European Commission aims to level the playing field between suppliers and large customers by introducing recommendations on unfair trade practices

The European Commission recently adopted a Communication encouraging EU Member States to look at ways of improving protection for small food producers and retailers against the unfair practices of their sometimes much larger and stronger trading partners.

The Commission has concerns that, over the past few decades,  due to developments such as increased market concentration and vertical integration, there is increasing disparity in the levels of bargaining power between different players in the supply chain and that the abuse of this market power may sometimes lead to unfair trading practices (“UTPs”). 

Commission Vice-President for Internal Market and Services Michel Barnier said: "There needs to be a level and fair playing field between SME food suppliers and retailers on one side and large multinational manufacturers and supermarkets on the other side. Unfair trading practices jeopardise this. The industry has already made important and valuable efforts to address unfair behaviour and should continue doing so. Member States should ensure that they have effective and consistent regulatory frameworks in place to build on and complement self-regulatory initiatives."

The Commission’s communication does not envisage regulatory action at EU level at this moment in time, nor does it prescribe a single solution to address the issue of UTPs. Rather, it makes suggestions for how Member States can tackle UTPs and encourages them to do so in an appropriate and proportionate manner, taking into account national circumstances and best practice. 

The suggestions made by the Commission in its recommendation are built upon three principles:

  • Support of the voluntary Supply Chain Initiative:  The Communication encourages operators in the food supply chain to join the existing Supply Chain Initiative launched in September 2013 and its national platforms.  It also calls on the governance group of the Initiative to maximise the participation of SMEs which are the Initiative’s key beneficiaries.
  • EU-wide standards for principles of good practice:  The Communication states that in order to address UTPs effectively throughout the EU, there should be a common set of rules and standards.  The Communication suggests that the principles of the Supply Chain Initiative could be the basis of such a common regulatory understanding.
  • Effective enforcement at national level:  The Communication suggests that minimum enforcement standards should be applied throughout the EU and states that this is necessary to establish a credible deterrence factor against the use of UTPs.

The Commission will monitor and assess progress made by Member States in implementing its recommendations.  It intends to present a report to the Council and the European Parliament at the end of 2015, at which time, if Member States have failed to take appropriate steps, it will decide whether further action should be taken at EU level.

The Commission’s communication follows its publication of a Green Paper on unfair trading practices in the business-to-business food and non-food supply chains in Europe in January 2013.  The publication of this Green Paper led to several Member States, including the UK, proposing their own responses to the Commission and making suggestions on how to combat UTPs.  Many industry commentators had hoped that the next step would be that the Commission would require Member States to comply with imposed minimum standards.  They have criticised the Commission for not taking a robust stance against UTPs, and for promoting a voluntary system.