Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on unfair trading practices in business-to-business relationships in the food supply chain
Date: 2018-04-12
Institutions: Directorate-General for Agriculture and Rural Development, European Commission
Subjects: agri-foodstuffs, chain store, consumer protection, food industry, restriction on competition, small and medium-sized enterprises, supplier, supply, unfair terms of contract

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   EUROPEAN COMMISSION  Brussels, 12.4.2018 COM(2018) 173 final 2018/0082 (COD)  Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on unfair trading practices in business-to-business relationships in the food supply chain  {SWD(2018) 91 final} - {SWD(2018) 92 final} - {SWD(2018) 93 final}  
 
 
EXPLANATORY MEMORANDUM 

1. 

• 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

Farmers,  processors,  traders,  wholesalers,  retailers  and  consumers  are  all  actors  in  the  food 
supply chain. Smaller operators in the food supply chain are more prone to face unfair trading 
practices (UTPs) due to their, in general, weak bargaining power in comparison to the large 
operators  in  the  chain.  Agricultural  producers  are  particularly  vulnerable  to  UTPs  as  they 
often lack bargaining power that would match that of their downstream partners that buy their 
products. This is because alternatives for getting their products to consumers are limited. 

There is  a wide-spread consensus  that UTPs occur throughout  the food supply chain. Three 
Commission  communications  since  2009  have  focused  on  the  food  supply  chain  including 
UTPs.  
In  June  2016,  a  European  Parliament  resolution1  called  on  the  Commission  to  submit  a 
proposal for a Union legal framework concerning unfair trading practices. In December 2016, 
the Council invited the Commission to undertake, in a timely manner, an impact assessment 
with  a  view  to  proposing  a  Union  legal  framework  or  non-legislative  measures  to  address 
unfair trading practices.2  In September 2016, the European Economic and Social Committee 
published a report calling on the Commission and the Member States to take swift action to 
prevent UTPs by establishing an EU harmonised network of enforcement authorities, so as to 
create a level playing field within the single market.3 

In its report from 2016 the Commission identified a number of areas for further improvement 
concerning  both  Member  States’  UTP  legislation  and  voluntary  industry  initiatives.  The 
Commission  committed  to  re-assessing  the  need  for  EU  action  to  address  UTPs  in  light  of 
its  mandate.  The  expectations  about 
subsequent  developments  before 
improvements  were  not  fully  met  as  is  discussed  in  greater  detail  in  the  impact  assessment 
(section 3.3).  

the  end  of 

When  occurring,  UTPs  can  put  operators’  profits  and  margins  under  pressure,  which  can 
result in a misallocation of resources and even drive otherwise viable and competitive players 
out of business. For example, retroactive unilateral reductions of the contracted quantity for 
perishable  goods  equates  to  income  foregone  for  an  operator  who  may  not  easily  find  an 
alternative  outlet  for  these  goods.  Late  payments  for  perishable  products  after  they  are 
delivered  and  sold  by  the  buyer  constitute  extra  financial  cost  for  the  supplier.  Possible 
obligations for suppliers to  take back products not  sold  by the buyer after  the suppliers and 
buyer  may  constitute  an  undue  transfer  of  risk  to  suppliers  that  has  repercussions  on  their 
security  of  planning  and  investment.  Being  forced  to  contribute  to  generic  in-store 
promotional  activities  of  distributors  without  drawing  a  commensurate  benefit  may  unduly 
reduce a supplier’s margin. 

In  an  agricultural  policy  environment  that  has  become  distinctly  more  market  oriented,  the 
good  governance  of  the  food  supply  chain  has  become  more  important  for  operators,  in 
particular for agricultural producers. The proposal should ensure that these operators are able 
to  compete  on  fair  terms,  thereby  contributing  to  the  overall  efficiency  of  the  chain.  Unfair 
business  conduct  by  operators  wielding  bargaining  power  that  is  not  prohibited,  or  the 

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European  Parliament  resolution  of  7  June  2016  on  unfair  trading  practices  in  the  food  supply  chain 
(2015/2065(INI)). 
Council  Conclusions of  12 December  2016, Strengthening  farmers’  position  in  the food  supply chain 
and tackling unfair trading practices.  
COM(216) 32 final, 30 September 2016. 

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existence of redress possibilities that lack effectiveness, are liable to undermine the economic 
viability of operators in the chain. Such weak governance is also likely to erode trust in the 
overall fairness and functioning of the food supply chain.  

The food supply chain is a continuum of vertically inter-related markets. It is characterised by 
significant  differences  in  relative  bargaining  power  the  between  smaller  and  medium-sized 
enterprises  and  larger  ones.  The  concentration  levels  at  the  stages  downstream  of  primary 
production are high in all Member States. In some cases UTPs affect weaker producers, such 
as agricultural producers, even if they are not directly exposed to them, if UTP-induced costs 
are passed back along the food supply chain to the weakest link which is often the farmer. The 
negative  effect  of  a  UTP  that  occurs  downstream,  for  instance  between  a  retailer  and  a 
processor, thus can cascade backward in the chain to ultimately reach farmers. 

Specific UTP rules in 20 Member States bear witness to the significant concern about UTPs at 
the national level. However, the heterogeneity in the treatment of UTPs in Member States is 
significant.  In  certain  Member  States,  there  is  no,  or  ineffective  specific  protection  against 
UTPs. 

General  (contract)  law  may  prohibit  certain  practices  and  those  who  have  faced  UTPs  have 
the option to seek redress before a court of civil law. But general contract law, to the extent 
that it covers the practice at issue, may de  facto be difficult  to  enforce: a weaker party to  a 
commercial transaction is often unwilling to lodge a complaint for fear of compromising an 
existing commercial relationship with the stronger party (“fear factor”).  

The  divergence  of  Member  States’  regulatory  approaches  to  UTPs  results  furthermore  in 
dissimilar conditions of competition for operators. Under the current piecemeal approach, the 
extent  of  protection  from  UTPs  that  operators  are  granted  depends  on  the  Member  State. 
Divergence of rules is liable to lead to differences in the conditions of competition.  

There is also very little coordination among Member States’ enforcement authorities, due to 
the absence of formal coordination structures at EU level. Such coordination could improve 
the enforcement practices in Member States. 
The  voluntary  Supply  Chain  Initiative  (SCI)4  is  a  private  industry  initiative  that  seeks  to 
govern  UTPs.  Similar  national  initiatives  exist  in  Member  States  alongside  national 
mandatory  measures.  Since  its  inception,  the  SCI  has  played  an  important  role  in  Member 
States in raising awareness about UTPs and fostering fairness of business conduct. It has been 
evolving and most recently nominated an independent Chair. It provides a forum for early and 
non-litigious  dispute  resolution.  The  SCI  is,  however,  unlikely  to  develop  into  a 
comprehensive  governance  framework  that  would  make  public  governance  measures 
including  enforcement  superfluous.  Participation  in  the  SCI  is  voluntary  and  the  SCI  so  far 
does  not  cover  all  operators  in  the  food  supply  chain.  For  instance,  while  retailers  are 
members  of  the  SCI  retailer  buying  alliances  do  not  participate  in  the  SCI,  nor  do  the 
organisations representing agricultural producers. The latter did not join the SCI since, in their 
view, it does not ensure sufficient confidentiality for complaining parties and does not provide 
for independent investigations or sanctions.5 However, organisations representing agricultural 
producers participate in national supply chain inititatives. 

Certain limitations to a voluntary code may also be structural. The SCI has no capability of 
imposing sanctions, nor are decisions published (no deterrent effect). One-on-one disputes are 

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http://www.supplychaininitiative.eu/. The SCI formally was created in 2013 but its “Principles of Good 
Practice”, a sort of code of conduct, date from 2011.   
European Commission, Report from the Commission to the European Parliament and the Council, on 
unfair business-to-business trading practices in the food supply chain, January 2016, p. 8. 

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not dealt with in a manner that would ensure the confidentiality of complaints, not even in the 
early  stages  of  the  procedure.  Furthermore,  there  is  no  ability  to  carry  out  own  initiative 
investigations. The concerns about effective enforcement account for the continued low level 
of participation of agricultural producers in the SCI. Moreover, a voluntary initiative cannot 
address, in and of itself, the fragmentation of UTP rules in Member States. 

Accordingly, the present proposal for a Directive aims at reducing the occurrence of UTPs in 
the food supply chain by introducing a minimum common standard of protection across the 
EU that consists of a short list of specific prohibited UTPs. The protection covers small and 
medium-sized suppliers in the food supply chain insofar as they sell food products to buyers 
who  are  not  small  and  medium-sized.  This  scope  aims  at  contributing  to  a  fair  standard  of 
living for the agricultural community, an objective of the common agricultural policy under 
Article 39 TFEU. 

Provisions  targeting  minimum  enforcement  requirements  applying  to  national  competent 
authorities  add  to  the  deterrent  character  of  the  proposed  regime.  Last  but  not  least,  a 
coordination mechanism between enforcement authorities facilitated by the Commission will 
enable the exchange of data concerning the number and type of infringements investigations 
carried out and will also provide a forum for the exchange of best practices, with a view to 
improving the effectiveness of enforcement. 

The  proposed  measures  are  complementary  to  measures  existing  in  Member  States  and  the 
code of conduct of the SCI (minimum harmonisation approach).  

• 

Consistency with existing policy provisions in the policy area 

There are, as of yet, no EU horizontal rules on UTPs between businesses. Fairness in market 
activities  in  the  business-to-business  context  is  the  specific  objective  of  Directive 
2006/114/EC,  which  deals  with  misleading  practices  and  the  requirements  of  comparative 
advertising.  However,  the  provisions  set  forth  in  that  Directive  do  not  address  business-to-
business trading practices as identified in this proposal. 

• 

Consistency with other Union policies 

Competition  law  has  a  scope  that  is  different  from  rules  on  UTPs.  UTPs  are  unilateral 
practices that do not in most cases imply an infringement of competition rules because such 
an infringement requires the existence of a dominant position in a given market, as well as the 
identification of an abuse of that position that affects the market overall. Comparatively, rules 
on  UTPs  address  any  situation  of  unequal  bargaining  power  (in  most  cases  without  a 
dominant  position  in  the  market)  and  prohibit  undertakings  from  imposing  on  their  trading 
partners,  or  obtaining  or  attempting  to  obtain  from  them,  terms  and  conditions  that  are 
deemed  unjustified,  disproportionate  or  without  consideration  (without  necessarily  an  effect 
on the market overall). Accordingly, UTP rules will be compatible with and complementary 
to the EU’s competition rules.  

Regulatory divergence and under-protection of kinds similar to UTPs have given rise to EU 
initiatives in the area of business-to-consumer protection. Some Member States have extended 
such  rules  to  national  business-to-business  situations.  The  conceptual  approach  under  the 
EU’s business-to-consumer rules indeed shares relevant characteristics with Member States’ 
existing  UTP  rules  governing  business-to-business  transactions,  namely  the  focus  on 
relatively weaker parties to a commercial transaction.  

The  Late  Payment  Directive  (2011/7/EU)  foresees  that  in  commercial  transactions  between 
businesses ("undertakings") the payment term established in the contract should not exceed 30 
calendar days, which can be extended to 60, unless otherwise expressly agreed in the contract 
and  provided  it  is  not  grossly  unfair  to  the  creditor.  Therefore  the  absence  of  a  binding 

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maximum  payment  term  in  business-to-business  transactions  is  often  exploited  to  impose 
payment  terms  much  longer  than  what  the  creditor  is  comfortable  with,  or  which  is  not 
justified by the practices of the trade or the nature of the contract. The proposal therefore aims 
at  setting  a  maximum  payment  term  of  30  calendar  days  in  commercial  transactions  in 
relation  to  the  purchase  and  sale  of  food  products  between  businesses.  This  term  is  binding 
and  shall  not  be  exceeded  under  any  circumstance.  While  this  proposal  constitutes  a  lex 
specialis  concerning  payment  terms  for  the  contracts  within  the  scope  of  this  Directive,  the 
Late  Payment  Directive  nevertheless  remains  applicable  whenever  late  payment  occurs,  for 
the  remaining  provisions,  in  particular  the  parts  concerning  payments  and  rates  of  interests, 
compensations, unfair contractual terms and practices, expedited procedures to obtain orders 
of payments, payments schedules, retention of title. 

