Special CAPitals: The laggers and the leaders of the Unfair Trading Practices directive

Unfair trade practices (UTPs) includes late payments and last-minute order cancellations for perishable food products, unilateral or retroactive changes to contracts, or refusal to commit to written contracts. [SHUTTERSTOCK]

Welcome to EURACTIV’s third edition of the CAPitals, where we will be bringing you bi-monthly updates on all things European farming and Common Agricultural Policy (CAP).

In this third brief, the EURACTIV network takes a look at the state of play of the implementation of the Unfair Trade Practices (UTP) directive across the bloc which, by the European Commission’s own admission, has been spotty at best.

Adopted in 2019, the directive aims to redress the imbalances in the EU food supply chain created by large operators against trading partners with weak bargaining power, such as individual farmers and smallholders, in a bid to protect European farmers.

It does this by banning certain unfair trading practices imposed unilaterally by one trading partner on another at the EU level in the agricultural and food supply chain.

This includes late payments and last-minute order cancellations for perishable food products, unilateral or retroactive changes to contracts, or refusal to commit to written contracts.

While the directive entered into force on 1 November 2020, EU countries were required to transpose it into national law by 1 May 2021 and apply it six months later.

However, the road to implementing the directive has been a bumpy one, resulting in the Commission sending letters of formal notice in July to 12 member states who failed to transpose the EU rules within the allotted time frame.

So how far along are member states in their UTP journeys? Let’s find out.

Western Europe

Naughty school kid is playing catch up. France was part of the 12 EU member states that had failed to fully transpose the UTP Directive into national law by May 2021.

As the Commission pointed out, France had only partially transposed the Directive into its national legislation.

However, following a letter of formal notice to the twelve states in question requesting them to adopt and notify the relevant measures, France has since notified full transposition of the UTP Directive.

In its report on the state of the transposition of the UTP Directive from 27 October, the Commission notes that while several EU countries have introduced new laws, while others incorporated the Directive into existing legislation.

This is also the case in France, whose transposition, according to the report, “is partially based on pre-existing provisions that have a general (as opposed to an agri-food sector) scope.”

France has notably supplemented provisions of its Commercial Code, which governs trade, competition and commercial law and already contains general clauses related to unfair commercial practices and competition law.

Concretely, the matter of unfair trading practices and the imbalance in bargaining power between suppliers and buyers of agricultural and food products has been a hot topic in France this year.

The so-called “price war”, waged in the context of annual negotiations between French farmers and retailers on prices for agrifood products, escalated in March, with farmers accusing retailers of not taking the rising costs of animal feed and raw materials into account and continuing to beat down prices to the detriment of farmers.

The French government has responded to the crisis with the ‘Egalim 2’ law, passed on 19 October, and which is supposed to ensure better regulation and transparency of price negotiations, thereby guaranteeing fairer revenues for farmers. (Magdalena Pistorius | EURACTIV.fr)

Germany is top of the class.  Germany is one of the countries where the EU’s UTP directive has been completely transposed as of July 2021, through the “law for the strengthening of organisations and supply chains in the agricultural sector”.

In accordance with the directive, the law sets out a ‘black list’ of banned UTPs, such as the short-term cancellation of orders or unilateral changes to delivery conditions.

Practices on a “grey list” continue to be permitted, providing that all parties explicitly agree on them in advance. With its national law, Germany goes beyond what the EU-level directive proposes by blacklisting two additional practices that otherwise would have been on the grey list.

This means that buyers will not be allowed to give unsold agricultural and food products back to producers without paying and storage costs can no longer be passed on to the producer.

Moving more practices from the grey to the black list in the national legislation had been one of the demands of the German farmers’ association (DBV).

“Explicit agreements” on grey-listed practices “are usually not the result of eye-level negotiations, but are often about unilaterally shifting risks and costs to the less powerful producers,” a DBV position paper on the issue reads.

Germany also broadened the legislation’s scope compared to the EU directive by raising the maximum annual turnover of producers protected by the rules to €4 million.

The move was met with harsh criticism from food retailers, who argued that the raised maximum turnover meant that large international food producers will also enjoy special protection.

“The EU Commission has clearly stated that the protection of large companies is not intended, as this could lead to market disruptions,” the national retailers association HDE wrote in a letter to a relevant lawmaker.

