Summary
The EU UTPS regulation has not been transposed into member states national law, but with uneven results. Ensuring common standards of enforcement to uphold minimum EU requirements for removing UTPS in agri-food supply chins is no essential. Equally there is an urgent need to ensure enforcement mechanisms recognise the realities of ACP-to-EU supply chains and actively prevent the adoption of commercial practices between importers and exporters which de facto circumvent the intention of EU UTP regulations in regard to 3rd country-EU supply chains.
The deadline for the transposition of the EU UTPs Directive into national laws lapsed on 1 May 2021, with these new EU member states national laws coming into effect in 6 months (from 1 November 2021). Within a year of publication of the national law all ‘existing contracts must be brought into compliance’, with the new UTP laws. The EC heralded this event with an information brochure (1) and factsheet (2) on the EU ‘Directive on Unfair trading Practices in the agricultural and food supply chain’.
The EC Fact Sheet maintains the ‘protection of farmers is at the heart of the Common Agricultural Policy’, with the aim of the EU’s UTP regulation being to ensure farmers are ‘treated fairly and get a fair share of the price paid by European citizens for food’ (2). This is to be achieved through the establishment of minimum EU member states regulatory requirements via the complete prohibition of ten ‘black’ UTPs and tighter regulation of six ‘grey’ UTPs. ‘Grey’ practices are allowed only, where such practices are mutually agreed before-hand ‘in a clear and unambiguous manner’ (2).
| TEN “BLACK” UTPs | SIX “GREY” UTPs |
| 1. Prohibits payment later than 30 days for perishable agricultural and food products.
2. Prohibits payment later than 60 days for other agri-food products. 3. Prohibits short-notice cancellations of perishable agri-food products. 4. Prohibits unilateral contract changes by the buyer. 5. Prohibits payments not related to a sale of agricultural and food products. 6. Prohibits the risk of loss and deterioration of products being transferred to the supplier. 7. Prohibits the refusal of a written confirmation of a supply agreement by the buyer, if so, requested by the supplier. 8. Prohibits the misuse of trade secrets by the buyer. 9. Prohibits commercial retaliation by the buyer. 10. Prohibits the transferring of the costs of examining customer complaints to the supplier. |
1. Prohibits the return of unsold products to the supplier at the supplier’s expense.
2. Prohibits claims for payments by the supplier of stocking, display and listing costs incurred by the supermarket. 3. Prohibits claims for payments by the supplier for in-store promotions. 4. Prohibits claims for payments by the supplier for marketing costs undertaken by the supermarket. 5. Prohibits claims for payments by the supplier for advertising costs incurred by the supermarket. 6. Prohibts claims for payments by the supplier for staffing costs incurred by the buyer for fitting out its premises for the sale of purchased goods. |
The EU seeks to adopt a ‘step approach’ in regulating relations between suppliers and buyers at the business-to-business level. The EU UPTP regulation and associated national implementation laws are aimed at protecting ‘a supplier from unfair trading practices engaged in by an economically stronger buyer’. Bigger suppliers and businesses of equal economic weight are not seen as needing regulatory protection.
Minimum EU requirements will ‘complement existing Member States’ rules as well as voluntary initiatives of the industry.’ The EU regulation requires member states to establish an enforcement authority with certain minimum powers. This should include the power to:
- Act upon a complaint or act ex officio.
- Investigate complaints lodged on a confidential basis.
- Terminate any infringements of UTP requirements which may have been undertaken.
- Levy fines and impose other penalties.
- Publish decisions, thereby publicly ‘shaming’ offending business, who are highly vulnerable to adverse public reaction.
The transposition process has taken place with uneven result. A Joint civil society and trade union statement has pointed out ‘while some Member States have already put on the table draft laws with innovative solutions…others still have to catch up to meet their obligations.’ The more ambitious proposals tabled by the Spanish and Italian governments ‘which forbid or set limits to buying below production cost’ have been welcomed, since this ‘can help to tackle the root cause of many abusive practices.’ However, the statement called for all EU member states to include such ‘buying below production cost’ prohibitions in their national UTP regulations (3).
It was noted how some member states have adopted procedures which allow modification of ‘forbidden UPTs by Ministerial decree’ rather than new laws, while Germany has added two grey areas to the list of prohibited practices in regard to ‘the return of unsold goods at the supplier’s expense, and the assertion of storage costs after delivery.’ The joint statement, however, calls for all ‘grey UTPs’ to be added to the list of prohibited practices, with in addition, a general ban on the adoption of measures to circumvent UTP prohibitions (3).
Some member states are considering the establishment of a ‘database of contracts to make it easier for the enforcement authorities to investigate’ and an expanded role for ‘the ombudsperson for consumer disputes to include also UTPs-related issues.’ In Germany, under the new national law there ‘will be a new independent ombudsman (as in the UK) and a price monitoring body to report unfair practice’ (4). However, this broader approach is not generalised across the EU (3).
The joint statement highlights how given the EU UTP regulation also requires prohibitions to be applied to sourcing from non-EU suppliers, national enforcement authorities need to ‘take steps to proactively engage with non-EU suppliers, making sure that they are aware of the protections that the Directive offers and that they are confident in how to raise a complaint.’
In this context the observation is made that the new national laws will only be as good as the implementation strategies set in place by national enforcement bodies (3). It is however unclear what resources EU member states intend to devote to enforcement activities, given the multidimensional economic and fiscal challenges faced as a result of the Covid-19 pandemic.
However, this is not just about implementation. Analysis from Marita Wiggerthale, of Oxfam Germany, has highlighted a multiplicity of unfair costs which German supermarkets still impose on their suppliers. This includes, for example ‘breakage allowances’, whereby the burden of such losses falls on the suppliers, or compulsory contributions to marketing programmes and in-store promotion initiatives such as customer loyalty programmes. These are but 3 of the 40 such contractual provisions commonly imposed on suppliers by ‘German supermarkets like Edeka, Rewe, Lidl, Kaufland and Aldi’ in dealings with their suppliers. Provisions which suppliers have to accept, if they are not to be simply de-listed by the supermarkets concerned. These practices are not limited to Germany but are common across the EU (4).
| Comment and Analysis Ensuring ACP suppliers are aware of the ‘business-to-business’ commercial practices which are now prohibited is an important first step in operationalising the development intent of the EU’s UTP directive. This is particularly the case in the most vulnerable ACP-to-EU supply chains in the fruit and vegetable sector, where small holder producers play a major role in production and export. Of particular relevance in the fresh fruit and vegetable sector would be the prohibitions on short notice cancellation of supply arrangements for perishable agri-food products, as well as provisions related to the transference of supermarket costs to suppliers and late payment prohibitions. It would appear to be important EU member states UTP laws recognise the informal nature of many of the orders placed by EU supermarkets, which take the form of email exchanges rather than formal supply contracts. Consideration needs to be given to granting full legal status to such email exchanges when defining contracts entered into and the enforcement of UTP provisions. The calls by civil society organisations and trade unions for provisions which prevent buyers from setting in place measures which have the equivalent effect of prohibited UTPs, are also worthy of close attention. The application of UTP requirements can largely be circumvented along 3rd country-to-EU fruit and vegetable supply chains involving small holder producers by leaving procurement exclusively in the hands of local exporting companies. Air-tight UTP compliant supply agreements can then be concluded with the exporters, which continue to leave agricultural producers in developing countries vulnerable to UTPs which it was the intention of the EU regulation to prohibit. The question arises: what role can organisations such as the Organisation of African, Caribbean and Pacific States (OACP) play in promoting awareness amongst ACP exporters of their new rights which prohibit a range of UTPs to which they have previously been subject, and which have served to undermine the net revenue obtained by ACP exporters? The OACP has in place large supply chain development programmes which could usefully assist in this awareness raising process, particularly given the increased familiarity of ACP exporters with Zoom style conferencing arrangements. Unfortunately, given the scale of Covid-19 challenges faced across the ACP, there is likely to be little ‘band width’ for the launching of such awareness raising initiatives. In this context, the new EU member states UTP laws are likely to remain a dead letter when it comes to improving the functioning of ACP-to-EU supply chains. |
Sources:
(1) EC, ‘The Directive on Unfair trading Practices in the agricultural and food supply chain’, Brochure, 30 April 2021
https://ec.europa.eu/info/sites/default/files/food-farming-fisheries/key_policies/documents/brochure-utp-directive_en.pdf
(2) EC, ‘The Directive on Unfair trading Practices in the agricultural and food supply chain’, Fact Sheet, 30 April 2021
https://ec.europa.eu/info/sites/default/files/food-farming-fisheries/key_policies/documents/factsheet-utp-directive_en.pdf
(3) Joint civil society organisation and trade union statement, ‘Two months left to transpose the EU Unfair Trading Practices Directive’, 1 March 2021
https://fairtrade-advocacy.org/wp-content/uploads/2021/03/Joint-statement_-Two-months-left-to-transpose-the-EU-Unfair-Trading-Practices-Directive-2.pdf
(4) braveneweurope.com, ‘The Counterbalance – How supermarket chains squash their suppliers . . . and how to stop them’, May 18, 2021
https://braveneweurope.com/the-counterbalance-how-supermarket-chains-squash-their-liers-and-how-to-stop-them