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

A  key  objective  of  the  CAP  is  to  ensure  a  fair  standard  of  living  for  the  agricultural 
community  (Article  39  TFEU).  The  EU’s  constitutional  emphasis  on  producer  welfare  is 
unique  to  the  agricultural  sector  hinting  at  the  comprehensive  responsibility  of  the  CAP  for 
European  agriculture.  The  Treaty  lists  four  other  objectives  for  the  CAP,  i.e.  increasing 
agricultural  productivity,  stabilising  markets,  assuring  availability  of  supplies  and  ensuring 
reasonable prices for consumers. 

Article 39 of the Treaty on the Functioning of the European Union (TFEU) specifies that the 
common  agricultural  policy  (CAP)  shall  ensure  a  fair  standard  of  living  for  the  agricultural 
community as well as increase agricultural productivity, stabilise markets, assure availability 
of supplies and ensure reasonable prices for consumers. Article 40 TFEU stipulates that the 
common  market  organisation  shall  exclude  discrimination  between  producers.  Article  43 
TFEU specifies that the common market organisation shall ensure conditions for trade within 
the Union similar to those existing in a national market.  

The patchwork of UTPs rules in Member States or the absence thereof is liable to impair the 
objective of ensuring a fair standard of living for the agricultural community. UTPs jeopardise 
the  profitability  of  agricultural  producers  and  lead  to  downward  pressure  on  their  market 
income. Their governance falls therefore within the CAP’s principled remit.  

The absence of a common UTP framework stands in contrast to other areas which the CAP 
governs,  and  which  have  direct  relevance  for  operators,  such  as  competition  rules,  state  aid 
rules  and  marketing  standards.  In  these  areas,  the  common  market  organisation  (Regulation 
(EU)  No  1308/2013)  lays  down  common  rules  relevant  to  the  market  conditions  operators 
face  in  the  EU  so  as  to  contribute  to  economic  and  social  cohesion,  as  well  as  to  a  level 
playing field in the single market.  

According to Article 38(2) and (3) TFEU the CAP primarily covers the agricultural products 
listed  in  Annex  1  to  the  TFEU.  However,  the  European  Court  of  Justice  has  explicitly 
confirmed  that  food  products  not  listed  in  Annex  I  TFEU  (Annex  I  products  are  deemed 
“agricultural  products”  under  the  Treaty)  can  be  covered  by  acts  adopted  under  Article  43 
TFEU  if  this  contributes  to  the  achievement  of  one  or  more  of  the  CAP  objectives  and 
agricultural products are principally covered.6  

Moreover,  an  approach  which  protects  agricultural  producers  and  their  associations 
(cooperatives and other producer organisations) also must take into account indirect negative 

6 

Judgment of the European Court of Justice, C-343/07, 2 July 2009, paragraphs 50-51. 

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effects they may suffer through UTPs occurring downstream in the food supply chain, i.e. by 
operators who are not farmers but whose weak bargaining position in the downstream chain 
makes them vulnerable to UTPs. Protection against UTPs applying to downstream suppliers 
prevents  unintended  consequences  for  farmers  due  to  trade  being  diverted  to  their  investor-
owned competitors – for example at the processing stage – which would not enjoy protection 
(e.g. less legal risk for buyers to be confronted with UTP accusations).  

In light of this, Article 43 TFEU, which entrusts the Union legislator with the legal powers to 
establish a common organisation of agricultural markets in the EU, can in principle serve as 
the legal basis for measures covering UTPs occurring in the food supply chain in relation to 
the trade of food products which originate with agricultural producers.  

• 

Subsidiarity (for non-exclusive competence)  

No  common  EU  rules  exist  that  would  provide  for  a  minimum  European  standard  of 
protection by approximating or harmonising Member States’ diverging UTP measures. Short 
of  EU  measures,  Member  States  lack  coordinating  mechanisms  to  bring  about  such 
approximation,  nor  do  they  have  obvious  incentives  to  self-align.  A  minimum  standard  of 
protection  against  UTPs  in  Member  States  does  not  yet  exist,  despite  the  Commission’s 
recommendations in its communications. 

Certain Member States have no specific rules at all that would protect against UTPs. Others 
do not address important aspects of effective UTP enforcement. This leads to under-protection 
of vulnerable operators, in particular agricultural producers. Moreover, in spite of its positive 
effects in the area of private governance of UTPs, the voluntary codes including the SCI – to 
the extent it applies in Member States – are not able to effectively replace public governance 
measures.  

There is thus a necessity for EU measures that target the problem of under-protection against 
UTPs  by  providing  for  a  common  EU-wide  minimum  standard.  After  years  of  discussion, 
analysis  and  recommendations,  which  have  improved  the  situation  on  the  ground  only  to  a 
certain  extent,  EU  legislation  is  a  means  that  can  ensure  such  a  minimum  standard  of 
protection throughout the EU, including with regard to coordination and enforcement. 

The  effectiveness  of  EU  rules  consists  in  a  minimum  standard  that  is  common  in  Member 
States and that would introduce protection in those Member States which currently lack rules 
protecting  against  UTPs.  The  approach  chosen  is  proportionate  in  relation  to  the  problem 
encountered and in relation to the measures existing in Member States. It does not lay down a 
comprehensive  EU  framework  governing  UTPs  in  Member  States.  Rather,  in  line  with  a 
minimum harmonisation approach, it tackles a short list of manifestly unfair trading practices 
but leaves Member States room to keep or provide for more far-reaching measures. More far-
reaching national UTP rules and voluntary codes like the SCI would not be replaced but rather 
complemented.  An  EU  minimum  standard  is  therefore  expected  to  lead  to  synergies  rather 
than the cancelling out of the advantages of these regimes. Secondly, the proposed Directive 
lays down effective enforcement powers that have proven effective in tackling the fear factor, 
as  well  as  enhancing  the  deterrent  effect  and  improving  redress  possibilities  in  Member 
States.  Again,  the  approach  followed  is  that  of  a  minimum  harmonisation  and  relies  on 
Member  States  enforcement  authorities  rather  than  any  centralised  enforcement  authority. 
Third,  the  proposed  Directive  includes  the  setting  up  of  a  coordination  network  of 
enforcement authorities facilitated by the Commission which will enable the exchange of best 
enforcement practices and a platform on which to discuss and improve the application of the 
UTP rules. Experience from the enforcement of UTPs by the UK Grocery Code Adjudicator 
shows  that  an  effective  protection  regime  can  reduce  the  occurrence  of  UTPs  and  improve 
effective redress against them. 

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Measures at the EU level, complementary to Member States regimes and the SCI, consist in 
common UTP rules that would aim at improving the governance of the food supply chain and 
pursue the objective of ensuring fair living standards of the agricultural community (Article 
39  TFEU).  The  approach  adopted  takes  the  form  of  partial  (minimum)  harmonisation  and 
takes  the  positive  effects  of  market  driven  contractual  arrangements  between  parties  into 
account. As UTPs occur along the food supply chain and have repercussions that are likely to 
be  passed  through  to  agricultural  producers,  it  makes  sense  to  address  them  in  a 
comprehensive manner and target them along the chain.  

• 

Proportionality 

The option packages discussed in the impact assessment differ according to their ambition. As 
regards  their  suitability  to  effectively  address  the  issue,  all  are  in  principle  suitable  to 
contribute to achieving the stated objectives, which are to reduce the occurrence of UTPs and 
address the situation of under-protection. Having said this, recommendations by the EU can 
only do so much in relation to the objectives pursued. Recommendations in 2014 and 2016 by 
the Commission to Member States and the SCI have not been given full effect, partly because 
certain outcomes may depend on a common mandatory approach. Accordingly, the  approach 
chosen in the present Directive is more effective in ensuring the goal of a common minimum 
level of protection in Member States and can, as has been shown by the example of certain 
Member  States,  address  some  of  the  identified  problems  relating  to  UTPs,  including  the 
enforcement shortcomings. By the same token, it would seem that less intrusive means are not 
likely to achieve the objective in an equally effective manner.  

The  approach  taken  is  circumspect  in  different  ways  and  is  therefore  proportionate  to  the 
objective pursued. Partial harmonisation is proposed, not full harmonisation. Member States 
will continue to be able to have rules on UTPs above and beyond the minimum standard of 
protection  this  Directive  intends to  introduce  (subject  to  applicable  EU  law).  What  is  more, 
the  Directive  suggests  an  approach  that  is  based  on  decentralised  enforcement  by  Member 
States.  The  Directive  is  complementary  to  existing  rules,  including  those  established  by 
voluntary  initiatives  such  as  the  SCI.  Accordingly,  the  Directive  does  not  aim  to  define  all 
practices  that  could  be  UTPs  but  establishes  a  short  list  of  prohibited  UTPs.  The  scope  of 
protection is limited to SME suppliers in the food supply chain thereby not interfering  with 
the commercial relationships of large players who are less likely  to  be affected by UTPs or 
who can be expected to counter-vail undue pressure to “suffer” UTPs, and who would not be 
subject to the fear factor discussed in the impact assessment report in the same way as SME 
operators.  

Sections 3.2 and 3.3 of the impact assessment address proportionality. The characteristics of 
the  preferred  option,  which  make  the  proposal  proportional  within  the  above  meaning,  are 
discussed in sections 5 and 6 and eventually in section 8, which presents the preferred option. 

• 

Choice of the instrument 

The  instrument  chosen  is  a  Directive,  as  a  soft  law  approach  risks  being  ineffective  in 
ensuring  the  desired  minimum  level-playing  field.  The  endorsement  of  a  Directive  as  the 
relevant  instrument  for  UTP  measures  is  also  mindful  of  subsidiarity:  a  Directive  enables 
Member States to integrate the minimum protection into their national legal orders in a way 
that is compatible with their choices of laws, regulations and administrative provisions.  

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3. 

• 

RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER 
CONSULTATIONS AND IMPACT ASSESSMENTS 

Ex-post evaluations/fitness checks of existing legislation 

As there is no EU legislative framework to address UTPs yet, it is not possible at this stage to 
present an evidence-based evaluation on how EU measures perform. However, some Member 
States  have  performed  ex  ante  or  ex  post  evaluations  with  respect  to  the  effectiveness  and 
efficiency of their UTP policies.  

• 

Stakeholder consultations 

The consultation process included consultations on the inception impact assessment, an open 
public consultation, targeted food supply chain stakeholder consultations (undertakings in the 
food  supply  chain  and  consumer  organisations),  a  consultation  of  Member  States,  an 
academic  workshop  on  UTPs  in  the  food  supply  chain  (organised  by  the  Joint  Research 
Centre),  ad  hoc  meetings  with  food  supply  chain  stakeholders,  and  engagements  with  CAP 
Civil Society Dialogue groups. The consultation process was primarily aimed at the collection 
of evidence to inform the impact assessment report.  

Stakeholders  were  invited  to  offer  comments  and  evidence  on  problem  definition,  policy 
objectives, the need for EU action, policy options, on the likely impact of the policy options, 
and on implementation issues, including monitoring and enforcement. 

Stakeholders largely stated that frequent and damaging UTPs are occurring in the food supply 
chain, and they support legal action at the EU level (with the exception of the retail sector), 
including minimum enforcement standards. (Large) retailers disagree that UTPs occur widely 
and  are  opposed  to  EU  measures.  Consumer  organisations  had  limited  participation  in  the 
consultation process but expressed an interest to be involved at the legislative stage. 

90% of respondents to the open public consultation agreed or partially agreed that there were 
practices  in  the  food  supply  chain  that  could  be  considered  to  be  UTPs.  These  results  were 
broadly  similar  for  all  stakeholder  groups  (producers,  processors,  traders,  researchers,  etc.), 
with the exception of the retail sector (12% agreed or partially agreed that UTPs exist in the 
food  supply).  The  most  damaging  practices  that  were  identified  in  the  consultation  broadly 
aligned with those identified by the SCI in its Principles of Good Practice. Overall, 87% of 
respondents  believed  action  should  be  taken  by  the  European  Union  (in  combination  with 
Member  States,  58%;  or  the  EU  acting  alone,  29%).  In  terms  of  the  effectiveness  of 
enforcement,  the  most  important  features  named  by  respondents  were:  transparency  of 
investigations  and  results  (94%),  possibility  of  fines  in  the  case  of  violations  to  the  rules 
(93%), possibility to file collective complaints (92%), ability to receive and treat confidential 
complaints  (89%),  designation  of  a  competent  authority  (89%),  and  ability  to  conduct  own 
initiative investigations (73%). 

