EC, implemented in Italy with Legislative Decree 145/07 and Legislative Decree 146/07 (Consumer Code). Notes on unfair practices in relations between economic operators can also be found in dir. 2006/114 / CE, however, within the narrow limits of misleading and comparative advertising

(2) See the various articles published on http://www.ilfattoalimentare.it/?s=Articolo+62

(3) Initiatives to this effect have also been taken in England e in Ireland. At the European level, the Voluntary supply chain initiative (http://www.supplychaininitiative.eu/), useless precisely as it is voluntary and devoid of sanction mechanisms

(4) The text of the proposed directive 'on unfair trading practices in business-to-business relationships in the food supply chain'and other related documents are available, for now only in English, on https://ec.europa.eu/info/publications/key-documents-unfair-trade-practices_en

(5) The latest resolution on unfair trading practices in the food supply chain was adopted by the Strasbourg Assembly on 7.6.16. See http://www.europarl.europa.eu/sides/getDoc.do?type=TA&language=EN&reference=P8-TA-2016-0250

(6) Still in 2016, despite all evidence on the seriousness of the problem, the European Commission persisted in not adopting any regulatory proposal. See the previous article https://www.foodagriculturerequirements.com/news_1/commissione-europea-una-legislazione-sulle-pratiche-commerciali-sleali-non-necessaria-al-momento

(7) See CFR, articles 16, 51, 52

(8) See TFEU, Article 39

(9) SMEs are 'companies that employ fewer than 250 people, whose annual turnover does not exceed € 50 million or whose annual balance sheet total does not exceed € 43 million'(communication 361/2003 / EC, art.2.1)

(10) NB: perishable goods, in the proposed directive, are 'all food products that will become unfit for human consumption unless stored, processed, packaged or otherwise preserved to prevent ' this (Article 2.1.e)

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

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