The association also warned that the law could burden consumers by leading to higher food prices.

In Germany, the four biggest food retailers account for around 76% of the market, according to industry data. Farmers have been regularly protesting against retailers’ market power and low prices for agricultural products such as milk. (Julia Dahm | EURACTIV.de)

Austria slows off the mark. Austria is lagging behind on the implementation of the UTP directive and had not transposed the directive into national law by the deadline in July 2021.

The national government complied and presented an amended national law set to implement the directive in late September, shortly before the deadline for responding to the Commission’s requests expired.

The amendments to the country’s competition and local supply law are set to come into effect on 1 January 2022.

Additionally, the country plans to introduce an ombudsman service within the agricultural ministry from March onwards, which will be tasked with investigating anonymous tips on unlawful trading practices.

Austria’s plans for the national implementation of the UTP directive go beyond what is required by the EU in that they list two additional trading practices to be banned or restricted.

The country’s private trade association expressed “surprise” over the legislation’s ambition superseding EU requirements. The organisation also criticised Austria’s agricultural minister, Elisabeth Köstinger, for regularly “bashing” food retailers.

When presenting the draft law, Köstinger had accused retailers of “always negotiating prices in a way that harms farmers,” adding that the new law aims to render this impossible.

In Austria, three main retailers account for more than 90% of the national market, according to industry data.

The trade association also bemoaned that Austria plans to extend the scope of the legislation to producers with an annual turnover of up to €1 billion, compared to €350 million as proposed by the EU directive.

Speaking to Austrian newspaper Die Presse, the association’s director, Rainer Will, denounced the move as “clientele policy” meant to protect large dairy plants in the country. (Julia Dahm | EURACTIV.de)

Businesses braced for change in April 2022. Ireland transposed the EU’s directive into Irish law back in April of this year with the Irish UTP regulations, which have been applicable since 1 July 2021.

From 28 April 2022, all supply agreements, including those that were in place before the signing of the law, must be in compliance with the regulations.

The regulations prohibit 16 UTPs – 10 (black) UTPs which are prohibited in all circumstances and a further 6 (grey) UTPs which are prohibited unless the parties agree clearly and unambiguously beforehand.

Some of the ‘black’ UTPs include payments later than 30 days for perishable agricultural and food products and later than 60 days for other agricultural and food products, as well as short-notice cancellations of perishable agricultural and food products and unilateral contract changes by the buyer.

The regulations afford protection for any supplier of agricultural and food products with a turnover of up to €350 million, subject to the supplier’s turnover being lower than the buyer’s turnover within stated categories, and provide protection for five graduated levels of supplier turnover categories relative to the buyer up to that limit.

To oversee compliance with the regulations, agriculture minister Charlie McConalogue has established a UTP enforcement authority that has the power to initiate and conduct investigations on its own initiative or on the basis of a complaint.

Ireland has also set up a dedicated website that outlines the details of how suppliers can make a complaint.

Earlier this month, McConalogue took the opportunity to remind suppliers and buyers of agricultural and food products of their legal rights and obligations under the UTP regulations introduced earlier this year.

“I am calling on buyers across the food supply chain to be aware of, and understand, their legal obligations, and to use the next six months to ensure that all supply agreements are UTP compliant,” he warned. (Natasha Foote | EURACTIV.com)

Southern Europe

Green light for new rules. The Spanish Parliament has approved the reform of the existing Food Chain Act where the UTP directive will be transposed into national law.

Through this reform, Spain has chosen to go beyond the minimum protections set out in the EU rules, introducing some improvements intended to address the imbalances among stakeholders in the food supply chain.

The new act includes, among other changes, the ban of selling below farmers’ production costs and tougher sanctions. Furthermore, a digital register for contracts where farmers are involved will be created.

The scope of the regulation will also be extended to the Horeca sector (hotels, restaurants and coffee bars) where bans and sanctions will be applicable to the commercial relationships among Spanish and foreign operators (EU and non-EU operators).

Spain has had a national regulation in place to improve the functioning of the food chain since 2013.

Farmers organisations see some progress in the reformed law but considering it does not go far enough.

The new Spanish Food Chain Act comes at a critical time, with farmers holding demonstrations all around the country to demand fair prices and more help to solve their problems of profitability linked to the rise in inputs. (Mercedes Salas Felipe | Efeagro)

A positive step, but producers should be supported ‘proactively’. The transposition of the UTP directive into national law is a positive step, although it is too early to assess its successful implementation and impact on the operation of the chain, Elli Tsiforou, director-general of GAIA EPICHEIREIN, Greece’s official member of EU farmers’ union Copa-Cogeca, told EURACTIV Greece.

However, Tsiforou emphasised that strengthening the bargaining power of producers in the food supply chain is an issue that must be addressed proactively.

“By creating a favourable framework for information, institutional shielding and incentives for producers to participate in organised collective schemes and to proceed with the verticalisation of their activity, creating added value,” she said.

Tsiforou added that the future CAP, which provides opportunities for support in both directions, should be used to strengthen organised collective schemes in Greece.

Tsiforou said while the agricultural sector contributes 38.5% in the employment of the country’s food supply chain, it still is the chain’s “weakest link” due to several reasons.

Citing a 2020 report conducted by the National Competition Commission, she said the acquisitions in the supermarket sector in recent years have led to the concentration of the industry.

In particular, while the four largest companies/groups accounted for 45-55% of the market in 2013, they controlled 65-75% of the market in 2018.

The most common unfair practice concerns the delay of suppliers’ payments.

Tsiforou referred to Competition Commission estimates which suggested that the average repayment period of the suppliers of the sector increased by 30% in the period 2014-2018, while the average of the 12 largest companies was estimated at 133 days in 2018.

In addition to late payments, Tsiforou said other critical issues such as the high fragmentation of the wholesale trade with the participation of many intermediaries resulted in the non-creation of economies of scale, the opacity in transactions and the lack of state controls. (Georgia Karagianni | EURACTIV.gr)

Slow start, but busy making up for lost time. Italy has implemented the UTP directive against commercial practices in the agri-food sector, which has become operational on 15 December.

“Based on its legal system, Italy has not only transposed and applied the directive – of which I have been rapporteur for the European Parliament – but enriches it by adding further illegal actions,” Paolo De Castro, socialist MEP told EURACTIV Italy.

It was included, for instance, “the fight against double-down auctions that over the years, unfortunately, have marked the relationships between farmers and first processing companies, on the one hand, and large-scale distribution chains and purchasing centres, on the other,” he added.

Over the years, Italy has had news of unfair practices in the relations between suppliers and distributors of agri-food products, but the news was “too often told informally, but mostly never reported to the authorities, due to the fear of retaliation and cancellation of the existing contracts between the parties,” De Castro said.

“Among the 16 most common actions that we have identified at European level, we are talking, for example, of non-payment of supplies within the time limits set at a maximum of 60 days; of cancellation of orders for perishable products at short notice; of charging of expenses for unscheduled promotions”, the MEP explained.

For now, De Castro said that the directive has yet to have concrete effects in Italy, except for a few isolated cases of criticism by the large-scale retail trade.

But its application within the transposition decree that will now enter into force will be the “litmus test of illegal actions that we have observed for years without effective counteraction,” he said.

“Personally, I am confident of the work that ICRQF (central Inspectorate for the protection of quality and fraud prevention of agri-food products), the department of the Italian Ministry of Agricultural Policies entrusted with operating in the collective interest along the value chain of the agri-food sector, will be able to do”, De Castro concluded. (Daniele Lettig | EURACTIV.it)


Leisurely paced Poland. Poland did not make haste when transposing measures from the UTP Directive. Previously, unfair trading practices in the agricultural sector were regulated by an act that was passed in 2016 and came into force a year later.

However, the law hardly covered the requirements, even after it was last amended in 2020, as it did not contain even one mention of the directive. 

The new act, passed only in November this year, repeals its predecessor, and properly introduces the directive’s provisions. While many other EU member states introduced additional measures, the Polish act in its current form only covers the directive’s basic requirements.

On top of that, the fines are set at a maximum of 3% of the previous year’s annual turnover for both the suppliers and the buyers.

It could come as no surprise that so far little has been done by the Polish parliament and government on the matter of unfair trading practices in the food supply chain.

This has led to frequent farmer protests in recent years, which often resulted in blockades on the streets of many major cities. These protests were mainly caused by extremely low farm gate prices set by distributors and other middlemen.

