towards a sustainable european food chain: the fight against abusive practices

Towards a sustainable European Food Chain: The fight against

abusive practices.Hacia una cadena alimentaria

sostenible en Europa: la lucha contra las prácticas abusivas

Francisco González CastillaCatedrático acreditado de Derecho mercantil

Presidente de la Comisión de Defensa de la Competencia Comunitat Valenciana

EU Agricultural Markets Briefs are available in Europa: http://ec.europa.eu/agriculture/markets-and-prices/market-briefs/index_en.htm

Agriculture and Rural Development

EU Agricultural Markets Briefs No 4 | June 2015

You are part of the food chain Key facts and figures on the food supply chain in the European Union

Contents

1. The EU food chain in a nutshell

2. How does the food chain affect my budget and the EU economy?

3. Who does what in the EU food supply chain?

4. A look at prices

5. Conclusions

Everyone takes part in the food chain. Even if you're not directly involved in the production, processing or distribution of food, you are part of the food chain as a consumer. Food reaches consumers either directly (the less common purchases from the farmer) or via a number of intermediaries. Activities such as the processing of raw agricultural commodities, checking consumer safety standards, packing or transport activities add value to food before it is sold. The food chain links all the market players involved in the production, processing and distribution of food to consumers.

The number of actors in the food chain varies greatly at each level. In the EU, around 12 million farms produce agricultural products for processing by about 300 000 enterprises in the food and drink industry. The food processors sell their products through the 2.8 million enterprises within the food distribution and food service industry, which deliver food to the EU's 500 million consumers.

Synthetic and approximate representation of the food chain in the EU by actors involved*

* Where the number of holdings/enterprises per food chain stage and number of consumers are represented by the size of each shape.

This Brief gives a picture of the food chain in the Euro-pean Union, on the basis of Eurostat data, covering a description of:

x the food chain and its contribution to the eco-nomy,

x prices and price trans-mission in the food chain.

Consumers

Food and beverage processing industryFarmers

Food service Food retail

I. Diagnosis: imbalance in commercial relationships along the food supply chain and

unfair trade practices (UTPs)II. Treatment: hard Law vs. soft Law:

regulatory action and voluntary measures against unfair practices

III. Example of a legislative action: The Spanish Law on Measures to Improve the Food

Supply Chain (Ley 12/2013)

DIAGNOSIS: imbalance in commercial relationships along the food supply chain

Increased concentration and vertical integration of the retailers and food processing industry vs. great fragmentation of the producers= asymmetries in bargaining power

Increased role of the supermarkets compared to other retail formats= Reduction of the farmers’ commercial channels

Increased market share of the distributor brands= A sharp decline of the weaker manufacturer brands

Lack of market transparency, especially in contracts and price agreements

Unfair trading practices that grossly deviate from good commercial conduct and are contrary to good faith and fair dealing

DIAGNOSIS: consequences of asymmetries in bargaining power in the food supply chain

Anticompetitive practices that distort the market

Antitrust Law (European Commission and National Authorities)

Private law: general civil and commercial law against abusive contract clauses

Private law: unfair competition law

DIAGNOSIS: consequences of asymmetries in bargaining power in the food supply chain

IS THIS REGULATION INSUFFICIENT?

DIAGNOSIS: European reports and measures on the structure of the food supply chain

European CommissionCommunication of 28 October 2009: «A better functioning food supply chain in Europe» (COM(2009)0591)Communication of 15 July 2014: «Tackling unfair trading practices in the business-to-business food supply chain» (COM(2014)0472)European ParliamentResolution of 7 September 2010 on fair revenues for farmers: A better functioning food supply chain in Europe, (2009/2237(INI))Resolution of 19 January 2012 on the imbalances in the food supply chain

Green Paper of 31 January 2013 on «Unfair trading practices in the business-to-business food and non-food supply chain in Europe» (COM(2013)0037)

Commission Decisión of 30 July 2010 establishing the High Level Forum for a Better Functioning Food Supply Chain (2010/C210/03)

DIAGNOSIS: European reports and measures on the structure of the food supply chain

TREATMENT: regulatory or self-regulatory frameworks?

Concentration in the food processing industry and retail sectors, endowing downstream actors with higher bargaining power is not illegal


Is the asymmetry between the counterparts a market failure or a characteristic of the food chain?

What should be the policy response to Unfair Trade Practices?


What should be the policy response to Unfair Trade Practices?

Self-regulation (Principles of Good Practice, voluntary dispute settlement mechanisms)

Legislative action(private or public enforcement? The Fear Factor)

Enforcement of existing law


Goals:

Protection against unfair practices:Definition of unfair practices and its enforcement

Transparency and legal certainty:The requirement of a written contract and its (fixed) content


EXAMPLE OF A LEGISLATIVE ACTION: The Spanish Law on Measures to Improve the Food Supply Chain (Ley 12/2013)

Legal certainty in trade relations: Agreements should be in writing and cover relevant elements

Public Enforcement to prevent the abuse of bargaining power in the food chain

Elimination of unfair trade practices: legal identification of the main categories and clear penalties(public enforcement)Self-regulation: codes of conduct (like the Principles of Good Practice)

using a mixed approach

«Los contratos alimentarios deberán formalizarse por escrito. Dicha formalización deberá realizarse antes del inicio de las prestaciones que tengan su origen en los mismos»


The written agreement is mandatory but it does not affect the existence and validity of the contract

Which agreements should be in writing?

Contents of the contract (art. 9)

Which are the consequences?


The Law reinforces Legal certainty in relations between the parties But will it change the parties’

behaviour under the contract, or will it only introduce a new bureaucratic element?


Which are they?

a) Unspecified or ambiguous contractual terms

b) Retroactive contract changes

c) Transfer of commercial risk

d) Unfair use of information

e) Unfair termination or disruption of a commercial relationship

Elimination of unfair trade practices: legal identification of the main categories and clear penalties (public enforcement)

Art. 12. Unilateral changes and additional payment requirements

Art. 13. About providing relevant essential information to the other party in contractual negotiations and ensuring that information is not misused

Art. 14. Brand Management


Which are they?

What is the main tool of this Law against UTPs?

The Administration will be able to impose penalties on operators for their contractual behaviour

The Fear Factor prevents Private Law from being effective: the weaker party fears than initiating litigation may lead the stronger party to terminate the commercial relationship


What about the penalties?

All breaches of the Law are qualified as only minor

Confluence of different administrations, rules and procedures on the same behaviours

Erroneous gradation of penalties

The procedure is not regulated in detail

Risk of generating anticompetitive effects in the market.


The Law includes administrative penalties for contractual behaviour Paternalistic administration?


www.magrama.es [email protected]

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CÓDIGO BUENAS PRÁCTICAS MERCANTILES EN LA CONTRATACIÓN ALIMENTARIA

La Ley 12/2013, de 2 de agosto, de medidas para mejorar el funcionamiento de la cadena alimentaria tiene entre sus fines el hacer posible un mayor equilibrio y transparencia en las relaciones comerciales que se registran entre los diferentes operadores que la integran, el mejorar el acceso a la información y la trazabilidad a lo largo de la cadena alimentaria, así como la regulación de las prácticas comerciales, promoviendo para el logro de dichos objetivos, entre otras medidas, la formalización de códigos de buenas prácticas mercantiles en la contratación entre los operadores. El Título III de la citada ley está dedicado a los sistemas voluntarios de control, establecidos bajo la fórmula de códigos de buenas prácticas, y en concreto el Capítulo I se centra en la regulación de un Código de Buenas Prácticas Mercantiles en la Contratación Alimentaria. Se encomienda su impulso al Ministerio de Agricultura, Alimentación y Medio Ambiente, junto con el Ministerio de Economía y Competitividad, las Comunidades Autónomas y las organizaciones y asociaciones representativas de la producción, la transformación, la industria o distribución. En el artículo 15 de la citada Ley se establecen los aspectos que habrán de tenerse en cuenta en relación con su finalidad, alcance y proceso de elaboración. Estando el artículo 16 reservado a concretar diferentes cuestiones relacionadas con el contenido del Código de Buenas Prácticas Mercantiles en la Contratación Alimentaria. Contenido que deberá contemplar los principios sobre los que deberán fundamentarse las relaciones comerciales entre los operadores, así como los sistemas de resolución de conflictos y de mediación, que los operadores económicos, adheridos al mismo, se comprometen a aplicar de forma voluntaria en sus intercambios comerciales, con objeto de facilitar el desarrollo de sus relaciones contractuales. Los operadores de la producción, la industria y la distribución, cuyas relaciones se encuentren amparas por la Ley 12/2013, de 2 de agosto, de medidas para mejorar el funcionamiento de la cadena alimentaria, que voluntariamente se adhieran al presente Código de Buenas Prácticas Mercantiles en la Contratación Alimentaria, se comprometen a respetar los principios y pautas que se indican seguidamente y a someter sus relaciones comerciales con otros operadores, a las siguientes normas:

MINISTERIO DE AGRICULTURA, ALIMENTACIÓN Y MEDIO AMBIENTE

SECRETARÍA GENERAL DE AGRICULTURA

Y ALIMENTACIÓN

DIRECCIÓN GENERAL DE LA INDUSTRIA ALIMENTARIA

Self-regulation: codes of conduct (like the Principles of Good Practice)

Muchas gracias Francisco González CastillaCatedrático acreditado de Derecho mercantilPresidente de la Comisión de Defensa de la Competencia Comunitat Valenciana

Codes of conduct and Principles of Good Practice: just good intentions?

The Law includes administrative penalties for contractual behaviour Paternalistic administration?

The Law reinforces Legal certainty in relations between the parties only a new bureaucratic element?

Muchas gracias Francisco González CastillaCatedrático acreditado de Derecho mercantilPresidente de la Comisión de Defensa de la Competencia Comunitat Valenciana