Non-exhaustive listing of (potential) Unfair and abusive commercial

practices and contractual conditions

HLF platform B2B contractual practices meetingMarc Rosiers, Copa-Cogeca, Brussels, 9 March 2011

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1.Introduction2.Unfair and abusive practices and contractual conditions

2.1. Access to retailers2.2. (Potential) unfair

contractual conditions or unilateral changes to contract terms3. Conclusions4. Ultimate Objective

Structure of the presentation

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1. Introduction

An unbalanced food chain – a result of:• a very concentrated and consolidated input supply sector (e.g. fertilisers, seeds, plant protection products)

•a large number of farmers (13.4 million), small in dimension and in economic power

• an agri-food industry with (some 300000 enterprises) of variable dimension and economic power

• a very concentrated and consolidated retail sector very small in number but with an impressive economic power

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1. Introduction

Unbalanced food chain - the causes:• Increasing globalisation;

• Retail consolidation;

• Processing Consolidation;

• Ferocious competition amongst retailers;

• Farmers are weak sellers;

• Unfair and abusive commercial practices;

• Oversupply in some sectors.

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1. Introduction

Unbalanced food chain- the consequences:

• Relentless downward pressure on prices;• Farmers, in many cases, do not cover

production costs;• Insufficient investment in farm business;• Alarmingly low level of R & D;• Farmers abandoning sector and activity;• Risk for the consumer of a reduced choice,

reduced flexibility of supply and possibly food safety.

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2.1. Access to retailers

• Advance payment for accessing negotiations

• (disproportionate) Listing fees

• Shelf space pricing

• Imposition of promotions

• Pricing

• Payment delays

• Most favoured client clause

2. Unfair and abusive practices and contractual conditions

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2.2. (Potential) unfair contractual conditions or unilateral changes to contract terms

• Unilateral and retrospective changes to contractual conditions

• Unilateral breach of contract

• Exclusivity clauses/fees

• Imposing private brands

• Imposing standard model contracts

2. Unfair and abusive practices and contractual conditions

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2.2. (cont’ed)

• “Forced” contribution to the opening of new stores or their decoration

• Retaliatory practices to force suppliers to sign contracts

• Non-written contractual agreements to impose unfair practices

• Margin recovery

• Over-riding discounts

2. Unfair and abusive practices and contractual conditions

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2.2. (cont’ed)

• (advanced) extra price reductions by the supplier without any commitment to buy

• Unilateral imposition of quality standards

• Retailer collecting advance deduction of penalties for delays

• Buying products for which 2/3 of their shelf life has already elapsed

• Sales without price for perishable products

2. Unfair and abusive practices and contractual conditions

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2.2. (cont’ed)

• Imposing payment for waste processing/removal

• Group buying/joint negotiation

• Unrealistic delivery terms (cost or non-cost wise)

• Non-transparent and discriminatory reverse auctions

• Incorrect measurement of volumes

2. Unfair and abusive practices and contractual conditions

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2.2. (cont’ed)

• Invoicing suppliers for services related to the marketing of the product not specifically related to the selling of it

• Imposing the use of a specific package supplier or packaging material

• Imposing the use of a specific logistic platform or operator

2. Unfair and abusive practices and contractual conditions

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2.2. (cont’ed)

• “Forced’ payment to cover on-store promotions using suppliers’ own material

• Payment to cover non previously agreed promotions

• Over-ordering a product intended for promotion

• Extracting payment for not reaching certain sales levels

2. Unfair and abusive practices and contractual conditions

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2.2. (cont’ed)

• Unilateral removal/withdrawal of products from store shelves

• Imposing an unconditional return of (unsold) products

• Imposing unreasonable costs related to customers’ complaints

• Imposing to suppliers costs related to product shrinkage or theft even when occurring in the retailers’ premises

2. Unfair and abusive practices and contractual conditions

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2.2. (cont’ed)

• Imposing contributions to the operation of retailers’ loyalty cards/systems

• Imposing contributions to cover costs of the operation of electronic debit/credit payment systems

• Buyer enacting a pre-approval of public statements by suppliers

2. Unfair and abusive practices and contractual conditions

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2.2. (cont’ed)

Further to these one can often find unacceptable situations whereby through a combination of pricing and other actions a retailer sells products bellow its cost.

2. Unfair and abusive practices and contractual conditions

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Imbalanced food chain;

Lack of business ethics and strategies based mainly on pricing

Lead to unfair and abusive trading and contractual practices

Need to have a B2B (food chain approach) Unfair commercial practices directive

3. Main Conclusions

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to achieve a

Fair, functional and transparent

food supply chain

4. Ultimate objective

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Copa-Cogeca:Copa-Cogeca:

Defending and developing Defending and developing the European Model of the European Model of

AgricultureAgriculture

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www.copa-cogeca.eu

Thank you!