The discipline of promotional sales - as regards agri-food products - still does not offer adequate and effective protection for producers and consumers.
Farmers and food processing companies should be protected against sales below cost, in theory, through the application of Legislative Decree 198/21 which incorporates the directive. EU 2019/633. (1)
Consumers in turn should be protected against misleading commercial practices, with regard to the extent of discounts and the availability of products on offer. (2)
1) (theoretical) protection of agri-food producers
1.1) Sales below cost between economic operators
Sales below cost of agricultural and food products - in B2B commercial relations only (business to business), not even in B2C ones (business to consumers) - are prohibited by Legislative Decree 198/21. Except in cases of:
- supplies to cooperatives and producer organizations (POs),
- unsold fresh and perishable food at risk of perishable nature,
- commercial operations planned and agreed in writing.
1.2) B2B below cost, the reality
Application of the ban however, below cost is problematic, a euphemism, in two respects:
- actual production costs are uncertain. It would be enough to elaborate and trace in blockchain the cost structure of companies, applying the accounting principles. (3) Where, on the other hand, for the purpose of automatic price substitution, the estimates of average costs are theorized in the ISMEA bulletins or those of average prices'for similar products in the reference market'(Legislative Decree 198/2021, art. 7.3),
- public controls are entrusted to an authority, ICQRF, completely deprived of the resources necessary to carry them out on a potentially huge pool of operators (360 inspectors, already engaged on numerous other fronts, and about 3 million companies involved in the supply chain agri-food in Italy).
2) Consumer protection in the EU
The historical directives 98/6 / EC and 2005/29 / EC - implemented in Italy with the Consumer Code and subject to recent revision (4,5) - protect consumers in very general terms, against unfair commercial practices that may materialize in information misleading on the selling price.
2.1) Historical directives and the Consumer Code
'It is considered deceptive [and incorrect, ed.] a commercial practice that contains information that does not correspond to the truth or, even if in fact correct, in any way, even in its overall presentation, induces or is capable of misleading the average consumer regarding one or more of the following elements and, in any case, induces him or is capable of inducing him to take a decision of a commercial nature that does not otherwise he would have taken: (...) the price or the way this is calculated or the existence of a specific price advantage ' (Legislative Decree 206/05, art. 21.1.d).
2.2) EU Dir. 2019/2161
The dir. EU 2019/2161 reforms the aforementioned historical directives by introducing sanctions'effective, proportionate and dissuasive', up to 4% of the turnover of the previous year. With regard to promotional sales, the new directive - which the Member States should have transposed by 28.11.21, guaranteeing its application from 28.5.22 - establishes the following.
'1. Each announcement of a reduction of a price must indicate the previous price applied by the trader for a specified period of time before the application of that reduction.
2. The previous price means the lowest price applied by the trader during a period of not less than 30 days before the application of the price reduction.
3. Member States may establish different rules for goods which are liable to deteriorate or expire rapidly.
4. If the product has been on the market for less than 2 days, Member States may also set a shorter period of time than referred to in paragraph XNUMX.
5. Member States may provide that, in cases where the price reduction is progressively increased, the previous price is the price without the reduction prior to the first application of the price reduction. ' (EU directive 2019/2161, article 2. New article 6-bis of directive 98/6 / EC). (6)
3) Italian trade law
3.1) Extraordinary sales
The so-called law of commerce (Legislative Decree 114/1998) has defined three hypotheses of extraordinary sale in Italy, requiring that on such occasions the merchants offer consumers favorable, real and effective purchasing conditions:
- clearance sales. They are carried out in order to quickly liquidate all stocks in the warehouse. Following the cessation of commercial activity, sale of the company, transfer of the company to another premises, transformation or renovation of the premises. They can be carried out at any time of the year, upon communication to the Municipality of the data and the elements that prove the conditions,
- end of season sales. They relate to seasonal or fashion products, which are susceptible to significant depreciation if they are not sold within a certain period of time,
- promotional sales. They are performed on all or part of the merchandise products and for limited periods of time.
3.1) Sales below cost to the consumer
The law of commerce is limited to defining sales below cost as they have as their object 'the sale to the public of one or more products carried out at a price lower than that resulting from the purchase invoices, increased by the value added tax and any other tax or tax related to the nature of the product and decreased by any discounts or contributions attributable to the product itself as long as documented.(7)
3.2) Promotional sales, the rules in Italy
In case of extraordinary sales, regardless of the category to which it belongs, the discount or reduction made must be expressed as a percentage of the normal sale price, which must in any case be displayed (Legislative Decree 31.3.98 n. 114, art. 15.5).
The regions they have the competence to regulate the methods of carrying out and advertising in their territories, also for the purpose of providing correct information to the consumer, as well as administrative penalties, periods and duration of sales. In compliance with the criteria indicated by the Consumer Code.
3.3) Concurrent regional legislation
Regional legislation competitor integrates the national discipline with measures to be applied that also pertain, as we have seen, to the government of the territory. (8) Promotional sales were also liberalized with law 248/06 which eliminated the time limits hitherto provided for, and rarely respected, by the law on commerce.
Regional laws they are therefore devoid, in fact, of any concrete usefulness for the weak parties in the supply chain, upstream producers and downstream consumers. In fact, they overlap with national legislation, which in turn is obsolete with respect to the reform introduced by dir. EU 2019/2161. Without adding anything but insignificant details, and draconian sanctions. (9)
4) Economic aspects
4.1) Mirrors for larks
The sales promotional and undercutting continue to be used as 'decoy', such as consumer cues at a physical store or online and where the trolley tends to be filled with other references on which the distributor can recover margins.
