**Brussels**: The EU’s Unfair Trading Practices Directive establishes clear obligations to protect smaller suppliers in the agri-food sector, urging businesses to ensure fair and transparent trading practices, despite ongoing challenges in compliance and awareness among stakeholders.
As regulatory scrutiny intensifies within the agri-food supply chain, buyers face growing pressure to ensure their trading practices are fair, transparent, and sustainable. The EU’s Unfair Trading Practices (UTP) Directive has been introduced to address persistent imbalances by establishing clear obligations on buyers to protect smaller suppliers. Beyond merely fulfilling compliance requirements, the Directive offers a foundation for fostering long-term, mutually beneficial trading relationships that can enhance the functionality of the entire supply chain.
The legislation, applicable across all EU Member States, sets minimum requirements while allowing individual countries the liberty to enforce stricter rules if deemed necessary. Consequently, businesses that operate cross-border must be well-versed not only in the overarching EU framework but also in any additional regulations that may be imposed in various jurisdictions. Notably, the Directive affects trading relationships where either the buyer or supplier is based within the EU. Therefore, agri-food companies outside the EU engaging in business with EU-based counterparts must also remain informed of these requirements.
The UTP Directive categorises supplier-buyer relationships based on turnover tiers, determining which interactions are covered under its provisions. Suppliers with an annual turnover of up to €350 million may find themselves under its protection, contingent upon the size of their trading partners. Companies are encouraged to evaluate their position within this structure to discern which of their trading relationships fall under the Directive’s regulations.
Despite the UTP Directive’s implementation several years prior, a recent EU-wide survey highlighted that approximately 30% of agri-food suppliers remain unaware of the legislation and the protections it entails. Such unawareness raises the risk of suppliers experiencing unfair treatment and missing chances to assert their rights. Furthermore, the survey revealed that many industry participants do not view the Directive as entirely effective. A significant number of respondents indicated that unfair practices identified by the Directive persist in more than 20% of their transactions. Although five years of survey data indicate a decline in unfair practices, the continued incidence of non-compliance suggests that enforcement and regulatory oversight will remain a significant focus in the coming years.
The Directive incorporates a list of trading practices deemed unfair in the agri-food supply chain, which are classified into two sections: the ‘Black list’ and the ‘Grey list.’ The Black list comprises practices that are always prohibited, whereas the Grey list includes practices that may only be allowed if they are agreed upon in a transparent manner prior to execution. The Black list identifies ten specific practices that businesses must avoid, including late payments for perishable goods, refusal to acknowledge contractual terms, and unilateral modifications of contract terms.
Conversely, the Grey list features provisions that often involve cost-shifting from the buyer to the supplier, such as charges for promotional activities or costs related to unsold stock that must be returned. These practices can undermine trust within trading relationships if not clearly documented and agreed upon in advance.
The UTP Directive empowers enforcement authorities with significant capabilities, including the initiation of investigations, documentation requests, and the ability to impose fines for any breaches. Penalties must be “effective, proportionate, and dissuasive,” ensuring that businesses understand the serious implications of non-compliance. The increasing scrutiny within this area is expected to persist.
Auditing adherence to the Black list and Grey list practices presents operational challenges for businesses. Buyers and suppliers need to ensure that agreements are meticulously documented, easily accessible for audits, and that clear systems are in place to accurately calculate payments without over-claims that may be perceived as exploitative.
One entity addressing these challenges is Enable, which collaborates with businesses in the agri-food sector to navigate the UTP legislation and cultivate healthier supply chain partnerships. The company’s platform centralises trading agreements, provides a robust audit trail, tracks all interactions related to agreements, and supports accurate calculations to foster a trust-based dynamic among trading partners.
In conclusion, both compliance with the UTP legislation and the fostering of sustainable trading relationships are crucial. The implementation of fair practices facilitated by the Directive can lead to mutual growth and ensure long-term success within the supply chain. Whether a supplier seeking protection or a buyer managing compliance risks, understanding the framework set forth by the UTP Directive could yield significant advantages in the evolving agri-food landscape.
Source: Noah Wire Services
