12.11.2013   

EN

Official Journal of the European Union

C 327/26

1.1

The EESC takes note of the European Commission's publication of this Green Paper and thinks that it reflects a positive and marked shift in the Commission's approach to unfair trading practices (UTPs).

1.2

The EESC considers the use of unfair trading practices as not only "unfair" or "unethical", but also as contrary to fundamental legal principles and to the interests of the supply and demand sides. Since it amounts in fact to the abuse of a significantly stronger market position, we recommend using the term "abusive trade practices", which is routinely used in French and English, for example.

1.3

The Committee sees the present breadth and depth of unfair trading practices as being mostly the result of the mergers and acquisitions that have occurred over recent decades.

1.4

In the Committee's view, the results so far of the High Level Forum for a Better Functioning Food Supply Chain are unclear and the approaches proposed are insufficient to solve the problem of unfair practices. It would therefore urge the European Commission to come up with further initiatives.

1.5

While the EESC has no doubt that unfair practices may be employed in any kind of contractual relationship, it is convinced that matters are particularly grave when it comes to dealings between supermarkets on the one hand and farming and food SMEs on the other. There are forms and degrees of abuse here that do not occur elsewhere.

1.6

The EESC is particularly pleased that the Commission explicitly casts doubt in the Green Paper on the existence of true contractual freedom where relationships are very unequal, thus concurring with the EESC view.

1.7

The Committee finds that the Commission's Green Paper captures very well the essence and main types of unfair trading practices. However, it firmly believes that the Commission should provide a uniform definition of UTPs similar to that already set out in Directive 2005/29/EC, since the practices referred to in the Green Paper bear some resemblance to "misleading marketing practices" (1).

1.8

UTPs are all the more important within a "climate of fear" in which the weaker contracting party is frightened of losing the custom of the stronger party. This is especially true when large retailers put unfair pressure on their suppliers and/or they pass on excessively high prices to the retailers and consequently to the consumers.

1.9

In the EESC's view, the consequences of unfair trading practices are not restricted to business-to-business dealings; nor do they affect only weaker contracting parties. Consumers are also victims, as are national economic interests – a fact insufficiently highlighted in the Green Paper.

1.10

The EESC thinks that the laws to curb unfair trading practices adopted in several Member States reflect the fact that the current state of affairs is unacceptable. Although these laws have for various reasons not produced satisfactory results, it would be wrong to say that nothing has been achieved. One success is the greater transparency in the sharing of benefits and the cessation of the most outrageously extortionate practices.

1.11

Although the EESC has no reason to believe that the adoption of these laws by Member States is detrimental to the free movement of goods in the EU, some restrictions may occur. However, none of these laws is protectionist in nature and they apply equally to domestic businesses and to those from other Member States.

1.12

The EESC recommends that any further consideration of how to address the problem of UTPs should start with the absence of contractual freedom in some relations.

1.13

The EESC recommends that any proposals in future to regulate unequal commercial relations take the "fear factor" into account. The essential balance between contracting parties must be secured so that their relationship is a fair one. For this reason, the prime aim of UTP regulation cannot be to protect the weaker contracting party exclusively, but also the national economic interest. This would mean, for example, that food suppliers affected would not have to take an active part in administrative and legal proceedings.

1.14

The EESC calls on the European Commission to propose legislation banning UTPs. This should be based on an indicative list of the most typical such practices employed by the stronger contracting party and designed to transfer its own normal costs and risks to the weaker party.

1.15

The EESC calls on the European Commission to work with national competition authorities in drawing up, on the basis of practical experience over recent decades, a radical revision of current – and evidently obsolete – competition rules so as to promote fair competition based on the fair exchange of relevant information in this sector and take all existing dominant positions into account.

2.1

The Green Paper draws a distinction between food and non-food supplier/distribution chains, which is entirely justified, since the former has its own distinct features compared with others.

