Aprile 2018

Supply chain and farmers: legislation isn’t the answer. A proposal which won’t harmonise anything – and will harm countries where the supply chain works well.

Commenting on the European Commission’s draft legislation banning or restricting a number of practices between operators in the food supply chain, Christian Verschueren, Director-General of EuroCommerce said that EU legislation will do nothing to help the overall situation of farmers or create a level playing field in Europe:
“We are not convinced that a ‘minimum harmonisation’ approach is the right instrument to deliver the level playing field which the Commission wants to achieve. The Commission has not produced any evidence of a structural problem or of the utility of EU legislation in resolving it.”

There is already extensive legislation in most Member States, and EU legislation aiming to provide a minimum set of principles will not deliver more than Members States’ existing frameworks. Moreover, it allows Member States to go a lot further in intervening in the market, and will impose unnecessary regulation in countries where dialogue and better organisation of farmers have led to a well-functioning food supply chain without specific legislation.

The proposal goes against creating the positive relationships and trust needed for a better-functioning supply chain. On the contrary, it favours adversarial enforcement and sanctions, which in some countries have already spilled over into discriminatory action and disproportionate fines incompatible with EU law. The directive also introduces an arbitrary culture of name and shame with no right of response or defence.

We would have wished that the Commission had acknowledged and built upon the major progress, achievements and values of the Supply Chain Initiative in encouraging positive resolution of disputes through mediation and dialogue, producing quicker and better results for all players.

There are better ways to help farmers than political gestures
Like the Commission, retailers and wholesalers are keen to help farmers create a competitive food supply chain. But in responding to political pressure from the European Parliament and a number of Member States, the Commission has ignored much better ways of addressing the real problems facing farmers.

Christian Verschueren commented:
“Political gestures don’t make for good or ‘better regulation’. This directive won’t do anything to help farmers. The problems farmers face are best addressed by helping them organise themselves better through e.g. producer organisations and cooperatives, encouraging the use of risk management tools, and aligning what they produce better with what consumers want. There is also a need for better understanding of value transmission in the supply chain.”

Legislation that carries major risks
Christian Verschueren warned that the Commission draft legislation exposed the market – and consumers – to a number of major risks in the course of its negotiation:
“The Commission has opted for legislation to deal with issues which can be much better resolved by market operators through mediation and positive dialogue at national or local level, for example in national platforms and interbranch organisations. We therefore call upon the Parliament and the Council to resist making this a Christmas tree of additional, unnecessary and intrusive provisions or broadening the scope of the directive beyond farmers and SME suppliers.”

In light of the risks of this proposal running out of control in its passage through the institutions, EuroCommerce will be asking the Council and European Parliament in examining this proposal to:
– ensure that this directive focuses on helping small operators dealing with large operators; and avoid it further restricting the ability of retailers to negotiate with large manufacturers, whose net margins of 15-30% contrast with the 1-3% achieved by retailers. It will be consumers who end up paying for such an outcome, with no guarantee that farmers see any of the additional profits;
– consider whether further intrusion into the principle of freedom of contract and the workings of the market is really justified at EU level; and ensure that the list of practices covered remains limited and relevant to the players it seeks to help;
– ensure that the list of practices covered remains limited, and provides the necessary legal certainty for operators, with clear definitions and provisions to avoid wide interpretation and the abuse already experienced in a number of Member States;
– ensure that when transposing and enforcing the directive, Member States respect the principles of free movement of goods, services and establishment in the Single Market; this means that any implementing provisions need to be non-discriminatory and proportionate;
– introduce provisions in the proposal for mediation and dialogue at national level; and
– include mechanisms to ensure a proper right of response and defence for operators.

www.eurocommerce.eu

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5 years Supply Chain Initiative and future prospects. The Supply Chain Initiative (SCI) presented its annual report at an event supported by Anneleen Van Bossuyt MEP, Chair of the IMCO Committee and Czes³aw Adam Siekierski MEP, Chair of the AGRI Committee. The event welcomed a wide range of participants from the EU institutions, associations, industry and retail companies from across the supply chain, as well as national stakeholders from across the EU. The programme of the event can be viewed here.

The annual report, which was presented by Michael Hutchings, Chair of the SCI, shows that satisfaction with the SCI remains high among registered companies. 7 out of 10 respondents reported a good level of satisfaction and 9 out of 10 companies trained all or part of their staff members on the Principles of Good Practice. Companies considered the SCI to have helped them to improve internal company processes (32%), to improve their daily communication (28%) and to deal with disputes (10%), thanks to the signatories committed to the Principles.

40 companies reported having been faced with an alleged breach of at least one of the Principles of Good Practice since 1st September 2016. 32 companies resolved the issue informally within less than 4 months. In 8 cases, the companies were not able to solve the issue informally, and 2 companies subsequently lodged a complaint.

“The number of complaints reported remains low. On the one hand, this shows that the Principles of Good Practice are improving current practices and provide a standard for resolving disputes informally. On the other, we hope that our strengthened dispute resolution mechanism will provide reassurance that the system can help address disputes in a fair and transparent manner whilst reassuring the complainant that they will not be subject to retaliation“ says Michael Hutchings, SCI Chair.

Olli Wikberg, Vice-Chair of the Finnish Board of the Trading Practices in the Food Supply Chain showcased the impact of the SCI at the national level and presented two recommendations relative to contract terms for shelf life in contracts for grocery trade and to written contracts and unilateral changes.

Carsten Bermig, member of the Cabinet of El¿bieta Bieñkowska, Commissioner for Internal Market, Industry, Entrepreneurship and SMEs highlighted the important role the SCI plays in offering a dispute resolution option and at the same time pointed to the challenges of rolling this out on a larger scale.

“Market stabilisation is always the most important issue, both in case of inputs and processed goods, together with ensuring an adequate level of income for individual participants of the chain, as well as sound cooperation. There is nothing worse than severe price volatility on inputs and products between various players in the chain. That is why partnership, lasting relations and systematic dialog between the participants in the chain is needed. A retailer must understand the interests of farmers and processors and the farmer must understand the retailer and processor as well” says Czesaw Adam Siekierski MEP, Chair of AGRI.

www.supplychaininitiative.eu

www.eurocommerce.eu

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