Late payments are a scourge throughout business supply chains worldwide. Now the European Commission has announced action to ban unfair trading practices in the food supply chain. The proposal aims to ensure small and medium businesses in the food supply chain – including farming businesses – receive fair treatment and payments terms, allowing national authorities to impose penalties on those who infringe established rules.

What are the proposals?

The proposed regulations will ban the following practices:

• late payments for perishable food products;
• last minute order cancellations;
• unilateral or retroactive changes to contracts;
• forcing the supplier to pay for wasted products.

Other practices will only be permitted if subject to a clear and unambiguous upfront agreement between the parties. These include: a buyer returning unsold food products to a supplier; a buyer charging a supplier payment to secure or maintain a supply agreement on food products; a supplier paying for the promotion or the marketing of food products sold by the buyer.

The proposal will also require each member state to designate an authority to enforce the rules, using sanctions if required and carrying out investigations. Businesses will be able to file confidential and anonymous complaints about infringements of the regulations.

Protecting small players

The Commission points out that, because small businesses and farmers lack bargaining power, they are vulnerable to unfair trading practices. Agriculture and rural development Commissioner Phil Hogan said: “Any chain is only as strong as its weakest link... Today's initiative to ban unfair trading practices is about strengthening the position of producers and SMEs in the food supply chain. The initiative is equally about providing strong and effective enforcement. We are looking to eliminate the 'fear factor' in the food supply chain, through a confidential complaints procedure.”

The Commission's proposal will take the form of a European law (directive) and will now be submitted together with an impact assessment to the two co-legislators, the European Parliament and the Council, where member states' governments are represented.