Protecting The Little Guy: European Commission Addresses Unfair Practices In Food Manufacturing

By Melissa Lind, contributing writer

Small food processors frequently find they have a much weaker bargaining position in commercial relationships because of the lack of a “voice” which can result in unfair practices. The European Commission has turned to Member States to identify ways to improve the standing of small food manufacturers in the global food supply chain.

Small food producers often face unfair practices when dealing with larger trading partners. The European Commission (EC) has identified unfair trading practices that should be addressed by Member States through the establishment of consistent regulatory practices. Unfair trading practices that larger partners may use to interrupt trade for smaller food processors include:

• Commercial terms not specified in writing, even when requested
• Retroactive increases in costs of products or services
• Transfer of undue risk or liability to smaller partner
• Deliberate delay of supply schedule
• Termination of relationship without appropriate notice or justifiable reason

Michel Bamier, Commission VP says unfair trading practices jeopardize the need for a fair and level playing field and that Member States need to have “consistent regulatory frameworks” that will “build on and complement self-regulatory initiatives”. The EC recommendations for establishing fair practices are appropriate for trade organizations outside of the European Union as well and include:

• Support of voluntary self-regulation — The EU has established a voluntary Supply Chain Initiative, launched in Sept, 2013. It aims to increase fairness at all levels of the commercial food supply chain and applies to all sectors. It is intended to promote fair business practices to ensure equal partnerships
• Establish uniform good practice standards — Some regional areas have established standards, but some have not addressed unfair trading practices. The Commission has suggests establishing uniform standards will improve the overall food supply chain and ensure quality for both the customer and consumer
• Enable enforcement — Enabling governmental enforcement of established standards will ensure that smaller partners will feel free to address issues without fear of commercial retaliation. Voluntary resolution mechanisms may help prevent litigation, but enforcement should be made available in the event that non court-based mediation fails

Unfair trading practices hamper the ability of the food supply chain to deliver products of the highest quality to the consumer and ultimately damage confidence in the food supply chain. This has a negative impact on processes such as price competition, and effective process implementation, such as traceability and communication systems. As the food supply chain is evolving into an international system, efforts to stem unfair practices in any area can only improve the bottom line of every member of the industry.