2.2

Substantial consolidation has taken place among companies belonging to supply/distribution chains in the last two decades, leading to the creation of what are in reality oligopolies. As far as food supply/distribution chains are concerned, this is particularly true in the retail sector, somewhat less in the processing industry and least of all in the primary production of agricultural products. This has resulted in large imbalances in the food supply chain, since the oligopolies have enormous bargaining power vis-à-vis their commercial partners, who are far more fragmented.

2.3

The EESC is convinced that the structural imbalances that have emerged lead to UTPs being used in some cases and that these practices are often not only inimical to fairness, honesty and ethics, but also contravene fundamental principles of law.

2.4

The Green Paper is wrong in stating that UTPs were first discussed at EU level only in 2009. This is the year in which they first appeared on the European Commission's official agenda. As early as 2005, however, the European Economic and Social Committee issued an important opinion (2) which – at a time when the question of UTPs was still taboo – highlighted and criticised a number of negative aspects of the behaviour of retail chains. Mention should also be made of the important role played by the 2007 Written declaration on investigating and remedying the abuse of power by large supermarkets operating in the European Union  (3), in which the European Commission was directly called upon to take the steps needed to remedy the situation.

2.5

In the EESC's view, the results so far of the High Level Forum for a Better Functioning Food Supply Chain are somewhat uncertain, since the proposed good practice implementation framework has brought no agreement on tackling UTPs, a matter on which three European Commissioners, among others, have expressed regret (4).

2.6

The European Competition Network (ECN) report confirms that the use of UTPs is a reality, especially in the food sector. This accords with the EESC's conviction that the abuse of a stronger economic position by supermarkets vis-à-vis SME food producers and processors is orders of magnitude more serious than in other contractual relations. The fact that for years it is only these suppliers of food to large retail chains that have been complaining, and no one else, is further proof of this.

2.7

The EESC notes the Commission's statement that UTPs are harmful to the EU economy as such and not only to contractual relations between two businesses.

3.1.1

So far, no doubt has officially been cast upon the existence of contractual freedom in commercial relations – not even between supermarkets and SME food producers. Until recently, this freedom was one of the main arguments not only of the supermarkets, but also public authorities, against the regulation of UTPs, which would allegedly have curtailed such freedom. The EESC finds it very significant that the Green Paper has abandoned this position and that it explicitly acknowledges that there is no true contractual freedom where there is marked inequality of economic muscle between the two contracting partners.

3.1.2

For the European Economic and Social Committee this recognition of the lack of contractual freedom is the fundamental prerequisite for effectively seeking comprehensive solutions to problems arising from existing imbalances in the supply/distribution network, above all in the case of food.

3.1.3

In this section of the Green Paper, the European Commission captures very well the essence and main types of UTPs. In relations between supermarkets and food suppliers, in particular, the weaker party has no real alternative, since there are very few major customers in the market and, more importantly, they all treat suppliers in a very similar way.

3.1.4

Several examples of UTPs mentioned in the Green Paper reveal that some buyers do not hesitate to use any means whatsoever to secure extra and totally unwarranted benefits to the detriment of the other party. One particular form is payment for fictitious services or unsolicited services that have no value for the other party.

3.1.5

These are the EESC's answers to the questions posed in this section of the Green Paper:

3.2.1

The EESC welcomes the fact that the European Commission draws here on information from a number of national competition authorities. In addition to those mentioned, we particularly recommend collaboration with the French and Czech authorities, which have direct experience with implementing their national UTP laws. In conducting their inspections, anti-monopoly authorities have the right to examine accounting documents (contracts, invoices, bank statements, etc.) that can directly prove the use of UTPs.

3.2.2

These examples furnished by the UK, Spanish and Irish competition authorities show that it is misplaced to refer to many of the practices deployed as merely "unethical", since they are patently beyond the bounds of legality (especially where "bullying and intimidation" are involved).

