Amid calls from several EU leaders to re-examine the balance of market power in the supply chain, the retailers’ association Eurocommerce has called for stricter rules against transnational purchase alliances to be avoided.
The past months have seen farmers protesting in the streets of several EU countries over rising costs and insufficient trading protections, with political leaders in Spain, France and Germany pledging to tackle the market power of supermarkets and the food industry.
Spanish Prime Minister Pedro Sánchez was the latest to make a move on Wednesday (7 February) as protests escalated in southern Europe, saying his government would strengthen the national food supply chain law.
In late January, German Economy Minister Robert Habeck denounced the price-setting power of the food industry amid nationwide protests.
But the strongest stance came on 5 February from French President Emmanuel Macron, who called for stronger EU legislation to ensure greater protection for farmers, the economically weaker players in the food chain.
France calls for stronger farmer protections in supply chain negotiations
French President Emmanuel Macron has called for greater protections for food producers through a ‘European Egalim’ law, a reference to French legislation that regulates trade negotiations with supermarkets and manufacturers.
Macron proposed to shape the new EU rules on the national ‘Loi Egalim 3′, which is the most stringent in Europe, preventing retailers and wholesalers from sourcing food and other products in other EU countries.
Doing so, the law targets the retailers’ alliances, i.e. those with different national players pooling together to establish purchasing centres in other EU countries.
Pushback
The retail industry has been quick to react and redirect blame.
Retail alliances, designed to increase the contractual power in trade negotiations with large food processors, are beneficial for consumers and had “no demonstrated negative effects on farmers”, Eurocommerce – the European association representing retailers and wholesalers – said in a press release published on Thursday (8 February).
A 2020 study from the Joint Research Center of the European Commission acknowledged that farmers are typically the weaker stakeholders in the food chain, confronted with increasingly concentrated processing or retail sectors.
The report also suggested that the impact of the retail alliances on farmers is difficult to assess and likely indirect, as in Europe those alliances usually do not deal with fresh produce and do not negotiate directly with growers.
Eurocommerce called on policymakers “to refrain from taking erratic measures under pressure”, adding that their companies have “few direct relations with farmers, less than 5%”.
The business association pointed to “large international suppliers of processed products” – such as cola manufacturers – and their “strong market positions”.
“These global suppliers continue to make significant margins,” read the press release, adding that European retail alliances were one way of dealing with this.
“Finger-pointing at certain actors in the food chain is not going to solve the problems that many farmers and processors across Europe are facing today,” the association of food industry FoodDrinkEurope told Euractiv in a statement.
“We need to get over these oversimplifications and focus our efforts on strengthening the value chain from farm to fork,” FoodDrinkEurope added.
The French case
In France, the 2023 Egalim law, which aims to support farmers in the negotiations with the other stakeholders in the food supply chain, requires all products sold in France to comply with French laws, even if the products have been sourced in European purchasing centres in Spain, the Netherlands or Belgium.
Last December Eurocommerce asked the European Commission “to act as a matter of priority” against the French law “which restricts the freedom of retailers and wholesalers to source in the Single Market in breach of EU law”.
The Egalim laws require operators to take into account the increase in farmers’ production costs (raw materials, energy, etc.) during trade negotiations. The latest Egalim law, the Egalim 3, goes beyond by imposing a limit on promotions for distributors (34% maximum). The cost of agricultural raw materials such as meat and milk can no longer be negotiated.
The EU level
The contractual power of farmers in the food markets is a long-standing policy issue in the EU debate.
In 2010 the Commission created a High Level Forum for a Better Functioning Food Supply Chain, then launched the Supply Chain Initiative (2013-2019); in 2016, an Agricultural Markets Task Force worked on the topic, and finally, the EU adopted an EU Directive defining a common list of unfair trade practices in the food chain in 2019.
In a debate at the EP yesterday (7 February) the Commission Vice President Maros Šefčovič told MEPs that the EU executive is currently inspecting the directive’s application in the EU, aiming for “uniform implementation” of the rules.
The directive was fully transposed in the national legislation in 2022 only, and it is unlikely that in the short term the Commission would re-open the pandora box of a highly controversial topic.
“Indeed, the matter is controversial,” Paolo De Castro MEP told Euractiv. De Castro was the EP rapporteur of the 2019 directive. “It was not easy”, he recalled, “because the divergence in the views of stakeholders was very strong, as well as among member states and also in the Commission itself”.
“Now we have minimum EU rules and the hope is that member states will fully implement them,” De Castro concluded.
[Edited by Angelo Di Mambro/Nathalie Weatherald]
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