Most of the blame is directed towards popular supermarket chains, which underpay their suppliers while also enjoying high sales profit margins on the produce they buy from them.

Other than low pay for their crops, the farmers have also complained about having few legal protections when selling food to distributors.

As of 17 December, the act is still not in effect and the impact of the directive in Poland remains to be seen. The transposition of the directive into national law will come into force a day before this year’s Christmas Eve – on 23 December. (Jakub Krystek | EURACTIV.pl)

Adopted law will ‘bring chaos’, stakeholders warn.
The Slovak Parliament approved the transposition of the UTP directive back on 13 May and at the same time decided to bring forward its entry into force to 15 June.

Previously, the law regulating conditions in the food trade was last amended in 2019.

This resulted in a list of more than 40 unfair practices, several of which were significantly stricter than those in the European directive. Some of the conditions have been criticised by traders organisations who have therefore requested the European Commission to address this issue.

The adoption of a European directive in the spring has provoked a heated debate, involving farmers, food producers, traders and many politicians. Agricultural associations have argued that the European directive is more benevolent than the current national law and hence will weaken their position in supermarket chains.

Farmers did not like the fact the law was to withdraw the prohibition for the traders to buy food from a supplier below his justified economic costs, while traders warned that there is no clear definition of economically justified costs and that therefore is no way to find out this information from suppliers.

However, this condition remained unchanged after the objections of farmers and food producers.

The second controversial point of the legislation was an amendment that reduced the payment period for agro-food products.

Until now, buyers had to pay the supplier for agricultural and food products no later than 30 days after the delivery of the food, otherwise, it was considered an unfair trading practice.

But according to the new regulation, the due date will not be calculated from the moment of delivery of the goods, but only from the date of delivery of the invoice, a step designed to prevent VAT fraud.

Overall, neither farmers and food producers, nor traders, are satisfied with the approved law.

According to the director of the Food Chamber of Slovakia Jana Venhartová, the adopted amendment will make it impossible to control compliance with the law and will also bring chaos in the payments for delivered food.

“By adopting this law, members of the Slovak parliament have accommodated the wishes of foreign trade chains,” she told the TASR news agency.

According to the Ministry of Agriculture, the effects of the new law cannot yet be measured. (Marián Koreň | EURACTIV.sk)

The Balkans

Romania to veer off from Commission’s UTP directive. Romania is one of the member states against which the Commission launched infringement procedures started after it failed to transpose EU rules banning unfair trading practices in a timely manner.

A law is currently in parliamentary procedures, but there is currently no timeline for its adoption.

However, the version that it is in discussion breaks away from the EU directive, and stakeholders expressed their dismay at the form adopted by the Senate earlier this year.

For their part, retailers say the law includes anti-competitive provisions that discourage commercial relations and could lead to a halt of their programs to support local producers.

The Romanian association of large retail networks (AMRCR) said the form adopted by the Senate “significantly changes the text and spirit of the Directive,” introducing non-competitive provisions, and practically guaranteeing, in some cases, the conduct of a commercial act regardless of the supplier’s ability to fulfill its obligations correctly.

Some of the provisions aim to completely ban breaking a contract with suppliers, regardless of whether they have the capacity to supply the agreed volume of goods at the frequency in the contract, while certain products, such as those included in quality schemes, must be accepted in the retailer’s portfolio, AMRCR said.

The law also brings back the concept of the short supply chain, but it is still arbitrarily set at 250 kilometres, raising the possibility that agricultural producers will no longer be able to benefit from the opportunity to conclude a sale with traders outside this area.

Even support programs between large retailers and small producers are called into question, AMRCR said, as these, according to the wording adopted by the Romanian Senate, could be seen as unfair commercial practices towards other suppliers.

Last but not least, retailers say, the adopted draft law over-regulates commercial relations, so that – although the law aims to help small producers – it becomes counterproductive, as trade relations could become extremely difficult and complicated.

Senators said that they want to help small producers from Romania cope with the “abusive manner” in which some retail networks conduct their business with local farmers, producers and processing companies.

But, analysts noted that retailers could simply refuse to do business with local companies as the law, in its current form, would force them to build large acquisition structures to deal with the huge number of potential suppliers that could only deliver small quantities.

Moreover, the intention to force a rigid price structure and shorter payment terms have been already criticised by both the government and the Competition Council.

But since May, when the law entered the Chamber of Deputies – which is the decisional chamber – not much progress was made. The normative act has had some of the reports from committees, but it is yet to make it to the plenary debates.

Agriculture minister Adrian Chesnoiu pleaded Romania’s case in a discussion with Commissioner Janusz Wojciechowski in the margin of the AGRIFISH Council’s December meeting.

Chesnoiu said the draft law for transposing of the directive is under debate in the Chamber of Deputies and efforts are made to finalise it as soon as possible. As such, he appealed to the Commissioner to not advance the infringement procedure.

According to Romania’s Agriculture Ministry, Commissioner Wojciechowski acknowledged Romania’s efforts and said that the Commission needs the right information from Romania to not activate the infringement procedure.

But the Romanian minister also underlined the need to consolidate the position of farmers in the food supply chain, with the aim of setting a correct balance between producers and retailers.

“The implementation of the Directive must prove the protection of those who really need it, especially the smallest suppliers, and avoid the cost transfer over to primary producers as a result of abuses of the intermediaries,” Adrian Chesnoiu said during the recent Council debate. (Bogdan Neagu | EURACTIV.ro)

Retailers lost legal disputes over UTPs.
The act transposing the UTP directive into Croatian law entered into force on 1 September. Suppliers and customers have to comply with the provisions of the Act no later than six months from its entry into force.

Croatian Competition Agnecy highlighted that, in addition to the mere transposition, the national law introduced new concepts and new unfair practices that go beyond the EU framework.

concluded before its entry into force must comply with the provisions of the Act no later than six months from the date of its entry into force, i.e. no later than March 1, 2022.

At the beginning of November, two large retail chains, Kaufland and Plodine, lost their legal disputes against fines imposed on them for breaching the law banning unfair trading practices.

In the Plodine case, the retailer did not have initially a written contract with the supplier, so it could not ensure fixed prices and deadlines for payments

When a written contract was ultimately signed, this included a payment deadline of 60 days while the legal limit is 30 days according to the Croatian legal order. (Zelijko Trkanjec | EURACTIV.hr|

Bulgaria needs to protect its fruit and vegetable producers.
At the beginning of 2021, Bulgaria introduced a new list of unfair trading practices that all major players in the agricultural and food market should comply with.

The law listed a number of prohibited practices, including payments made by buyers to suppliers later than 30 days for delivery of non-durable goods and refusal of orders for non-durable goods with short notice.

All these changes in the law were aimed at creating clearer rules on the market for agricultural and food produce, and the fines start from €2,500 to €150,000.

The introduction of the European Directive on unfair trading practices in the food chain has solved some of the problems with the payment of producers’ products, but many issues remain unresolved.

During his election speech on Monday (14 December), the new Prime Minister Kiril Petkov spoke of the “legendary Bulgarian vegetables” are known throughout Europe for their good quality and taste.

In the last 30 years, however, the country’s fruit and vegetable production has fallen nearly threefold, and producers tend to blame the state.

The National Union of Gardeners complained about the import of undocumented fruits and vegetables, which leads to a price difference of nearly 20% to the detriment of Bulgarian produce. The organisation insisted on a comprehensive policy to ensure that vegetable produce in Bulgaria can survive.

The head of the National Union of Gardeners, Mariana Miltenova, said that it is a common practice for the supermarkets to set requirements in the contract demanding a €2500 – €7500 entry fee for the farmers which now due to farmers’ discontent the big chains have started presenting as an advertising clause.

Often supermarkets do not follow the quality standards by the book and return a lot of produce to the farmers because of a few bad pieces of fruits or vegetables.

There have also been cases where big chains disregarded their contracts purely because the produce is not selling fast enough, Miltenova said.

In some cases, the unsold produce is being described as bad quality, so the payment can be deducted, even though it had already gone through strict control, she pointed out.

The most significant complaint of most fruit and vegetable producers is intermediary buyers, who collect a large part of the profits.

In some regions of the country, there is a monopoly of intermediaries, which further pushes prices down, EURACTIV has learned from talks with manufacturers.

Much of the profits remain with the final trader and intermediary buyers, which has demotivating effects on the Bulgarian producers. (Krassen Nikolov, Kalina Angelova | EURACTIV.bg)

[Edited by Natasha Foote and Gerardo Fortuna]

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