Stakeholders’  input  was  incorporated  in  the  impact  assessment  analysis  throughout  the  text 
and taken into account in the proposal for the Directive. While most stakeholders called for 
extensive  regulation  of  several  types  of  UTPs  in  the  food  supply  chain,  the  Commission’s 
proposal comes forward with a restricted approach to cover only a few types of particularly 
damaging  UTPs.  The  Commission  largely  agrees  with  the  majority  of  stakeholders  on  the 
importance of robust enforcement capability of Member State authorities and coordination of 
enforcement at EU level. 

• 

Collection and use of expertise 

In  addition  to  the  stakeholder  consultations  described  above,  the  analysis  for  the  impact 
assessment relied on a wide range of scientific, legal and applied knowledge. For the defini-

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tion  of  the  baseline,  information  was  collected  from  Member  States  and  processed  and 
analysed by external legal experts; additional information pertaining to the possible impacts 
of  the  options  was  also  collected  from  Member  States,  as  well  as  from  publicly  available 
information.  More  generally,  the  evidence  base  of  the  impact  assessment  includes  data  and 
information  obtained  through  the  above-mentioned  consultations,  through  an  academic 
workshop  and  a  technical  report,  through  independent  literature  reviews,  and  through 
exchanges with  Member States  and third  countries with  experience  in regulating UTPs. For 
instance, in its report “The supply of groceries in the UK market investigation” from 2008, the 
UK’s  Competition  Commission  found  that  certain  UTPs  may  have  a  negative  effect  on 
competition  and  consumer  welfare.  In  a  study  for  DG  GROW  in  2016,  Areté  discussed  the 
limits of the SCI in addressing UTPs. And in a report about UTPs in 2013, SEO confirmed the 
role the fear of retaliation plays in UTP cases.  

In addition, the in-house expertise of both the researchers at the JRC, in particular its Unit on 
Economics of Agriculture, and the economic and legal experts within DG AGRI were used in 
the impact assessment.  

Academic workshop on UTPs in the food supply chain  

Together with DG AGRI, the Joint Research Centre (JRC) organised a workshop on “Unfair 
trading practices in the food supply chain” in July 2017. More than a dozen participants at this 
workshop came from universities across the EU as well as from the US. 

Based  on  the  outcomes  of  the  workshop,  and  with  the  support  of  the  workshop’s  academic 
rapporteurs, the JRC produced a technical report that confirmed the existence of UTPs in the 
food supply chain and referenced the extensive regulatory and analytical work on this topic.  

Study on national UTP rules in Member States  

Using a questionnaire-based approach, the Commission elicited feedback from Member States 
on their experiences with UTP rules and on the data and information they could share in this 
context. In particular, Member States were asked to (i) update information on the existence, 
implementation,  and  enforcement  of  national  UTP  legislation  that  had  been  collected  in  an 
earlier study in 2015, (ii) share information from impact assessments they may have carried 
out for decision-making on national UTP rules, and (iii) provide data and information on the 
administrative costs to public administrations from the introduction of national UTP rules.  

The  replies  from  Member  States  were  used  as  input  for  an  overview  of  the  “Specific 
regulations  on  unfair  trading  practices  in  Member  States  in  the  business-to-business  retail 
supply chain” (Cafaggi, F. and P. Iamiceli,  Annex F to the impact assessment).  In addition, 
DG  AGRI  used  Member  States’  estimates  of  their  administrative  costs  related  to  the  intro-
duction and enforcement of their national UTP rules when drafting the impact assessment and 
designing the different options.  

Analysis of the impact of UTP regulation  

The  Chief  Economist  of  DG  COMP  provided  an  analysis  of  the  possible  impact  of  the 
regulation  of  trading  practices  in  the  food  supply  chain,  including  the  identification  of  the 
possible benefits and drawbacks (for operators and consumers) of regulating different types of 
practices.  

• 

Impact assessment 

DG AGRI presented the impact assessment to the Regulatory Scrutiny Board on 21 February 
2018. The RSB issued a negative opinion on 23 February 2018. The Board requested further 
work to be done and asked for the resubmission of the impact assessment report. The Board 
identified  several  shortcomings  that  needed  to  be  addressed  in  a  revised  version.  A  revised 

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version of the impact assessment report was submitted to the Regulatory Scrutiny Board on 5 
March 2018 and the Board issued a second opinion, received on 12 March 2018, of positive 
with  reservations.  An  overview  of  the  Board's  recommendations  and  the  changes  made  is 
provided in Annex 1 of the impact assessment. 

The  different  policy  options  are  presented  and  discussed  in  section  5  of  the  impact 
assessment.  These  options  are  then  evaluated  and  combined  into  several  plausible 
differentiated  option  packages  (section  6.4).  A  preferred  option  package  is  presented  in 
Section 8. The methodology used and the assessment of the effectiveness and efficiency of the 
packages and of their underlying elements is described in Annex E. 

As  to  the  option  elements,  the  following  considerations  are  important.  A  detailed 
harmonisation  of  UTP  rules  in  the  EU  food  supply  chain  does  on  the  basis  of  the  evidence 
available, not seem warranted. A partial harmonisation approach with substantive UTP rules 
can  accommodate  Member  States’  stricter  UTP  rules  while  at  the  same  time  introducing  a 
common  minimum  standard  of  protection  in  the  EU  that  supports  the  objective  of  reducing 
the occurrence of UTPs. 

A  general  clause  prohibiting  UTPs  would  provide  a  common  standard  of  protection  against 
UTPs in Member States. While it would be interpreted by authorities in Member States on a 
case-by-case basis it would entail expectations about a uniform application. A general clause 
could thus come to de facto imply a degree of harmonisation that could give rise to tension in 
relation  to  Member  States’  existing  regimes  which  often  rely  in  their  own  right  on  general 
national prohibitions. Prohibitions of specific UTPs - the approach taken in this proposal for a 
Directive  -  do  not  have  this  broad  de  facto  harmonising  effect.  Concretely  formulated 
prohibitions  targeting  specific  UTPs  will  also  reduce  legal  uncertainty  for  commercial 
transactions that may derive from a more general prohibition. Due to their specificity the rules 
aim  to  be  predictable  for  operators  and  to  be  workable  for  authorities  entrusted  with  their 
enforcement.  

It  is  necessary  to  distinguish  between  practices  that  are  foreseen  in  clear  and  unambiguous 
terms  in  the  supply  agreement  between  the  parties  before  the  transaction  has  started,  and 
practices that occur after the transaction has started without being agreed in advance in clear 
and  unambiguous  terms.  The  first  category  of  practices  is  likely  to  generate  efficiencies 
whereas the second category is unlikely to generate efficiencies for the parties. The definition 
of  certain  UTPs  in  this  proposal  therefore  accommodates  contractual  arrangements  between 
parties unless they cannot reasonably be seen as creating efficiencies, for instance if they give 
vague and unspecified powers to the stronger party to unilaterally decide on such practices at 
a  point  in  time  after  the  transaction  has  started  (unpredictability)  or  because  some  practices 
are by their nature unfair.  

The proposed UTP rules focus on products listed in Annex I TFEU and being for food use as 
well as processed agricultural products traded along the food supply chain, thus covering all 
traded food products. Purchases of such products by non-SME buyers in the chain will have 
to  respect  the  EU’s  UTP  rules.  This  comprehensive  scope  is  consistent  with  the  SCI’s 
approach and with UTP measures in Member States. Only covering agricultural products as 
listed  in  Annex  I  would  risk  creating  distortions  in  the  supply  chain  that  could  ultimately 
affect negatively the trade in agricultural products and agricultural producers. 

A  targeted  protection  of  small  and  medium  suppliers  in  the  food  supply  chain  is  justified 
because they are often the ones who cannot defend themselves against UTPs due to their lack 
of  bargaining  power.  There  also  is  a  risk  of  negative  unintended  consequences  concerning 
measures  affecting  the  contractual  relationships  between  larger  operators.  Therefore,  even 
though  in  the  impact  assessment  UTPs  are  defined  in  terms  of  absolute  fairness 

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considerations,  a  targeted protection is  more proportionate at  this stage. By the same token, 
the rules are to apply to non-small and medium-sized buyers in the food supply chain, those 
being the ones who may be able to use their bargaining power against smaller operators in a 
way that enables the use of UTPs. 

Certain procedural powers for authorities that are competent to monitor UTP rules – and the 
existence of such an authority in the first place – have proven important for the perception of 
operators that effective enforcement exists and is apt to address the root causes for those who 
have  been  faced  with  UTPs  not  to  seek  redress  (fear  factor).  Member  States  are  therefore 
required  to  designate  a  competent  authority  for  UTP  enforcement  that  is  given  certain 
minimum enforcement powers inspired by best practices in Member States’ existing regimes.  
A  coordination  mechanism  between  competent  authorities  should  accompany  the  EU  rules 
and ensure their coordinated application, and it should facilitate an exchange of best practices. 
Importantly,  it  should  also  collect  data  through  Member  State  reporting  that  can  inform  a 
future  review  of  the  measures.  The  Commission  would  facilitate  the  network  by  hosting 
annual meetings based on annual application reports submitted by Member States’ competent 
authorities. 

As regards the impacts of UTP rules, a precise quantitative estimate of the benefits that will 
accrue  to  operators  is  difficult  to  give.  However,  each  of  the  targeted  UTPs  has  a  clear 
negative  impact  on  their  bottom  line  through  the  undue  transfer  of  risk  and  generation  of 
uncertainty,  i.e.  through  costs  that  in  competitive  markets  would  not  be  part  of  their 
entrepreneurial  agency. Respondents  in  the  numerous  surveys  that  were  cited in  this  impact 
assessment almost all converge in their concern about the occurrence of UTPs and their harm, 
as  well  as  in  their  expectations  of  positive  effects  from  public  (EU)  UTP  rules  and  their 
effective  enforcement.  For  instance  in  the  UK  the  Grocery  Code  Adjudicator  reports  that  it 
has proven effective in reducing the occurrence UTPs. 

Estimates about the harm which UTPs cause are given in sections 2.5 and 6.2.1 of the impact 
assessment.  According  to  a  2013  survey  of  agricultural  producers  and  agricultural 
cooperatives based on a wide definition of UTPs, the estimated damage from UTPs amounted 
to over EUR 10 billion per year. Manufacturers of food products participating in a survey in 
2011 based on a wide definition of UTPs reported that their UTP-related costs amounted to 
0.5% of their turnover, which would be equivalent to EUR 4.4 billion if extrapolated to the 
overall food industry turnover in that year.   

The expected benefits of reducing the occurrence of UTPs could be considered costs for those 
stronger operators that have been applying them and that must no longer apply them due to 
UTP rules. However, due to societal considerations concerning fairness such benefits, which 
are a result of subjecting suppliers to UTPs, are not considered justified in the first place. It 
follows that the benefits resulting from the prohibition of UTPs outweigh this specific form of 
“harm”. 

The main costs for operators that are subjected to UTP rules will be compliance costs. In this 
context, compliance costs are generally costs that relate strictly to training and adherence to 
the rules. The proposed UTP rules do not require operators to carry out certain activities, they 
only prohibit certain behaviour that is deemed unfair. Moreover, at least the signatories of the 
SCI already incurred compliance costs to respect the SCI’s voluntary code. One large retailer, 
for example, has spent EUR 200,000 on one-off training measures of staff in relation to the 
SCI code of conduct. 

A  partial  harmonisation  of  UTP  rules  at  EU  level  is  expected  to  have  limited  effects  on 
consumers. In the open public consultation, operators do in general not claim that UTPs (e.g. 