The economic crisis current and its dramatic impact on the spending power of Italian families stimulate distributors to insert as many offers as possible below cost. Although consumers have learned to retain chains and brands, eg. private label, (10) with the different approach 'everyday low price '.
4.2) Medium-term effects
Beyond the blunder initial - now chronic, unfortunately - promotional and below cost sales sacrifice the existence of farmers and food production companies that are unable to sustain the price war, and below cost. Except giving up manpower and safety standards. (11)
In the medium term, this phenomenon leads to the disappearance of the Italian entrepreneurial fabric which is essentially composed not only of micro-enterprises and SMEs but also of medium-large industries which are unable to compete with the gigantic ones and thus lose market share. (12) Crisis announced.
4.3) Socio-economic impact
Difficulties and the disappearance of companies that succumb to the price war is the ruin for hundreds of thousands of workers in every part of Italy, even in rural areas where alternatives do not exist. THE leader of the sector, after having vanquished the competition, can also impose new price lists or reduce the quantities of foods present in the packages (eg Barilla, bronze pasta, 400 g).
At the macroeconomic level, the loss of a lively productive fabric overwhelms the related industries associated with it and thus negatively affects GDP (Gross Domestic Product), employment rate and trade balance. And the chasm of the Italian economy that the government of the best continues to dig reaches abysmal depths.
5) Provisional conclusions
The recklessness of promotional sales based on the purchase of goods below cost from their producers is the beginning of a disaster of no return which is already manifesting evident symptoms in the stagflation hitherto hidden. (13)
The only solution in the specific context, it is to guarantee the transparency of the value chain in the individual supply chains and the effective application of Legislative Decree 198/21, also making use of already available IT tools. (14) For the good of all.
(1) UTPs (Unfair Trading Practices). V. Dario Dongo. Unfair commercial practices in the agri-food chain, Legislative Decree 198/2021. The ABC. GIFT (Great Italian Food Trade). 26.2.22, https://www.greatitalianfoodtrade.it/mercati/pratiche-commerciali-sleali-nella-filiera-agroalimentare-d-lgs-198-2021-l-abc
(2) UCPs (Unfair Commercial Practices). Dir. 2005/29 / EC, implemented in Italy by legislative decree 206/05 and subsequent ones (Consumer Code. Text updated on 17.1.22 on Normattiva, https://bit.ly/38fuXgV)
(3) Dario Dongo. Public blockchain and agri-food chain, sustainability for those who produce and those who consume. GIFT (Great Italian Food Trade). 28.2.21, https://www.greatitalianfoodtrade.it/progresso/blockchain-pubblica-e-filiera-agroalimentare-sostenibilità-per-chi-produce-e-chi-consuma
(4) Dario Dongo, Giulia Caddeo. Consumer protection, new EU directive approved. GIFT (Great Italian Food Trade). 21.12.19, https://www.greatitalianfoodtrade.it/consum-attori/tutela-dei-consumatori-approvata-la-nuova-direttiva-ue
(5) Directive (EU) 2019/2161, amending Council Directive 93/13 / EEC and Directives 98/6 / EC, 2005/29 / EC and 2011/83 / EU of the European Parliament and of the Council for a better application and modernization of the relevant Union rules consumer protection. https://bit.ly/3wQvLAW
(6) The implementation of dir. UE 2019/2161 in Italy is late, as usual. Its implementation has been delegated by Parliament to the government with the 2021 European delegation bill, not yet approved, in article 4
(7) Legislative Decree 31.3.98 n. 114, article 15. Reform of the regulations relating to the trade sector, pursuant to article 4, paragraph 4, of law 15.3.97, n. 59. Text updated to 30.8.12 on Normattiva, https://bit.ly/3wDZsqd
(8) Dario Dongo. Sustainable development in the Constitution and the vices of Italian democracy. #Clean shovels. GIFT (Great Italian Food Trade). 17.2.22, https://www.greatitalianfoodtrade.it/idee/lo-sviluppo-sostenibile-nella-costituzione-e-i-vizi-della-democrazia-italiana-vanghepulite
(9) See for example the Lazio Region law 6.11.19 n. 22
(10) Marta Strinati. How Inflation Changes Food Spending. ISMEA survey. GIFT (Great Italian Food Trade). 22.5.22, https://www.greatitalianfoodtrade.it/come-linflazione-cambia-la-spesa-alimentare-indagine-ismea
(11) Vito Gulli and Dario Dongo. Canettone and panettone, the necessary revolution. GIFT (Great Italian Food Trade). 17.12.18, https://www.greatitalianfoodtrade.it/idee/canettone-e-panettone-la-rivoluzione-necessaria
(12) Dario Dongo. Unfair commercial practices in the agri-food chain, the protections that are lacking. GIFT (Great Italian Food Trade). 26.4.21, https://www.greatitalianfoodtrade.it/idee/pratiche-commerciali-sleali-nella-filiera-agroalimentare-le-tutele-che-mancano
(13) Dario Dongo. Price increases in Germany, sales below cost in Italy. GIFT (Great Italian Food Trade). 4.4.22, https://www.greatitalianfoodtrade.it/mercati/aumenti-dei-prezzi-in-germania-vendite-sottocosto-in-italia
(14) Dario Dongo. An electronic commodity exchange to promote transparency and fairness in the food supply chain. GIFT (Great Italian Food Trade). 8.3.21, https://www.greatitalianfoodtrade.it/idee/una-borsa-merci-telematica-per-favorire-trasparenza-ed-equità-nella-filiera-alimentare