Farmers are essential economic players in the food supply chain.
There are currently 11 million farms in the EU, providing work for 44 million people altogether.
To ensure the competitiveness and sustainability of this key sector, the EU adopted its Common Agricultural Policy (CAP) in the sixties.
The CAP, by introducing income support, implementing market measures and creating rural development programmes, aimed to increase agricultural productivity, promote technical development, stabilise the markets and ultimately assure the availability of food supplies. This cannot be secured without providing a fair standard of living for the agricultural community.
Since its last reform, the CAP has become less reliant on the management of markets, which exposed farmers to greater market uncertainties and increased price volatility.
It became clear, that there is an inequality in bargaining power between operators of the food supply chain, which led to farmers being subject to unfair trading practices (UTPs).
The most common UTPs are:
· late payments for perishable food products;
· last minute order cancellations;
· unilateral or retroactive changes to contracts;
· excessive liability clauses regarding food wastage;
· obligation for suppliers to pay for costs of promotion and marketing by the buyers;
To strengthen the position of farmers, in January 2016 the EU set up the Agricultural Markets Task Force (AMTF), which expressed several concrete measures addressing UPTs.
Recently, on 12 April 2018, a proposal was drafted based on the findings of the AMTF for a “Directive on unfair trading practices in business-to-business relationships in the food supply chain”, which proposes that each EU Member State shall designate a competent authority to enforce harmonised UTP rules covering agricultural and processed products, with an enforcement mechanism at EU level.
The legislation, by protecting small and medium enterprises, aims to increase efficacy and bargaining power of smaller operators in the food supply chain, ultimately resulting in a positive social and economic impact on society.
The exact implementation dates are yet unknown, but by the end of 2018, we can expect further measures being taken by the EU in order to enhance market transparency and enforce prohibitions of UTPs.