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Law for Business

Knowhow - guidance - precedents

17 SEP 2012

Food Labelling, Retail competition and Compliance*

The EU has adopted a new Regulation 1169/2011 that imposes a requirement for mandatory origin labelling on food and alcoholic beverages. The Regulation will introduce a complex array of labelling requirements when it becomes effective. (The Regulation 1169/2011 will apply from 13 December 2014. The obligation to provide nutritional information on products will apply from 13 December 2016. http://ec.europa.eu/food/food/labellingnutrition/foodlabelling/proposed_legislation_en.htm.) The most important requirement upon suppliers is to provide country of origin on the products. The European Commission has also proposed that there will be increasing supervision for anti competition practices in the retail markets on food. This will augment the existing Internal Market and the Services Directorate (DG Market) and be effective in the food retail market that will also impact on farmers as it regulate the whole food chain.

The Regulation 1169/2011 will have an effect on anti competition policy because the food industry presents farmers and retail chains to devise their own policy measures at the expense of the customers or those in the food supply chain. The UK business operators in the food industry will have the choice of labelling or signposting when it becomes effective in 3 years although it has its plan called Food 2030 that is discretionary for companies to apply labelling to food products. In December 2010, the Food Safety Agency Board agreed with the agricultural sector that mandatory labelling of meat and milk obtained from the descendants of cloned farm animals would be unnecessary and disproportionate, providing no significant food safety benefit to consumers.

The European Parliament has called on the Commission to propose robust Regulation and adjustments to competition law to address problems in the distribution chain. (European Resolution of 19 January 2012. Imbalances in the Food Supply Chain.) It has done this by concentrating on the buyer power and potentially unfair trading practices as a serious concern. The Parliament has highlighted 32 practices which have been brought to the attention of Parliamentarians and they concern the buyers ie retailers and the customers. The issues that have been pointed out for redress are certain conditions that are allegedly forced upon suppliers information in the private labels; margin recovery; payments for promotion; retroactive changes to contracts as well as payment delays.

The resolution has no binding character but a strong message has been conveyed and the commission will have to take account of the proposals. The European Parliament's concern is that the self regulation is not sufficient and that a High Level Forum has been set up to agree on a proposed fraction to solve the problem in a relationship between the supplier and the buyers. (This has been set up under the Antonio Tejani, the EU Commissioner for Industry.) The Commission has further announced that a communication concerning unfair business to business practices in the food industry in late 2012 and have set up a task force in the food sector.

This plan was prompted by the consumer food prices in the second half of 2007 had alarmed the EU. As a reaction the European Commission conducted a market monitoring exercise in food prices in the Single Market and investigated the functioning of the food supply chain. The results were published in a 2008 interim report on ‘Food Prices in Europe' which suggested that making efforts to improve the functioning of the food supply chain. The objective was described as nothing less than to promote ‘fair earnings of agricultural producers, competitive prices and improved competitiveness of the food processing industry as well as greater choice, better affordability and higher quality of food products for European concerns' (http://epp.eurostat.ec.europa.eu/portal/page/portal/hicp/documents/Tab/Tab/European%20Food%20Prices.pdf).

This led to the establishment of the stakeholders from the agro - industry, producers, retailers and consumers to make recommendations to policy makers and regulators in the community. On the basis of the High Level Group's results the Commission provided that a better functioning food supply chain and different policy initiative should be enacted. The membership of this High Level Forum was extended to producers and retailers in the food industry and it included such companies as Danone, Nestle, and Unilever.

The High Level Forum has set up different platforms and arguably the most important is B 28 which is the business to the sustainable business platform for relationships in the food chain. Their mandate is to assess unfair contractual practices and prepare community actions where necessary. (A Better Functioning Food Supply Chain. http://ec.europa.eu/economy_finance/publications/publication15234_en.pdf .) The agenda is to deal with the misuses of bargaining power of the trading associations and the customers in the food industry.

The Commission also indicated through the HLF that the non regulating instruments could be suitable to remedy the problem of unfair practices. The participants in the food industry have been invited to engage in discussions to reach a consensus. The outcome of this consultation was the B 28 representing producers (eg the Association des Industries de Manque/ Euruopan Brands Association - AIM ) and retailers (eg Europ Commerce published ) in November 2011, a proposal for voluntary rules to govern voluntary relationships in the food supply chain.

The proposal consists of a list of unfair practices which mentions in particular of the following:

  • A unilateral termination of a contractual relationship without notice or without an objectively justified reason.
  • An imposition of unjustified or disproportionate contractual sanction or application of contractual sanction in a non transparent manner.
  • Retroactive unilateral changes to policies.
  • Inappropriate unilateral changes to prices.
  • Inappropriate contractual allocation of risks.
  • Disproportionate up front access payments.
  • Threat of disruption of business to obtain advantages from the other party.

At this point the proposals are still be viewed and under consideration for adoption as a compliance regulation or directive. There are enforcement options that will be proposed as part of the initiatives this year.

The Regulation 1169/2011 will have an effect on anti competition policy because the food industry presents farmers and retail chains to devise their own policy measures at the expense of the customers or those in the food supply chain. The UK business operators in the food industry will have the choice of labelling or signposting. There is increasing focus on the food sector in the EU and there are effort to streamline the diversity of national laws applicable to such practices which may cause the UK to consider the application of the Regulation.

* Zia Akhtar is a member of Grays Inn. He specialises in Food, Consumer and Compliance law. He has written in the Law Society Gazette; Solicitors Journal European Food and Feed Law Journal; European Competition Law Review; International Business Law Journal, etc.

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