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by  the  SCI)  lead  to  advantages  for  consumers,  for  example  through  lower  consumer  prices 
that  become  possible  through  margins  that  were  extracted  from  upstream  suppliers  through 
UTPs.  It  is  sometimes  argued  that  consumer  prices  are  negatively  affected  by  below-cost-
sales  prohibitions,  but  these  are  not  covered  by  the  impact  assessment.  The  consumer 
organisations which have reacted to the consultation encourage public UTP rules because they 
expect a longer-term negative effect of UTPs on consumer prices. 

Member  States  will  have  to  transpose  the  UTP  rules  into  national  law.  The  choice  of  a 
Directive leaves Member States a discretionary margin how to implement this transposition. 
Member  States  are  not  precluded  from  adopting  and  applying  on  their  territory  stricter 
national laws protecting small and medium sized buyers, as well as the suppliers specifically 
mentioned in this Directive. UTPs have been subject to a variety of heterogeneous legislative 
measures  in  Member  States  over  the  years.  Accordingly,  the  majority  of  Member  States 
already  provide  for  a  governance  framework  for  UTPs.  The  impact  of  EU  UTP  rules  on 
Member  State  legislation  will  depend  on  the  (scope  of  the)  existing  national  rules.  In  cases 
where  there  is  no  framework  at  all,  the  Member  State  would  have  to  implement  the  new 
measures, including designating an enforcement authority. Having said this and as shown by 
some  Member  States,  the  mandate  of  an  existing  authority  (e.g.  a  national  competition 
authority)  can  be  expanded.  Therefore,  such  implementation  costs  can  be  absorbed  to  some 
extent by current structures in Member States and therefore these costs would be limited. By 
way  of  illustration,  the  running  costs  of  the  UK  Grocery  Code  Adjudicator  stood  at  GBP 
1,786,000  in  the  2015/2016  financial  year,  and  at  GBP  622,000  in  the  2016/2017  financial 
year.  Most  of  the  difference  is  due  to  a  large-scale  investigation  into  one  retailer  in 
2015/2016. 

Finally,  UTP  rules  are  not  expected  to  have  a  significant  direct  impact  on  the  environment, 
although  operators  that  are  not  subject  to  UTPs  may  be  left  with  more  economic  margin  to 
invest in producing in environmentally sustainable and climate-friendly ways and to prevent 
food  waste,  or  they  may  feel  less  pressured  to  compensate  for  the  lost  margin  by  cutting 
corners when it comes to environmental and food safety legislation. 

• 

Regulatory fitness and simplification 

SMEs  are  expected  to  benefit  from  the  proposal.  While  SMEs  may  also  face  compliance 
costs,  this  was  not  an  issue  raised  in  the  answers  to  the  consultation.  Moreover,  voluntary 
rules like those of the SCI already apply regardless of size. 

• 

Fundamental rights 

Implementation  plans  and  monitoring,  evaluation  and  reporting  arrangements  The  EU  is 
committed to high standards of fundamental rights. A fair and effective system of protection 
against  UTPs  will  contribute  to  stakeholders’  ability  to  conduct  a  business  (see  Article  16 
Charter of Fundamental Rights of the European Union (CFR)). Union legislation must respect 
the rights enshrined in the Charter (Articles 51, 52 CFR). Enforcement powers therefore have 
to  be  shaped  in  a  manner  compatible  with  the  rights  of  defence  (Article  48  CFR),  e.g.  by 
providing  an  effective  remedy  against  the  decision  of  an  enforcement  authority  that  is 
imposing penalties. In particular for the confidential treatment of complaints, a balance must 
be struck in relation to the rights of defence.  

4. 

BUDGETARY IMPLICATIONS 

The  proposal  would  have  a  limited  impact  on  the  EU  budget.  It  would  entail  one  annual 
coordination meeting of Member States’ enforcement authorities in Brussels and the creation 
and management of a basic website for the information exchange by the Commission. 

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5. 

• 

OTHER ELEMENTS 

Implementation plans and monitoring, evaluation and reporting arrangements 

There are no relevant statistics available at EU level in the Eurostat database that could serve 
as  primary  sources  of  data  for  the  monitoring  and  evaluation  of  this  Directive.  Statistics  on 
producer,  processor  and  consumer  prices  collected  either  through  Eurostat  or  directly  in  the 
framework of the Common Organisation of the Markets, will be used by the Commission as a 
basis for econometric work in support of the monitoring and evaluation of the Directive.  

Monitoring  and  evaluation  will  therefore  rely  on  data  collected  in  the  framework  of  the 
present  Directive,  mainly  by  means  of  annual  reports  of  the  national  competent  authorities. 
Such reports will detail the activity of authorities on the application and  enforcement of the 
rules under this Directive, e.g. in terms of the number of complaints received (confidentially 
or not), the number of investigations launched (under own initiative or upon request) or the 
share  of  cases  resulting  in  findings  of  an  infringement.  The  annual  reports  will  also  cover 
concrete practices and experiences, with a view to facilitating the adoption of best practices. 
This  will  be  further  complemented  by  surveys  of  undertakings  in  the  EU  (from  agricultural 
producers to retailers) examining perceptions, as already carried out by some Member States 
and voluntary initiatives. Both experiences and perceptions are important factors influencing 
the behaviour of businesses in the Single Market. Finally, the Commission will also directly 
carry  out  or  commission  economic  studies  aiming  at  measuring  the  impact  of  the  different 
practices  concerned  by  national  rules  and  voluntary  initiatives  at  the  micro-  and 
macroeconomic level.  

According to the indicators identified in the impact assessment, the Commission will evaluate 
the effectiveness, efficiency, relevance, coherence and EU added value of this policy, as well 
as  possibly  other  relevant  evaluation  criteria  such  as  utility,  equity  and  acceptability  or 
coordination  (with  Member  State  rules  and  voluntary  self-regulation  initiatives).  These 
indicators  can  serve  as  the  basis  for  the  evaluation  that  should  be  presented  no  sooner  than 
three  years  after  the  application  of  the  Directive,  to  ensure  that  a  sufficient  data-set  is 
available.  

An implementation plan is not required for this Directive, which has a limited scope, does not 
propose  full  harmonisation,  and  does  not  entail  particular  technical,  compliance  or  timing 
challenges. In addition, several support actions are provided for by the Directive itself, which 
lays down a cooperation mechanism between enforcement authorities and the setting-up of a 
website for this purpose. 

• 

Explanatory documents (for Directives) 

For the reasons given above in the section on implementation plans, the Commission will not 
request explanatory documents concerning the transposition from Member States.  

• 

Detailed explanation of the specific provisions of the proposal 

The proposed Directive consists of 14 Articles. 

Article  1  defines  the  subject  matter  of  the  Directive,  which  follows  a  partial  (minimum) 
harmonisation  approach  to  introduce  a  minimum  standard  of  protection  relating  to  UTPs 
across Member States. The protection applies only to SME suppliers in the food supply chain 
as regards their sales to buyers which are not SMEs. 

Article  2  provides  definitions  of  terms  recurrently  used  in  the  provisions  of  the  Directive: 
“buyer”,  “supplier”,  “small  and  medium  sized  enterprise”,  “food  products”,  and 

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”perishability”.  These  definitions  contribute  to  defining  the  scope  of  the  application  of  the 
Directive.  

In terms of products covered, the Directive covers 'food products', that is to say agricultural 
products as listed Annex I TFEU for the use as food, including fishery and aquaculture and 
processed  agricultural  products  for  food  use  –  i.e.  processed  food  products  which  are  not 
already covered in Annex I TFEU.  

The relation between suppliers and buyers in combination with the product coverage results in 
a scope of the measures that applies along the food supply chain and that covers UTPs that 
can  cascade  backwards  to  eventually  put  farmers  under  pressure,  whether  directly  or 
indirectly.  The  protection  covers  small  and  medium-sized  agricultural  producers  (including 
their  producer  organisations  such  as  cooperatives)  and  other  SME  suppliers  in  the  chain, 
while the UTP rules constrain the behaviour of buyers which are not SMEs. 

The proposal takes into account that UTPs are not necessarily always laid down in a written 
contract and might, in principle, occur at any stage of the commercial transaction between the 
buyer and the  supplier of the food supply chain, including ex post  after a contract  has been 
concluded.  

As the food supply chain consists of inter-linked vertical supply relationships, and UTPs that 
occur at subsequent chain levels may have a negative impact on agricultural producers and in 
general on the efficiency of the food supply chain, the proposal does not limit the notion of 
“supplier”  to  agricultural  producers  and  their  organisations,  but  covers  any  supplier,  i.e. 
including  manufacturers  and  distributors,  along  the  food  supply  chain  as  long  as  they  are 
small and medium sized undertakings.  

The  manufacturing  sector,  in  particular,  has  a  fair  share  of  SMEs.  The  coverage  of  the 
proposal takes into account that small and medium sized intermediaries which might not be 
able to resist UTPs used by non-SME buyers, may pass on costs resulting from these practices 
to  their  own  suppliers,  namely  agricultural  producers.  In  addition,  foreign  suppliers 
established outside the Union can invoke the prohibition if they sell to buyers established in 
the Union.  

Article  3  lists  prohibited  UTPs.  While  paragraph  2  makes  this  subject  to  the  contractual 
freedom  of  parties,  in  other  words  it  makes  the  UTP  qualification  subject  to  the  parties’ 
discretion to decide otherwise by virtue of an agreement, the UTPs listed in paragraph 1 are 
not subject to parties’ contractual discretion due to their “as such” unfair nature.  

The group of practices in paragraph 1 covers the prohibition for buyers to pay their suppliers 
after 30 days, when the supply concerns perishable products. This provision will constitute a 
lex specialis for the food sector only for the provisions concerning the payment terms of the 
Late  Payments  Directive  that  is  applicable  to  all  sectors  of  the  economy.  This  group  also 
covers  short  notice  order  cancellation  for  perishable  products  and  unilateral  and  retroactive 
changes  in  the  terms  of  a  supply  agreement:  these  practices  are  expressions  of 
disproportionate allocation of risk in favour of the buyer, are manifestly unfair, and should be 
prohibited. 

Other practices that are unfair when applied without agreement may be acceptable and even 
lead  to  mutually  beneficial  efficiency  if  covered  by  an  agreement  between  the  parties. 
Therefore  these  practices  should  be  treated  differently  by  UTP  rules,  in  order  to  allow 
efficiency-enhancing practices resulting ultimately in appropriate supplies and prices. 

The terms of such an agreement have to be clear and not ambiguous. A vague agreement that 
would authorise one party to later determine the conditions concerning these practices would 

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be  unpredictable  and  cannot  therefore  be  seen  as  redeeming  such  later  determination  or 
practice and prevent the practice concerned from being qualified as a UTP.  

This  second  group  of  UTPs  includes  the  return of  unsold  or  wasted  products.  Payments  for 
stocking, displaying or listing food products of the supplier may yield efficiencies in favour of 
both contract partners and thus lead to win-win situations. This also applies to promotion and 
marketing  activities.  The  buyer  must  provide  the  supplier  with  a  payment  estimate  if  so 
requested.  In  the  case  of  marketing  and  stocking,  displaying  or  listing  activities  the  buyer 
must - on request - also provide the supplier with a cost estimate. 

They are acceptable if agreed by the parties and if objective and reasonable cost estimates are 
at the basis of the payment for stocking and listing products. Suppliers’ contributions to the 
promotion of products or the buyers’ marketing can also be efficient if agreed by the parties.  

Article  4  requires  Member  States  to  designate  a  competent  enforcement  authority  for  the 
prohibited  UTPs.  Existing  enforcement  authorities,  for  example,  in  the  area  of  competition 
law  (national  competition  authorities)  could  be  chosen  as  the  competent  authority  to  realise 
economies of scope. 

Article 5 deals with complaints and stipulates that the enforcement authority shall be able to 
deal  with  confidential  complaints  and  to  protect,  where  requested,  the  identity  of  the 
complainant.  Also  producer  organisations  and associations of  producer organisations  should 
be  able  to  file  a  complaint  with  the  enforcement  authority,  not  only  in  their  own  right  as  a 
contract  partner,  but  representing  their  members’  (or  their  members'  members)  interest  if 
these members are SMEs.  

