The European Commission has outlined proposals to ban “damaging unfair trading practices” in the food supply chain to ensure fairer treat­ment for small and medium sized (SME) food and farming businesses.

It wants SME businesses to have greater certainty and less need to manage risks over which they have little or no control. The proposal also includes enforcement provisions – sanctions can be imposed by national authorities where infringements are established.

SME producers are defined as having fewer than 250 employees or an annual turnover of less than EUR50m (US$62m).

The EC said smaller operators in the food supply chain, including farmers, are vulnerable to unfair trading practices employed by partners in the chain. They often lack bargaining power and alternatives to get their products to consumers.

Agriculture and rural development Commissioner Phil Hogan said: “Any chain is only as strong as its weakest link. An efficient and effective food supply chain is a fair one. Today’s proposal is fundamentally about fairness – about giving voice to the voiceless – for those who, through no fault of their own, find themselves the victims of a weak bargaining position. 

“Today’s initiative to ban unfair trading practices is about strengthening the position of producers and SMEs in the food supply chain. The initiative is equally about providing strong and effective enforcement. We are looking to eliminate the ‘fear factor’ in the food supply chain, through a confidential complaints procedure.”

The unfair trading practices to be banned are late payments for perishable food products, last minute order cancellations, unilateral or retroactive changes to contracts and forcing the supplier to pay for wasted products. 

Other practices will only be permitted if subject to a clear and unambiguous upfront agreement between the parties: a buyer returning unsold food products to a supplier; a buyer charging a supplier payment to secure or maintain a supply agreement on food products and a supplier paying for the promotion or the marketing of food products sold by the buyer.

The Commission’s proposal requires member states to designate a public authority in charge of enforcing the new rules. 

News agency Reuters notes that the move by the European Commission follows similar efforts in France, where President Emmanuel Macron has said he would raise minimum prices retailers can charge on food products and limit bargain sales in supermarkets.

The measures, which still need to be approved by member states and the European Parliament, have been broadly welcomed.

A joint statement from trade organisations and unions including FoodDrinkEurope, The Liaison Centre for the Meat Processing Industry in the European Union and EFFAT, the European Federation of Food, Agriculture and Tourism Trade Unions, said the proposal is a step forward but warned that promoting fairness in the whole chain remains a challenge.

It said: “Such a proposal for a directive has the potential to create a minimum harmonisation at EU level without endangering well-functioning existing systems already in place in some member states.

“The signatories are nevertheless concerned with the limited scope of the proposal, covering only SME suppliers. 

“A successful approach to combating UTPs {unfair trading practices} needs to be applicable to all players in the supply chain, regardless of their size, as it would therefore impact all commercial relations.”

Meanwhile, The European Dairy Association (EDA) said: “Today’s proposal by EU Commissioner Phil Hogan for a EU-wide framework on unfair trading practices in business-to-business relationships in the food supply chain reinforces the position of small and medium sized enterprises (SMEs).

“The proposed list of prohibited trading practices will be instrumental in the downstream food supply chain and strengthen the position of SME dairies vis-à-vis the retailer power.”

But EDA secretary general Alexander Anton added: “In an ever more concentrated retail environment, all dairies face unfair trade practices today – it isn’t a question of small dairies, it touches all dairies across Europe that deserve the same level of protection.”