Counterproductive Regulation? The EU's (Mis)Adventures in Regulating Unfair Trading Practices in the Food Supply Chain
43 Pages Posted: 26 Sep 2018 Last revised: 21 Nov 2018
Date Written: September 26, 2018
In April 2018, the European Commission revealed a proposal for a Directive on unfair trading practices in business-to-business relationships in the food supply chain. However, the issue of unfair trading practices (UTPs) in the food supply chain dates further back. For decades already, EU food producers have complained about increasing concentration on the purchasing markets for food in Europe, aggressive bargaining on the part of retail chains, including ever increasing demands for low prices and dubious commercial practices such as unfair use of proprietary information and unilateral changes to contract terms. Complaints have resulted in much discussion both at the EU and at the Member State level. On a number of occasions, Members of the European Parliament have pressed for enforcement of the competition rules and for reform of the Common Agricultural Policy (CAP). Additionally, a pan-European private self-regulatory initiative has been in place since 2013. However, where complainants have had the most success is at the national level. Making use of the exception in Art. 3(2) of Regulation 1/2003, EU Member States have introduced of a variety of new laws, in particular stricter competition rules and rules on unfair B2B contractual practices, in order to regulate the exercise of buying power in the food supply chain. These laws deviate from ‘mainstream’ EU competition law and may even be seen as a form of protectionism-in-disguise. Today only 5 out of 28 Member States have no specific regulation, with some Member States having put several types of legislative instruments in place, alongside private regulation.
This article raises the question about the appropriate role of EU competition law in addressing concerns with unfair trading practices (UTPs) in the food supply chain in the context of an integrated market. It firstly explains the background to the problem and what the role of EU competition law has been until now and then it maps the developments at the Member State level. Next, by referring to a regulatory studies typology of counterproductive regulation, the article sheds light on some of the important yet overlooked perverse side effects which arise when regulation of buyer power or UTPs occurs at the national level in the context of an integrated market like the EU. In light of the analysis, it expresses doubt that these pitfalls will be corrected by the newly proposed Directive on UTPs in the food supply chain. The conclusion of the article is that the national legislative developments have not been able to make up for the lack of supra-national enforcement of EU competition law and that the paucity and slowness of action of the European Commission on this issue has led to damage for consumers, taxpayers, and competition in general.
Keywords: Unfair trading practices, buyer power, business-to-business, competition law, superior bargaining power, food supply chain
JEL Classification: K12, K21, K23, K40
Suggested Citation: Suggested Citation