Under  Article  6,  enforcement  authorities  are  vested  with  the  necessary  powers  to  start  an 
investigation on their own initiative or based on a complaint, to gather information, terminate 
an  infringement  and  to  impose  fines  and  publish  the  decisions  taken  to  achieve  a  deterrent 
effect. 

Coordination and cooperation between enforcement authorities is foreseen in Article 7. This 
covers annual meetings facilitated by the Commission and annual reports that the enforcement 
authorities will submit. To the extent possible, Member States’ enforcement authorities should 
provide each other mutual assistance in their investigations.  

Article  8  of  the  proposal  clarifies  that  Member  States  may  provide  for  additional  rules 
designed to combat UTPs going above and beyond this minimum Union standard as long as 
those rules respect the rules pertaining to the internal market. 

In Article 9 the reporting obligations of Member States are laid down. The provision foresees 
the possibility for the Commission to adopt an implementing act in this area of reporting that 
may specify useful modalities.  

Article  10  provides  for  the  committee  procedure  that  will  assist  the  Commission  in  this 
respect. 

Article  11  provides  for  an  evaluation  to  be  carried  out  by  the  Commission  no  sooner  than 
three  years  after  the  application  of  this  Directive  as  well  as  an  interim  report  on  the 
transposition of the Directive. 

Provisions  concerning  the  transposition  of  the  Directive  are  contained  in  Article  12.  The 
provisions are standard procedure for Directives.  

Article 13 is about the entry into force of the Directive. Finally, Article 14 stipulates that the 
Directive is addressed to Member States. 

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2018/0082 (COD) 

Proposal for a 

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

on unfair trading practices in business-to-business relationships in the food supply chain 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 43(2) thereof, 

Having regard to the proposal from the European Commission, 

After transmission of the draft legislative act to the national parliaments, 
Having regard to the opinion of the European Economic and Social Committee7,  
Having regard to the opinion of the Committee of the Regions8,  

Acting in accordance with the ordinary legislative procedure, 

Whereas: 

(1) 

(2) 

7 
8 
9 

10 

11 

Three Commission  communications  since 20099 have  focused on the working  of the 
food supply chain, including the occurrence of unfair trading practices. Unfair trading 
practices  are  in  that  context  defined  as  practices  that  grossly  deviate  from  good 
commercial  conduct,  are  contrary  to  good  faith  and  fair  dealing  and  are  unilaterally 
imposed  by  one  trading  partner  on  another.  The  Commission  suggested  desirable 
features for national and voluntary governance frameworks of unfair trading practices 
in  the  food  supply  chain.  Not  all  of  those  features  have  become  part  of  the  legal 
framework  and  voluntary  governance  regimes  in  Member  States,  leaving  the 
occurrence of such practices still in the focus of the political debate in the Union. 
In June 2016, a European Parliament resolution10 invited the Commission to submit a 
proposal  for  a  Union  legal  framework  concerning  unfair  trading  practices.  In 
December 2016, the Council invited the Commission to undertake, in a timely manner, 
an  impact  assessment  with  a  view  to  proposing  a  Union  legal  framework  or  non-
legislative  measures  to  address  unfair  trading  practices11.  An  impact  assessment  has 

OJ C , , p. . 
OJ C , , p. . 
Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  the  European 
Economic and Social Committee and the Committee of the Regions, A better functioning of the food 
supply chain, COM(2009) 591. 
Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  the  European 
Economic and Social Committee and the Committee of the Regions, Tackling unfair trading practices in 
the business-to-business food supply chain, COM(2014)472 final. 
Report  from  the  Commission  to  the  European  Parliament  and  the  Council  on  unfair  business-to-
business trading practices in the food supply chain, COM(2016)032 final. 
European  Parliament  resolution  of  7  June  2016  on  unfair  trading  practices  in  the  food  supply  chain 
(2015/2065(INI)). 
Council Conclusions of  12 December  2016, Strengthening  farmers’  position  in  the food  supply chain 
and tackling unfair trading practices.  

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been prepared by the Commission which was preceded by an open public consultation 
as well as targeted consultations. 

(3) 

Different  operators  are  active  in  the  food  supply  chain  at  the  stages  of  production, 
processing, marketing, distribution and retail of food products. The chain is by far the 
most  important  channel  for  bringing  food  products  from  “farm  to  fork”.  Those 
operators  trade  food  products,  that  is  to  say  primary  agricultural  products,  including 
fishery and aquaculture products, as listed in Annex I to the Treaty for use as food, and 
other food products not listed in that Annex but processed from agricultural products 
for use as food.   

(4)  While  business  risk  is  inherent  in  all  economic  activity,  agricultural  production  is 
particularly fraught with uncertainty due to its reliance on biological processes, since 
agricultural products are to a greater or lesser extent perishable and seasonable, and its 
exposure to weather conditions. In an agricultural policy environment that is distinctly 
more market-oriented than in the past,  protection against  unfair  trading practices has 
become more important for operators active in the food supply chain and in particular 
for agricultural producers and their organisations.  

(5) 

(6) 

(7) 

The number and size of operators vary across the different stages of the food supply 
chain. Differences in bargaining power relate to the different levels of concentration of 
operators  and  can  enable  the  unfair  exercise  of  bargaining  power  by  using  unfair 
trading  practices.  Unfair  trading  practices  are  in  particular  harmful  for  small  and 
medium-sized operators in the food supply chain. Agricultural producers, who supply 
primary agricultural products, are largely small and medium-sized. 

A majority of all Member States, but not all of them, have specific national rules that 
protect  suppliers  against  unfair  trading  practices  occurring  in  business-to-business 
relationships  in  the  food  supply  chain.  Where  reliance  on  contract  law  or  self-
regulatory  initiatives  is  possible,  fear  of  retaliation  against  a  complainant  limits  the 
practical value of these forms of redress. Certain Member States, which have specific 
rules  on  unfair  trading  practices  in  place,  therefore  entrust  administrative  authorities 
with  their  enforcement.  However,  Member  States’  unfair  trading  practices  rules  -  to 
the extent they exist - are characterised by significant divergence. 

A  minimum  Union  standard  of  protection  against  certain  manifestly  unfair  trading 
practices  should  be  introduced  to  reduce  the  occurrence  of  such  practices  and  to 
contribute  to  ensuring  a  fair  standard  of  living  for  agricultural  producers.  It  should 
benefit  all  agricultural  producers  or  any  natural  or  legal  person  that  supplies  food 
products, including producer organisations and associations of producer organisations, 
provided that all those persons meet the definition of micro, small and medium-sized 
enterprises  set  out  in  the  Annex  to  Commission  Recommendation  2003/361/EC12. 
Those  micro,  small  or  medium  suppliers  are  particularly  vulnerable to  unfair  trading 
practices  and  least  able  to  weather  them  without  negative  effects  on  their  economic 
viability. As the financial pressure on small and medium-sized enterprises caused by 
unfair  trading  practices  often  passes  through  the  chain  and  reaches  agricultural 
producers,  rules  on  unfair  trading  practices  should  also  protect  small  and  medium-
sized  intermediary  suppliers  at  the  stages  downstream  of  primary  production. 
Protection  of  intermediary  suppliers  should  also  avoid  unintended  consequences 
(notably  in  terms  of  unduly  raising prices)  of  trade  diversion  away  from  agricultural 
producers  and  their  associations,  who  produce  processed  products,  to  non-protected 
suppliers. 

12 

OJ L 124, 20.5.2003, p. 36. 

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(8) 

(9) 

Suppliers established outside the Union should be able to rely on the Union minimum 
standard  when  they  sell  food  products  to  buyers  established  in  the  Union  to  avoid 
unintended distorting effects resulting from the protection of suppliers in the Union.  

The relevant rules should apply to business conduct by larger, that is to say non-small 
and  medium-sized,  operators  in  the  food  supply  chain  as  they  are  the  ones  who 
normally  possess  stronger  relative  bargaining  power  when  trading  with  small  and 
medium-sized suppliers.  

(10)  As a majority of Member States already have national rules on unfair trading practices, 
albeit diverging, it is appropriate to use the tool of a Directive to introduce a minimum 
protection standard under Union law.  This should enable Member States to integrate 
the  relevant  rules  into  their  national  legal  order  in  such  a  way  as  to  bring  about  a 
cohesive regime. Member States should not be precluded from adopting and applying 
on  their  territory  stricter  national  laws  protecting  small  and  medium-sized  suppliers 
and  buyers  against  unfair  trading  practices  occurring  in  business-to-business 
relationships in the food supply chain, subject to the limits of Union law applicable to 
the functioning of the internal market. 

(11)  As unfair trading practices may occur at any stage of the sale of a food product, i.e. 
before,  during  or  after  a  sales  transaction,  Member  States  should  ensure  that  the 
provisions of this Directive should apply to such practices whenever they occur.  

(12)  When  deciding  whether  an  individual  trading  practice  is  considered  unfair  it  is 
important  to  reduce  the  risk  of  limiting  the  use  of  fair  and  efficiency-creating 
agreements  agreed  between  parties.  As  a  result,  it  is  appropriate  to  distinguish 
practices  that  are  foreseen  in  clear  and  unambiguous  terms  in  supply  agreements 
between  parties  from  practices  that  occur  after  the  transaction  has  started  without 
being agreed in advance in clear and unambiguous terms, so that only unilateral and 
retrospective changes to those relevant terms of the supply agreement are prohibited. 
However,  certain  trading  practices  are  considered  as  unfair  by  their  very  nature  and 
should not be subject to the parties’ contractual freedom to deviate from them. 

(13) 

In  order  to  ensure  an  effective  enforcement  of  the  prohibitions  laid  down  in  this 
Directive,  Member  States  should  designate  an  authority  that  is  entrusted  with  their 
enforcement. The authority should be able to act either on its own initiative or by way 
of complaints by parties affected by unfair trading practices in the food supply chain. 
Where a complainant requests that his identity remain confidential because of fear of 
retaliation,  the  enforcement  authorities  of  the  Member  States  should  honour  such  a 
request.  

(14)  Complaints by producer organisations or associations of such organisations can serve 
to  protect  the  identity  of  individual  members  of  the  organisation  who  are  small  and 
medium-sized  suppliers  and  consider  themselves  exposed  to  unfair  trading  practices. 
Enforcement authorities of the Member States should therefore be able to accept and 
act  upon  complaints  by  such  entities  while  protecting  the  procedural  rights  of  the 
defendant.  

(15)  The enforcement authorities of the Member States should have the necessary powers 
that enable them to effectively gather any factual information by way of information 
requests. They should have the power to order the termination of a prohibited practice, 
where applicable. The existence of a deterrent, such as the power to impose fines and 
the  publication  of  investigation  results,  can  encourage  behavioural  change  and  pre-
litigation solutions between the parties and should therefore be part of the powers of 

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the  enforcement  authorities.  The  Commission  and  the  enforcement  authorities  of  the 
Member  States  should  cooperate  closely  so  as  to  ensure  a  common  approach  with 
respect  to  the  application  of  the  rules  set  out  in  this  Directive.  In  particular,  the 
enforcement authorities should provide each other mutual assistance, for example by 
sharing  information  and  assisting  in  investigations  which  have  a  cross-border 
dimension. 

(16)  To  facilitate  effective  enforcement,  the  Commission  should  help  organise  meetings 
between the enforcement authorities of the Member States where best practices can be 
exchanged and relevant information can be shared. The Commission should establish 
and manage a website to facilitate those exchanges.  

(17)  The rules laid down in this Directive should not impair the possibility for the Member 
States to maintain existing rules that are further-reaching or to adopt such rules in the 
future, subject to the limits of Union law applicable to the functioning of the internal 
market. The rules would apply alongside voluntary governance measures. 

(18)  The Commission should have an overview of the implementation of this Directive in 
the  Member  States.  In  addition,  the  Commission  should  be  able  to  assess  the 
effectiveness of this Directive. To this end, the enforcement authorities of the Member 
States  should  submit  annual  reports  to  the  Commission.  In  order  to  ensure  uniform 
conditions  for  the  implementation  of  the  reporting  obligation,  implementing  powers 
should  be  conferred  on  the  Commission.  Those  powers  should  be  exercised  in 
accordance with Regulation (EU) No 182/2011 of the European Parliament and of the 
Council13. The Committee for the Common Organisation of the Agricultural Markets 
should assist the Commission in this procedure.  

