The European Commission recently announced proposed amendments to the Common Agricultural Policy (CAP) alongside the EU Directive on unfair trading practices (UTPs), impacting key dynamics in the food manufacturing sector.
The CAP alterations would establish a requirement for written contracts between farmers and buyers, thereby promoting transparency and accountability. Furthermore, mediation mechanisms between farmers and their purchasers would become obligatory. This proposal aims to provide clear definitions for terms like ‘fair,’ ‘equitable,’ and ‘short supply chains’ in the context of supply chain organization for agricultural product marketing. Additionally, the EU would be enabled to support producer organizations taking private initiatives to effectively manage crises.
According to the EU, these changes will not only enhance the bargaining power of producer organizations and their associations but also broaden the avenues for stakeholders, including farmers, to pursue sustainability initiatives in alignment with evolving food and drink sustainability objectives.
The Commission also seeks to augment the enforcement mechanisms of the EU Directive on UTPs, which were announced earlier this year, in a move anticipated to strengthen food distribution trends and protect smaller suppliers within the food and beverage industry.
EU Directive on Unfair Trading Practices
The EU directive against unfair trading practices is designed to safeguard the negotiation power of farmers and small to medium-sized suppliers from larger businesses. Prohibited practices include unilateral contract modifications by the buyer, transferring risk of loss and deterioration onto suppliers, and the buyer’s refusal of written supply agreements upon supplier’s request. Enforcement of these rules must occur at the member state level.
Additionally, the proposed modifications emphasize procedural rules for cross-border cooperation among businesses. Under the new framework, national enforcement authorities will establish a mutual enforcement mechanism, allowing them to request and share information and seek actions from other authorities on their behalf. This integration, the EU suggests, will enable authorities to collaborate effectively when confronting unfair trading practices transcending borders.
“As the festive season approaches and families gather to share meals, we are reminded of the dedication of farmers who make these moments around the table possible. Fairness for farmers is a key priority. Decent income, fair prices, stronger bargaining position in the food chain, and better protections. That is why, as one of the first measures of this mandate, I am proud to announce proposals that will strengthen their competitive position,” stated EU President Ursula von der Leyen.
Criticisms of the Changes
Despite the intentions behind these changes, there has been notable criticism. For instance, the trade association Independent Retail Europe has expressed concerns that these proposals may disrupt the single market.
“If the proposal is adopted without changes, it will impact strongly the legal certainty of cross-border contracts between suppliers and buyers across Europe, as it may lead some national authorities to try to enforce their national laws on contracts which are bound by the law of another Member State and on which they normally do not have jurisdiction,” explained Alexis Waravka, director of digital and competitiveness at Independent Retail Europe, in a statement.
He added that this situation could foster “unstable legal circumstances for supply chain operators who engage across Europe or for the functionality of buying groups operating continent-wide.”