Documents considered by the Committee on 27 February 2019 Contents

3Unfair trading practices in the food supply chain

Committee’s assessment

Politically important

Committee’s decision

Not cleared from scrutiny; further information requested; drawn to the attention of the Environment, Food and Rural Affairs Committee and the Business, Energy and Industrial Strategy Committee

Document details

Proposal for a Directive of the European Parliament and of the Council on unfair trading practices in business-to-business relationships in the food supply chain

Legal base

Article 43(2) TFEU, QMV, Ordinary legislative procedure

Department

Environment, Food and Rural Affairs

Document Number

(39625), 7809/18 + ADDs 1–3, COM(18) 173

Summary and Committee’s conclusions

3.1With the aim of improving farmers’ and other small and medium sized enterprises’ (SMEs) position in the food supply chain, the EU has agreed new legislation on unfair trading practices (UTPs), which are business-to-business practices that deviate from good commercial conduct and are contrary to good faith and fair dealing.

3.2At our meeting of 16 January 2019, we noted that the UK will be obliged to make provision for this legislation under all Brexit scenarios. At one extreme, the UK would be obliged to apply the legislation under any post-Brexit implementation period extended until at least late 2021. Even if there is no deal concluded between the UK and the EU, the terms of the Directive would apply to relationships between EU suppliers and third country (including the UK) buyers and so UK authorities would need to make provision for such circumstances.

3.3We noted with concern the continued uncertainties about the impact of the Directive on the UK and the potential enforcement challenges. While retaining the document under scrutiny, we waived the scrutiny reserve in order that the Minister could support the Directive should such support be considered to be in the national interest.

3.4The Parliamentary Under Secretary of State for Food and Animal Welfare (David Rutley MP) has written22 to update the Committee on progress. He explains that other Member States are almost unanimously supportive of the compromise text agreed in December, with no further changes expected. The Directive is scheduled to be submitted to the European Parliament for approval in the plenary session beginning Monday 11 March, with formal Council adoption likely at the 18 March Agriculture and Fisheries Council.

3.5The Minister has little more to say on plans for implementation. He notes that this will be tightly bound with the work undertaken to explore enforcement strategies for domestic powers contained in the Agriculture Bill. He promises to write to the Committee again once this work has developed.

3.6In a separate letter23 to the House of Lords EU Committee, the Minister sets out more detail. He notes that there are an estimated 188,483 actors in the UK food supply chain. While it is not possible to estimate how many relationships within the food supply chain could be covered if the UK were to implement the Directive, it is reasonable to assert that the coverage would be greater than the status quo—the Groceries Supply Code of Practice (GSCOP) regulates the relationships between the UK’s 12 largest retailers and approximately 10,000 of their direct suppliers.

3.7The Minister adds that any duplication between the Directive and the GSCOP would only affect the twelve retailers currently regulated under the GSCOP. He explains that, whilst the prohibitions contained in the GSCOP and the Directive are broadly similar, there are some notable differences. The GSCOP, for example, contains an obligation for a buyer to pay for goods on time, meaning the payment period terms agreed to in the contract must be abided by. The Directive adopts a different approach and introduces a statutory 30-day deadline for payment for perishable goods and 60-day deadline for non-perishable goods. The Directive also includes a series of UTPs that are only permissible if agreed in clear terms in a contract, and this list of UTPs includes activities that UK retailers and their suppliers may engage in, such as returning unsold produce which can be used for further processing.

3.8We note that other Member States are almost unanimously supportive of the compromise text and so it is likely to be agreed when considered formally by the European Parliament and Council. The UK’s consistent position has been to abstain on this file and so, while the Minister does not set out how the UK intends to vote at Council, we assume that the abstention policy will continue. We would encourage the Minister to table a formal explanation of vote at Council to make the UK’s position clear. We ask him to write to us either before or after the Council confirming and explaining the UK position and providing a copy of any formal explanation of vote.

3.9We remain very concerned about the continued uncertainties surrounding the impact of this Directive on the UK and so we look forward to the Minister’s letter on UK plans for implementation and enforcement.

3.10Given the continued uncertainties, we will retain the document under scrutiny. We draw this chapter to the attention of the Environment, Food and Rural Affairs Committee and the Business, Energy and Industrial Strategy Committee.

Full details of the documents

Proposal for a Directive of the European Parliament and of the Council on unfair trading practices in business-to-business relationships in the food supply chain: (39625), 7809/18 + ADDs 1–3, COM(18) 173.

Previous Committee Reports

Fifty-first Report HC 301–l (2017–19), chapter 4 (16 January 2019); Forty-eighth Report HC 301–xlvii (2017–19), chapter 3 (12 December 2018); Thirty-ninth Report HC 301–xxxviii (2017–19), chapter 3 (10 October 2018); Thirty-third Report HC 301–xxxii (2017–19), chapter 4 (27 June 2018); Twenty-eighth Report HC 301–xxvii (2017–19), chapter 1 (16 May 2018).


22 Letter from David Rutley MP to Sir William Cash MP, dated 7 February 2019.

23 Letter from David Rutley MP to Lord Boswell, dated 7 February 2019.




Published: 5 March 2019