(19) 

In the interest of an effective implementation of the policy in respect of unfair trading 
practices  in  business-to-business  relationships  in  the  food  supply  chain,  the 
Commission should review the application of this Directive and submit a report to the 
European Parliament, the Council, the European Economic and Social Committee and 
the  Committee  of  the  Regions.  The  review  should  also  pay  particular  attention  to 
whether protection of small and medium-sized buyers of food products in the supply 
chain  –  in  addition  to  the  protection  of  small  and  medium  sized  suppliers  –  in  the 
future would be justified, 

HAVE ADOPTED THIS DIRECTIVE: 

Article 1 

Subject matter and scope 

1. 

2. 

13 

This  Directive  establishes  a  minimum  list  of  prohibited  unfair  trading  practices 
between buyers and suppliers in the food supply chain and lays down minimum rules 
concerning  their  enforcement  and  arrangements  for  the  coordination  between 
enforcement authorities. 

This  Directive  applies  to  certain  unfair  trading  practices  which  occur  in  relation  to 
the sales of food products by a supplier that is a small and medium-sized enterprise 
to a buyer that is not a small and medium-sized enterprise.  

Regulation  (EU)  No  182/2011  of  the  European  Parliament  and  of  the  Council  of  16  February  2011 
laying down the rules and general principles concerning mechanisms for control by Member States of 
the Commission's exercise of implementing powers (OJ L 55, 28.2.2011, p. 13). 

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3. 

This  Directive  shall  apply  to  supply  agreements  concluded  after  the  date  of 
applicability  of  the  provisions  transposing  this  Directive  referred  to  in  the  second 
subparagraph of Article 12(1).   

Article 2 

Definitions 

For the purposes of this Directive, the following definitions apply: 

(a) 

(b) 

“buyer” means any natural or legal person established in the Union who buys 
food products by way of trade. The term "buyer" may include a group of such 
natural and legal persons; 

“supplier”  means  any  agricultural  producer  or  any  natural  or  legal  person, 
irrespective of their place of establishment, who sells food products. The term 
“supplier” may include a group of such agricultural producers or such natural 
and  legal  persons,  including  producer  organisations  and  associations  of 
producer organisations; 

 (c)  “small  and medium-sized enterprise”  means an enterprise within the meaning 
of  the definition  of micro,  small  and medium-sized enterprises set out in  the 
Annex to Commission Recommendation 2003/361/EC14;  

(d) 

(e) 

“food  products”  means  products  listed  in  Annex  I  to  the  Treaty  intended  for 
use  as  food  as  well  as  products  not  listed  in  that  Annex,  but  processed  from 
those products for use as food;  

“perishable  food  products”  means  food  products  that  will  become  unfit  for 
human  consumption  unless  they  are  stored,  treated,  packaged  or  otherwise 
conserved to prevent them from becoming unfit. 

Article 3 

Prohibition of unfair trading practices 

1. 

Member States shall ensure that the following trading practices are prohibited:  

(a) 

a buyer pays a supplier for perishable food products later than 30 calendar days 
after the receipt of the supplier’s invoice or later than 30 calendar days after the 
date  of  delivery  of  the  perishable  food  products,  whichever  is  the  later.  This 
prohibition shall be without prejudice: 

-  to  the  consequences  of  late  payments  and  remedies  as  laid  down  in 

Directive 2011/7/EU; 

- to the option of a buyer and a supplier to agree on a value sharing clause 
within the meaning of Article 172 a) of Regulation (EU) No 1308/2013 of 
the European Parliament and of the Council15. 

14 

15 

Commission Recommendation 2003/361/EC of 6 May 2003 concerning the definition of micro, small 
and medium-sized enterprises (OJ L 124, 20.5/2003, p. 36). 
Regulation (EU) No 1308/2013 of the European Parliament and of the Council of 17 December 2013 
establishing  a  common  organisation  of  the  markets  in  agricultural  products  and  repealing  Council 

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(b) 

(c) 

a buyer cancels  orders of perishable food products at such short  notice that  a 
supplier cannot reasonably be expected to find an alternative to commercialise 
or use these products;  

a  buyer  unilaterally  and  retroactively  changes  the  terms  of  the  supply 
agreement  concerning  the  frequency,  timing  or  volume  of  the  supply  or 
delivery, the quality standards or the prices of the food products;  

(d) 

a  supplier  pays  for  the  wastage  of  food  products  that  occurs  on  the  buyer's 
premises and that is not caused by the negligence or fault of the supplier. 

2. 

Member States shall ensure that the following trading practices are prohibited, if they 
are  not  agreed  in  clear  and  unambiguous  terms  at  the  conclusion  of  the  supply 
agreement:  

(a) 

(b) 

(c) 

a buyer returns unsold food products to a supplier; 

a buyer charges a supplier payment as a condition for the stocking, displaying 
or listing food products of the supplier;  

a supplier pays for the promotion of food products sold by the buyer. Prior to a 
promotion  and  if  that  promotion  is  initiated  by  the  buyer,  the  buyer  shall 
specify  the  period  of  the  promotion  and  the  expected  quantity  of  the  food 
products to be ordered; 

(d) 

a supplier pays for the marketing of food products by the buyer.  

If a payment is requested by the buyer for the situations described in points (b), (c) 
and  (d)  of  paragraph  2,  the  buyer  shall,  if  requested  by  the  supplier,  provide  the 
supplier  with  an  estimate  of  the  payments  per  unit  or  overall,  whichever  is 
appropriate, and insofar as the situations described in points (b) and (d) of paragraph 
2 are concerned also an estimate of the costs and the basis for such estimate.  

Member  States  shall  ensure  that  the  prohibitions  laid  down  in  paragraphs  1  and  2 
constitute  overriding  mandatory  provisions  which  are  applicable  to  any  situation 
falling within their scope, irrespective of the law otherwise applicable to the supply 
agreement between the parties. 

3. 

4. 

Article 4 

Designated enforcement authority 

Each Member State shall designate a public authority to enforce the prohibitions laid down in 
Article 3 at national level ("enforcement authority"). 

Article 5 

Complaints and confidentiality 

1. 

A  supplier  shall  address  a  complaint  to  the  enforcement  authority  of  the  Member 
State in which the buyer suspected to have engaged in a prohibited trading practice is 
established. 

Regulations (EEC) No 922/72, (EEC) No 234/79, (EC) No 1037/2001 and (EC) No 1234/2007 (OJ L 
347, 20.12.2013, p. 671). 

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2. 

3. 

4. 

Producer  organisations  or  associations  of  producer  organisations  whose  member(s) 
or  member(s)  of  their  members  consider(s)  that  they  are  affected  by  a  prohibited 
trading practice shall have the right to submit a complaint.  

The  enforcement  authority  shall  ensure,  if  so  requested  by  the  complainant,  the 
confidentiality  of  the  identity  of  the  complainant  and  any  other  information,  in 
respect  of  which  the  complainant  considers  disclosure  harmful  to  his  interests.  The 
complainant shall identify such information in a possible request for confidentiality.  

Where  the  enforcement  authority  considers  that  there  are  insufficient  grounds  for 
acting on a complaint, it shall inform the complainant about the reasons.  

Article 6 

Powers of the enforcement authority 

Member  States  shall  ensure  that  the  enforcement  authority  is  properly  equipped  and  shall 
confer on it the following powers:  

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

1. 

2. 

to initiate and conduct investigations on its own initiative or based on a complaint; 

to require buyers and suppliers to provide all necessary information in order to carry 
out investigations on the prohibited trading practices;   

to  take  a  decision  establishing  an  infringement  of  the  prohibitions  laid  down  in 
Article  3  and  require  the  buyer  to  terminate  the  prohibited  trading  practice.  The 
authority  may  abstain  from  taking  any  such  decision,  if  such  decision  would  risk 
revealing the identity of a complainant or disclosing any other information in respect 
of which the complainant considers disclosure harmful to his interests, provided that 
the complainant has identified that information in accordance with Article 5(3); 

to  impose  a  pecuniary  fine  on  the  author  of  the  infringement.  The  fine  shall  be 
effective,  proportionate  and  dissuasive  taking  into  account  the  nature,  duration  and 
gravity of the infringement;  

to publish its decisions relating to points (c) and (d);  

to inform buyers and suppliers about its activities, by way of annual reports, which 
shall  inter  alia  describe  the  number  of  complaints  received  and  the  investigations 
initiated and closed by it. For each investigation, the report shall contain a summary 
description of the matter and the outcome of the investigation.  

Article 7 

Cooperation between enforcement authorities 

Member  States  shall  ensure  that  enforcement  authorities  cooperate  effectively  with 
each  other  and  provide  each  other  mutual  assistance  in  investigations  that  have  a 
cross-border dimension. 

The  enforcement  authorities  shall  meet  once  per  year  to  discuss  the  application  of 
this Directive on the basis of the annual reports referred to in Article 9(1) and best 
practices in the area it covers. The Commission shall facilitate those meetings.  

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3. 

The  Commission  shall  establish  and  manage  a  website  that  provides  for  the 
possibility  of  information  exchange  between  the  enforcement  authorities  and  the 
Commission, in particular in relation to the annual meetings.  

Article 8 

National rules 

Member  States  may  provide  for  rules  designed  to  combat  unfair  trading  practices  going 
beyond those set out in Articles 3, 5, 6 and 7, provided that such national rules are compatible 
with the rules on the functioning of the internal market. 

Article 9 

Reporting by Member States 

1. 

By 15 March of each year, Member States shall send to the Commission a report on 
unfair  trading  practices  in  business-to-business  relationships  in  the  food  supply 
chain. That report shall contain, in particular, all relevant data on the application and 
enforcement of the rules under this Directive in the Member State concerned in the 
previous year. 

2. 

The Commission may adopt implementing acts laying down: 

(a) 

(b) 

(c) 

rules on the information necessary for the application of paragraph 1; 

arrangements  for  the  management  of  the  information  to  be  sent  and  rules  on 
content and form; 

arrangements for transmitting, or making information and documents available, 
to the Member States, international organisations, the competent authorities in 
third countries, or the public, subject to the protection of personal data and the 
legitimate interest of agricultural producers and undertakings in the protection 
of their business secrets. 

Those  implementing  acts  shall  be  adopted  in  accordance  with  the  examination 
procedure referred to in Article 10(2). 

Article 10 

Committee procedure 

1. 

2. 

The Commission shall be assisted by the Committee for the Common Organisation 
of  the  Agricultural  Markets  established  by  Article  229  of  Regulation  (EU)  No 
1308/2013. That Committee shall be a committee within the meaning of Regulation 
(EU) No 182/2011. 

Where  reference  is  made  to  this  paragraph,  Article  5  of  Regulation  (EU)  No 
182/2011 shall apply. 

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Article 11  

Evaluation 

1.  

2.  

3.  

1. 

No  sooner  than  three  years  after  the  date  of  application  of  this  Directive,  the 
Commission  shall  carry  out  an  evaluation  of  this  Directive  and  present  a  report  on 
the  main  findings  to  the  European  Parliament,  the  Council  and  the  European 
Economic and Social Committee and the Committee of the Regions.  

Member States shall provide the Commission with the information necessary for the 
preparation of that report. 

Six  months  after  the  date  of  transposition  of  this  Directive,  the  Commission  shall 
present an intermediary report on the state of its transposition and implementation to 
the European Parliament and to the Council as well as to the European Economic and 
Social Committee and the Committee of the Regions. 

Article 12 

Transposition 

Member States shall adopt and publish, by six months after the entry into force of the 
Directive at the latest, the laws, regulations and administrative provisions necessary 
to comply with this Directive. They shall forthwith communicate to the Commission 
the text of those provisions. 

They  shall  apply  those  provisions  from  12  months  after  entry  into  force  of  this 
Directive. 

When  Member  States  adopt  those  provisions,  they  shall  contain  a  reference  to  this 
Directive  or  be  accompanied  by  such  a  reference  on  the  occasion  of  their  official 
publication. Member States shall determine how such reference is to be made. 

2. 