3.3.1

The adverse impact of the stronger party's use of UTPs against the weaker party is beyond doubt and the stifling of investment and innovation in production is their logical consequence. However, the impact on consumers is, in the EESC's view, inadequately signalled, since it translates into far more than just impeding innovation. Yet, this section completely ignores the threat to national economic interests, which does get some mention earlier in the Green Paper. This threat is most in evidence in the countries of Central and Eastern Europe, where supermarkets are entirely in the hands of businesses from other Member States. Given that domestic producers – the vast majority of them SMEs – are unable to meet what often amount to extortionate terms, the whole agri-food sector in this region is collapsing and countries that were traditionally self-sufficient in the production of food staples have to a large extent lost their food security. Domestic production is thus replaced by imports of often very dubious quality.

3.3.2

These are the EESC's answers to the questions posed in this section of the Green Paper:

4.1

Two facts emerge from analysis of current legal frameworks at Member State and EU level. Firstly, the use of UTPs by some strong economic players is now a matter of common knowledge and an indisputable fact, with the appropriate authorities in several Member States having concluded that the current situation calls for regulation.

4.2

The current extent of UTPs, especially in dealings between large retail chains and food producers, reveals above all the obsolescence of competition legislation. Some forms of UTP highlight the severe distortion of the competitive environment and the existence of real dominant positions that current monopolies legislation fails to address.

4.3

In addition to revision of competition legislation, the EESC thinks it entirely legitimate to ban at EU level the use of certain defined UTPs and so create the necessary harmonisation of a disparate legal environment. However, there must be a logical link between regulation of UTPs and revised monopolies legislation to make sure that it is only the logical initiators of contracts with UTPs – i.e., parties with the dominant position – that are sanctioned.

4.4

To be effective, this harmonised regulation must take account of the "threat of delisting" and hence the inability of weaker contracting parties, especially SME suppliers to supermarkets, to complain; it must be conceived to do more than merely tackle problems in B2B relations.

4.5

These are the EESC's answers to the questions in this section of the Green Paper not yet answered:

5.1.1

The EESC endorses the European Commission's view that current mechanisms implemented at national level against UTPs are generally inadequate. This is mainly because they fail to take into account a certain climate of fear arising from the absence of true contractual freedom and the threat of delisting. These problems have so far been best tackled by France, where the supervisory authority can act on the basis of unofficial information and on its own initiative. Suppression of UTPs is also based on the protection of the national economic interest and not on protecting the weaker contracting party.

5.1.2

While some Member States have laws to combat the use of unfair contractual practices, others do not. Moreover, there are rather significant differences between individual laws. There is no doubt that these two facts constitute a certain hurdle to crossborder trade (question 16).

5.1.3

In the view of the EESC, the only sensible common approach to tackling the adverse impact of differences in the applicable legislation would be to adopt harmonising legislation targeting the use of UTPs (question 17).

5.2.1

The EESC agrees with the Commission's claim that there is currently no specific mechanism at EU level to combat UTPs. It is also convinced of the necessity – if the fear factor is to be overcome – of giving national authorities for this area the powers to act on their own initiative, to receive anonymous or unofficial complaints and to impose sanctions (question 18).

6.1

The EESC agrees that UTPs occur throughout the food and non-food supply chain, but is convinced – in keeping with what has been said above – that the situation is at its worst in dealings between supermarkets and SME producers.

6.2

Where listing is concerned, it is not at all clear what the consideration is for the fee that the would-be supplier has to pay. In the vast majority of cases, even payment of this fee – which is a preliminary and necessary condition of any form of commercial dealings – does not give the supplier any guarantee that the purchaser will actually take the goods in question and will not, for no reason, delist him.

6.3

Supplier rebates are a routine part of the current practice of large retail chains. The EESC believes their general benefit to be doubtful, to say the least. On the one hand, supplier rebates are a symbol of the abuse of an actual dominant position, since they often conceal unsolicited and fictitious services; on the other, they create a significant lack of transparency regarding the distribution of benefits. The existence of supplier rebates means that suppliers (and outside observers) find it very difficult to ascertain how much they have really been paid for the goods supplied. In reality, the order to supply goods is conditional upon acceptance of services offered by the buyer. In the view of the EESC, fees for real and justified services provided by the buyer to the supplier should be included in the purchase price of food.

6.4

These are the EESC's answers to the questions in this section of the Green Paper not yet answered: