Commission publishes report on the state of play of the unfair trading practices Directive

By 31 July 2021, 16 Member States notified complete transposition of the Unfair Trading Practices (UTP) Directive. Generally, the Member States followed the overall approach of the Directive. A majority of them went beyond the minimum protection level for farmers and small agri-food businesses established in the Directive. Most Member States extended the Directive’s list of UTPs or made the prohibitions stricter. Member States generally followed the sectoral approach of the legislation and applied the requirements to the agri-food supply chain. Those are among the key findings of the interim report on the state of the transposition and implementation of the UTP Directive published today by the European Commission.

The report, covering 16 of the 19 Member States that have notified complete transposition to the Commission to date, gives an overview of the state of play of the transposition and implementation of the Directive on UTPs in business-to-business relationships in the agricultural and food supply chain. It covers the scope of application, the UTPs prohibited and the enforcement mechanisms chosen by Member States.

When looking at the type of operators and the type of relationships affected by the legislative measures, the report notes that 14 Member States determined that the rules apply to relationships between suppliers and buyers of agricultural and food products at any stage of the supply chain.

Regarding business size, all Member States, except two, refer to business size as a criterion for limiting the scope of application of the legislation. For instance, some Member States target relationships between suppliers whose annual turnover is lower than a given threshold and buyers whose annual turnover is higher than the same threshold. This is the approach set in the Directive. The thresholds however differ, and in some cases, Member States have only considered the buyer’s size.

Most Member States chose to apply the rules to sale transactions in which either the supplier or the buyer, or both, are established in the EU, as set out in the Directive. Four Member States decided to apply the rules to sale transactions where one of the two, or both, are established in the respective Member State itself.

Looking into the prohibited UTPs, the Directive requires prohibiting a specific set of unfair practices, splitting them into two groups: the ‘black list’ that applies to unconditional prohibitions and the ‘grey list’ that are prohibited practices unless they are clearly agreed upfront in an agreement between the supplier and the buyer.

Among the 16 Member States, five introduced the two lists as established in the Directive. All Member States used lists of prohibited practices and most of them followed the ‘black’ and ‘grey’ distinction. Some Member States added additional practices to the ‘black’ and ‘grey’ lists, while a few others moved one or more ‘grey list’ practices into the ‘black list’.

The Directive requires Member States to designate one or more authorities at national level to enforce the rules. All Member States designated such authorities, with 13 opting for a single one and three for two authorities. All of them have chosen administrative authorities.

As regards the submission of complaints to the designated enforcement authority, a majority of Member States provided for confidentiality provisions concerning the complainant’s identity, in accordance with the Directive. The respective conditions differ depending on the country.

Finally, in terms of enforcement, the most common measures are financial sanctions, provided for in all 16 Member States. While the Directive does not stipulate minimum and maximum thresholds for financial sanctions, some Member States do.

A more comprehensive view of the state of transposition will emerge once the remaining Member States submit their notifications. An evaluation of the Directive at EU level is due end of 2025.

Background

The European Parliament and the Council adopted the Directive on unfair trading practices in the agricultural and food supply chain in April 2019. The Directive aims at protecting farmers, farmers organisations and other weaker suppliers of agricultural and food products against stronger buyers. EU Member States were required to transpose the Directive into national law by 1 May 2021 and apply it six months later.

In July 2021, the Commission launched infringement procedures against the 12 Member States who failed to notify the complete transposition into national law of the Directive. Four of them have notified complete transposition in the meantime.

The Directive is part of a wider policy agenda, which aims to achieve a more efficient and a fairer food supply chain. This agenda includes the possibilities for agricultural producers to cooperate and organise themselves, without running risks under competition law, as well as measures to enhance market transparency. The 2020 Farm to Fork Strategy is also designed to contribute to improving farmers’ position in the food supply chain as part of the economic sustainability of the sector.