Member States shall communicate to the Commission the text of the main provisions 
of national law which they adopt in the field covered by this Directive. 

Article 13 

Entry into force  

This  Directive  shall  enter  into  force  on  the  fifth  day  following  that  of  its  publication  in  the 
Official Journal of the European Union. 

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Article 14 

Addressees 

This Directive is addressed to the Member States. 

Done at Brussels, 

For the European Parliament 
The President 

For the Council 
The President 

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LEGISLATIVE FINANCIAL STATEMENT 

1. 

FRAMEWORK OF THE PROPOSAL/INITIATIVE  

1.1.  Title of the proposal/initiative  

1.2.  Policy area(s) concerned 

1.3.  Nature of the proposal/initiative  

1.4.  Objective(s)  

1.5.  Grounds for the proposal/initiative  

1.6.  Duration and financial impact  

1.7.  Management mode(s) planned  

2. 

MANAGEMENT MEASURES  

2.1.  Monitoring and reporting rules  

2.2.  Management and control system  

2.3.  Measures to prevent fraud and irregularities  

3. 

ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE  

3.1.  Heading(s)  of  the  multiannual  financial  framework  and  expenditure  budget 
line(s) affected  

3.2.  Estimated impact on expenditure  

3.2.1. Summary of estimated impact on expenditure  

3.2.2. Estimated impact on operational appropriations  

3.2.3. Estimated impact on appropriations of an administrative nature 

3.2.4. Compatibility with the current multiannual financial framework 

3.2.5. Third-party contributions  

3.3.  Estimated impact on revenue

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LEGISLATIVE FINANCIAL STATEMENT 

1. 

FRAMEWORK OF THE PROPOSAL/INITIATIVE  

1.1. 

Title of the proposal/initiative  

DIRECTIVE  OF  THE  EUROPEAN  PARLIAMENT  AND  OF  THE  COUNCIL 
concerning  unfair  trading  practices  (UTPs)  in  business-to-business  relationships  in 
the food supply chain. 

1.2. 

Policy area(s) concerned  

Agricultural Policy 

Competition Policy 

1.3. 

Nature of the proposal/initiative  

X The proposal/initiative relates to a new action  

  The  proposal/initiative 
project/preparatory action16  

relates 

to  a  new  action 

following  a  pilot 

 The proposal/initiative relates to the extension of an existing action  

 The proposal/initiative relates to an action redirected towards a new action  

1.4. 

Objective(s) 

1.4.1.  The  Commission's  multiannual 

strategic  objective(s) 

targeted  by 

the 

proposal/initiative  

The  proposal  aims  at  limiting  unfair  trading  practices  that  result  from  unequal 
bargaining  power  in  the  food  supply  chain  how,  in  order  to  contribute  to  the  4th 
Juncker  priority  for  “a  deeper  and  fairer  internal  market  with  a  strengthened 
industrial  base”  which  is  translated  into  the  general  objective  of  “viable  food 
production” of the Common Agricultural Policy.  

1.4.2. 

Specific objective(s) 

Specific objective No 

Maintain market stability 

Enhance agricultural producers’ income 

Improve agricultural competitiveness 

16 

As referred to in Article 54(2)(a) or (b) of the Financial Regulation. 

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1.4.3.  Expected result(s) and impact 

Specify the effects which the proposal/initiative should have on the beneficiaries/groups targeted. 

1. Reduce occurrence of UTPs 

2. Contribute to level playing field 

3. Enable effective redress 

Impact:  a  better  position  of  the  agricultural  producers  in  the  food  chain  having  a 
positive effect on the income of agricultural producers. 

1.4.4. 

Indicators of results and impact  

Specify the indicators for monitoring implementation of the proposal/initiative. 

Ad 1. Declared occurences of each UTP concerned by undertakings (share of firms 
declaring and frequency declared, perceived costs of UTP’s) 

Ad 1. Compliance costs for firms 

Ad 1. Potential effects of trade diversion to the detriment of protected parties 

Ad  2.  Alignment  of  application  of  UTP  rules  (e.g.  number  of  changes  to  national 
rules with a view to approximate practices)  

Ad 2. Number of best practices recommendations adopted 

Ad 2. Declared administrative costs for Members States 

Ad 2. Relative production and consumer price changes 

Ad 3. Number of complaints received (anonymously or not) 

Ad 3. Number of mediation meetings, if applicable 

Ad 3. Number of investigations launched (own initiative or upon request)  

Ad 3. Share of cases resulting in findings of an infringement 

1.5. 

Grounds for the proposal/initiative  

1.5.1.  Requirement(s) to be met in the short or long term  

This proposal aims at limiting UTPs in the food supply chain by ensuring a minimum 
level  of  protection  across  the  EU  through  a  framework  that  outlaws  the  most 
egregious UTPs and provides possibilities for redress. By removing an impediment 
to  efficiency,  the  proposal  would  also  improve  the  functioning  of  the  food  supply 
chain in general. 

1.5.2.  Added  value  of  Union  involvement  (it  may  result  from  different  factors,  e.g. 
coordination gains, legal certainty, greater effectiveness or complementarities). For 
the purposes of this point 'added value of Union involvement' is the value resulting 
from  Union  intervention  which  is  additional  to  the  value  that  would  have  been 
otherwise created by Member States alone. 

Reasons for action at European level (ex-ante)  

Article 39 of the Treaty on the Functioning of the European Union (TFEU) specifies 
that  the  common  agricultural  policy  shall  ensure  a  fair  standard  of  living  for  the 
agricultural  community.  Article  40  TFEU  stipulates  that  the  common  market 

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27 

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organisation shall exclude discrimination between agricultural producers. Article 43 
TFEU  specifies  that  the  common  market  organisation  shall  ensure  conditions  for 
trade within the Union similar to those existing in a national market.  

Most Member States put in place UTP rules, but took diverging approaches towards 
the problem and related measures are not harmonised; MS lack coordination mecha-
nisms, nor do they have incentives to self-align. To achieve only a minimum level of 
protection  against  UTPs  throughout  the  EU  and  ensure  a  level  playing  field  for  all 
producers, EU measures are needed 

Expected generated Union added value (ex-post) 

Minimum  protection  against  UTPs  in  the  food  supply  chain  across  Member  States 
and hence a better functioning and more efficient food supply chain. Level playing 
field for agricultural producers’. 

1.5.3.  Lessons learned from similar experiences in the past 

Buyers and suppliers can have unequal bargaining powers that may lead to UTPs that 
put  profits  of  affected  suppliers  under  pressure and  can  result in  a  misallocation  of 
resources, which reduces the efficiency of the food supply chain  

Agricultural  suppliers  are  particularly  vulnerable  because  they  are  often  dependent 
on  bigger  downstream  partners  to  get  their  products  to  consumers  and  long 
production lags and the perishability of many of their products limits their room for 
manoeuvre.  

The current proposal is the outcome of a longer discussion. In 2013, the Commission 
had  carried  out  a  public  consultation  on  the  topic,  and  in  2016  the  European 
Parliament,  the  Council,  and  the  European  Economic  and  Social  Committee  all 
called for action on UTPs. 

1.5.4.  Compatibility and possible synergy with other appropriate instruments 

The  proposal  complements  existing  EU  rules  on  unfair  commercial  practices  in 
business-to-consumer relationships; so far, there are no horizontal EU rules on UTPs 
between  businesses.  The  proposal  also  complements  other  areas  with  relevance  for 
operators  that  are  already  subject  to  common  rules,  such  as  competition,  state  aid, 
and marketing standards. 

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1.6. 

Duration and financial impact  

 Proposal/initiative of limited duration  

–    Proposal/initiative in effect from [DD/MM]YYYY to [DD/MM]YYYY  

–    Financial impact from YYYY to YYYY  

X Proposal/initiative of unlimited duration 

–  Implementation with a start-up period from YYYY to YYYY, 

–  followed by full-scale operation. 

1.7.  Management mode(s) planned17  

X Direct management by the Commission 

–  X by its departments, including by its staff in the Union delegations;  

–    by the executive agencies  

 Shared management with the Member States  

 Indirect management by entrusting budget implementation tasks to: 

–   third countries or the bodies they have designated; 

–   international organisations and their agencies (to be specified); 

–  the EIB and the European Investment Fund; 

–   bodies referred to in Articles 208 and 209 of the Financial Regulation; 

–   public law bodies; 

–   bodies governed by private law with a public service mission to the extent that 

they provide adequate financial guarantees; 

–   bodies governed by the private law of a Member State that are entrusted with 
the  implementation  of  a  public-private  partnership  and  that  provide  adequate 
financial guarantees; 

–    persons  entrusted  with  the  implementation  of  specific  actions  in  the  CFSP 

pursuant to Title V of the TEU, and identified in the relevant basic act. 

– 

If more than one management mode is indicated, please provide details in the ‘Comments’ section. 

Comments  

17 

Details of management modes and references to the Financial Regulation may be found on the 
BudgWeb site: 
https://myintracomm.ec.europa.eu/budgweb/EN/man/budgmanag/Pages/budgmanag.aspx  

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2. 

MANAGEMENT MEASURES  

2.1.  Monitoring and reporting rules  

Specify frequency and conditions. 

Once per year: 

Member  States  shall  send  by  15  March  of  each  year  to  the  European  Commission 
annual  reports  by  means  of  an  information  technology  based  system.  Reports  shall 
contain in particular all relevant data on the application and enforcement of the rules 
under this Directive. 

2.2.  Management and control system(s)  

2.2.1. 

Justification of the management mode(s), the funding implementation mechanism(s), 
the payment modalities and the control strategy proposed 

The general risks as regards to the rules in the proposal that can be identified relate to 
the effectiveness of the proposal, and not as regards to the EU expenditure given the 
relatively insignificant amounts which are involved. 

Risks  may  be  linked  to  shortcomings  in  the  administrative  enforcement  authority, 
including handling of complaints and confidentiality, reporting by the Member States 
and supervision by the Commission. 

The  annual  reports,  annual  meeting  and  dedicated  website  should  ensure  proper 
follow up as to the implementation of the Directive in the EU member States. 

2.2.2. 

Information concerning the risks identified and the internal control system(s) set up 
to mitigate them 

Expenditure  entailed  by  this  proposal  shall  be  implemented  by  the  Commission 
under  direct  management,  in  accordance  with  the  principles  set  out  in  article  32  of 
Regulation  (EU,  Euratom)  No  966/2012  on  the  financial  rules  applicable  to  the 
general budget of the Union – the Financial Regulation. 

As  required  by  the  Financial  Regulation,  the  Director  General  for  Agriculture  and 
Rural  Development  has  put  in  place  the  organisational  structure  and  the  internal 
control  processes  suited  to  the achievement  of  the  policy  and  control  objectives,  in 
accordance  with  the  internal  control  standards  adopted  by  the  Commission  and 
having  regard  to  the  risks  associated  with  the  environment  in  which  the  policy 
operates. 

2.2.3.  Estimation and justification of the cost-effectiveness of the controls (ratio of "control 
costs ÷ value of the related funds managed"), and assessment of the expected levels 
of risk of error (at payment & at closure)  

The controls of the legality and regularity of payments following the new directive 
will be covered by the existing provisions for direct management in the Commission. 

Expenditure entailed by this proposal will not lead to an increase in the error rate for 
the  European  Agricultural  Guarantee  Fund,  taking  into  account  the  insignificant 
amounts involved and the implementation mode (direct management). 

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2.3.  Measures to prevent fraud and irregularities  

Specify existing or envisaged prevention and protection measures, e.g. from the Anti-Fraud Strategy. 

The  Commission  shall  take  appropriate  measures  ensuring  that,  when  actions 
financed under this Regulation are implemented, the financial interests of the  Union 
are protected by the application of preventive measures against fraud, corruption and 
any  other  illegal  activities,  by  the  performance  of  effective  checks  and,  if 
irregularities are detected, by the recovery of the amounts wrongly paid as well as, 
where  appropriate,  by  effective,  proportional  and  deterrent  penalties,  in  accordance 
with  Article  325  of  the  Treaty  on  the  Functioning  of  the  European  Union,  with 
Council  Regulation  (EC)  No  2988/95  on  the  protection  of 
the  European 
Communities’  financial  interests,  and  with  title  IV  of  the  Financial  Regulation 
applicable to the general budget of the  Union. 

The  Commission  or  its  representatives  and  the  Court  of  Auditors  shall  have  the 
power of audit, on the basis of documents and on-the-spot, over all contractors and 
subcontractors  who  have  received  Union  funds.  OLAF  shall  be  authorised  to  carry 
out on-the spot checks and inspections on economic operators concerned directly or 
indirectly by such funding in accordance with the procedures laid down in Council 
Regulation (EC) No 2185/96 of 11 November 1996 with a view to establishing that 
there  has  been  fraud.  Decisions,  agreements  and  contracts  resulting  from  the 
implementation of the Regulation shall expressly entitle the Commission, including 
OLAF,  and  the  Court  of  Auditors  to  conduct  such  audits,  on-the-spot  checks  and 
inspections. 

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3. 

3.1. 

ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE  

Heading(s)  of  the  multiannual  financial  framework  and  expenditure  budget 
line(s) affected  

  Existing budget lines  

In order of multiannual financial framework headings and budget lines. 

Budget line 

Type of  
expenditure 

Contribution  

Heading of 
multiannual 
financial 
framework 

Heading  2:  Sustainable  growth  natural 
resources 
Heading 5: Administration 

Diff./Non-
18 
diff.

from 
EFTA 
countries
19 

from 
candidate 
20 
countries

from third 
countries 

within the 
meaning of 
Article 21(2)(b) of 
the Financial 
Regulation  

05 01 02 11 – External personnel and 
other management expenditure in support 
of the 'Agricultural and Rural 
Development' policy area – Other 
management expenditure 

05 08 09 – European Agricultural 
Guarantee Fund (EAGF) — Operational 
technical assistance 

Non-diff. 

NO 

NO 

NO 

NO 

18 
19 
20 

Diff. = Differentiated appropriations / Non-diff. = Non-differentiated appropriations. 
EFTA: European Free Trade Association.  
Candidate countries and, where applicable, potential candidates from the Western Balkans. 

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3.2. 

Estimated impact on expenditure  

3.2.1. 

Summary of estimated impact on expenditure  

Heading of multiannual financial  
framework  

2 

Sustainable growth natural resources 

EUR million (to three decimal places) 

DG AGRI 

 Operational appropriations  

Year 
202021 

Year 
2021 

Year 
2022 

Year 
2023 

Enter as many years as 
necessary to show the duration 
of the impact (see point 1.6) 

TOTAL 

05  08  09  –  European  Agricultural  Guarantee 
technical 
Fund 
assistance. 

(EAGF)  — Operational 

Commitments 

Payments 

(1) 

(2) 

0,05 

0,05 

0,05 

0,05 

0,05 

0,05 

0,05 

0,05 

As long as directive is in 
place 
As long as directive is in 
place 

To be indexed 

To be indexed 

Appropriations  of  an  administrative  nature  financed  from  the 
envelope of specific programmes22  

TOTAL appropriations 
for DG AGRI 

Commitments 

=1+3 

0,05 

0,05 

0,05 

0,05 

Payments 

=2+3 

0,05 

0,05 

0,05 

0,05 

As long as directive is in 
place 
As long as directive is in 
place 

To be indexed 

To be indexed 

(3) 

- 

- 

- 

- 

21 
22 

EN 

Year 2020 is the year in which implementation of the proposal/initiative starts. 
Technical and/or administrative assistance and expenditure in support of the implementation of EU programmes and/or actions (former ‘BA’ lines), indirect research, 
direct research. 

33 

EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
 TOTAL operational appropriations  

Commitments 

Payments 

  TOTAL  appropriations  of  an  administrative  nature 
financed from the envelope for specific programmes  

(4) 

(5) 

(6) 

0,05 

0,05 

0,05 

0,05 

0,05 

0,05 

0,05 

0,05 

- 

- 

- 

- 

TOTAL appropriations  
under HEADING 2 
of the multiannual financial framework 

Commitments 

=4+ 6 

0,05 

0,05 

0,05 

0,05 

Payments 

=5+ 6 

0,05 

0,05 

0,05 

0,05 

As long as directive is in 
place 
As long as directive is in 
place 

To be indexed 

To be indexed 

As long as directive is in 
place 
As long as directive is in 
place 

To be indexed 

to be indexed 

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34 

EN 

 
 
 
 
 
 
 
 
 
 
 
Heading of multiannual financial  
framework  

5 

‘Administrative expenditure’ 

Year 
2020 

Year 
2021 

Year 
2022 

Year 
2023 

Enter as many years as 
necessary to show the duration 
of the impact (see point 1.6)  

TOTAL 

EUR million (to three decimal places) 

DG: AGRI 

 Human resources  

  Other  administrative  expenditure  (1  meeting  per  year  with 
experts from enforcement authorities) 

0,215 

0,215 

0,215 

0,215 

0,017 

0,017 

0,017 

0,017 

As long as directive is in 
place 

As long as directive is in 
place 

To be indexed 

To be indexed 

TOTAL DG AGRI 

Appropriations  

0,232 

0,232 

0,232 

0,232 

0,232 

To be indexed 

TOTAL appropriations 
under HEADING 5 
of the multiannual financial framework  

(Total  commitments  = 
Total payments) 

0,232 

0,232 

0,232 

0,232 

0,23 

To be indexed 

Year 
202023 

Year 
2021 

Year 
2022 

Year 
2023 

Enter as many years as 
necessary to show the duration 
of the impact (see point 1.6) 

TOTAL 

EUR million (to three decimal places) 

TOTAL appropriations  
under HEADINGS 1 to 5 
of the multiannual financial framework  

Commitments 

0,282 

0,282 

0,282 

0,282 

Payments 

0,282 

0,282 

0,282 

0,282 

As long as directive is in 
plance 

As long as directive is is 
place 

To be indexed 

To be indexed 

23 

Year 2020 is the year in which implementation of the proposal/initiative starts. 

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35 

EN 

 
 
 
 
 
 
 
 
 
                                                 
3.2.2.  Estimated impact on operational appropriations  

–   

–  X 

The proposal/initiative does not require the use of operational appropriations  

The proposal/initiative requires the use of operational appropriations, as explained below: 

Indicate 
objectives and 
outputs  

 

24

Type

Aver
age 
cost 

Year 
2020 

Year 
2021 

Year 
2022 

Year 
2023 

OUTPUTS 

Commitment appropriations in EUR million (to three decimal places) 

Enter as many years as necessary to show the 
duration of the impact (see point 1.6) 

TOTAL 

o
N

Cost  N

o

Cost 

o
N

Cost 

o
N

Cost  N

o

Cost  N

o

Cost  N

o

Cost 

Total 
No 

Total 
cost 

For all three SPECIFIC 

OBJECTIVE’s

25

Construction and 
maintenance  of  
of website 

Use  of 
website 

0,05 

1 

0,05 

1 

0,05 

1 

0,05 

Subtotal for specific objectives 

1 

0,05 

1 

0,05 

TOTAL COST 

1 

0,05 

1 

0,05 

1 

1 

0,05 

0,05 

1 

1 

1 

0,05 

As long as directive exists 

0,05 

As long as directive exists 

0,05 

As long as directive exists 

To be 
indexed 

To be 
indexed 

To be 
indexed 

24 
25 

EN 

Outputs are products and services to be supplied (e.g.: number of student exchanges financed, number of km of roads built, etc.). 
As described in point 1.4.2. ‘Specific objective(s)…’ The website is dedicated to exchange information between MS authorities and the Commission services and as 
such contributes to improving the farmers position in the food chain across the EU, improving their competitiveness, enhacing their income and maintain market 
stability. 

36 

EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
3.2.3.  Estimated impact on appropriations of an administrative nature 

3.2.3.1.  Summary  

–   

The proposal/initiative does not require the use of appropriations of an 

administrative nature  

–  X 

The  proposal/initiative  requires  the  use  of  appropriations  of  an 

administrative nature, as explained below: 

 EUR million (to three decimal places) 

Year 
26
2020 

Year 
2021 

Year 
2022 

Year 
2023 

Enter as many years as necessary to show the 
duration of the impact (see point 1.6) 

TOTAL 

HEADING 5 
of the multiannual 
financial framework 

Human resources  

0,215 

0,215 

0,215 

0,215 

As long as directive is in place 

0,017 

0,017 

0,017 

0,017 

As long as directive is in place 

0,232 

0,232 

0,232 

0,232 

0,232 

Other administrative 
expenditure  

Subtotal HEADING 5 
of the multiannual 
financial framework  

27 

Outside HEADING 5
of the multiannual 
financial framework  

Human resources  

Other expenditure  
of an administrative 
nature 

Subtotal  
outside HEADING 5 
of the multiannual 
financial framework  

To be 
indexed 

To be 
indexed 

To be 
indexed 

TOTAL 

0,232 

0,232 

0,232 

0,232 

0,232 

To be 
indexed 

The  appropriations  required  for  human  resources  and  other  expenditure  of  an  administrative  nature  will  be  met  by 
appropriations from the DG that are already assigned to management of the action and/or have been redeployed within the 
DG,  together  if  necessary  with  any  additional  allocation  which  may  be  granted  to  the  managing  DG  under  the  annual 
constraints
the 
allocation 

budgetary 

procedure 

light 

and 

of 

in 

26 
27 

Year 2020 is the year in which implementation of the proposal/initiative starts. 
Technical  and/or  administrative  assistance  and  expenditure  in  support  of  the  implementation  of 
EU programmes and/or actions (former ‘BA’ lines), indirect research, direct research. 

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37 

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3.2.3.2.  Estimated requirements of human resources 

–   

–  X 

The proposal/initiative does not require the use of human resources.  

The  proposal/initiative  requires  the  use  of  human  resources,  as 

explained below:  

Estimate to be expressed in full time equivalent units 

Year 
2020 

Year 
2021 

Year 
2022 

Year 
2023 

Enter as many years as necessary to show the duration 
of the impact (see point 1.6) 

 Establishment plan posts (officials and temporary staff) 

05 01 01 01 (Headquarters and Commission’s 
Representation Offices) 

1,5 

1,5 

1,5 

1,5  As long as directive is in place 

XX 01 01 02 (Delegations) 

XX 01 05 01 (Indirect research) 

10 01 05 01 (Direct research) 

 External staff (in Full Time Equivalent unit: FTE)

28

XX 01 02 01 (AC, END, INT from the ‘global 
envelope’) 

XX 01 02 02 (AC, AL, END, INT and JED in the 
delegations) 

XX 01 04 yy 

29

- at Headquarters 

- in Delegations  

XX 01 05 02 (AC, END, INT - Indirect research) 

10 01 05 02 (AC, END, INT - Direct research) 

Other budget lines (specify) 

TOTAL 

1,5 

1,5 

1,5 

1,5 

As long as directive is in 
place 

XX is the policy area or budget title concerned. 

The human resources required will be met by staff from the DG who are already assigned to management of the 
action  and/or  have  been  redeployed  within  the  DG,  together  if  necessary  with  any  additional  allocation  which 
may  be  granted  to  the  managing  DG  under  the  annual  allocation  procedure  and  in  the  light  of  budgetary 
constraints. 

Description of tasks to be carried out: 

Officials and temporary staff 

External staff 

3 AD officials part time 50 %  

3.2.4.  Compatibility with the current multiannual financial framework  

–  X 

The  proposal/initiative  is  compatible  the  current  multiannual  financial 

framework. 

–   

The  proposal/initiative  will  entail  reprogramming  of  the  relevant 

heading in the multiannual financial framework. 

28 

29 

AC=  Contract  Staff;  AL  =  Local  Staff;  END=  Seconded  National  Expert;  INT  =  agency  staff; 
JED= Junior Experts in Delegations.  
Sub-ceiling for external staff covered by operational appropriations (former ‘BA’ lines). 

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  EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
–   

The proposal/initiative requires application of the flexibility instrument 

or revision of the multiannual financial framework. 

3.2.5.  Third-party contributions  

–  The proposal/initiative does not provide for co-financing by third parties.  

3.3. 

Estimated impact on revenue  

–  X 

The proposal/initiative has no financial impact on revenue. 

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39 

  EN