Documents considered by the Committee on 27 June 2018 Contents

4Unfair 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

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

4.1With the aim of improving farmers’ and other small and medium sized enterprises’ (SMEs) position in the food supply chain, the European Commission proposed 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.

4.2We first considered this proposal at our meeting of 16 May 2018, noting the Government’s concerns based on the importance of Member State flexibility to make arrangements most appropriate to its market and on the cost of the increased remit of the regulator. The Minister for Agriculture, Fisheries and Food (George Eustice) has responded, clarifying his position.11

4.3On the nature of the UK supply chain, the Minister observes that supply chains vary both between sectors within a nation and between different Member States. Any action taken should address these unique characteristics and is best pursued at a national level, the Minister continues to believe.

4.4Concerning the question of whether an EU approach could benefit UK small and medium-sized enterprises (SMEs) selling to EU buyers, including those operating across the Irish border, the Minister’s answer only covers the Irish border question. He says that the Republic of Ireland currently has a domestic regime in place to prohibit UTPs.12 This protects UK businesses supplying Irish buyers and, similarly, Irish SMEs supplying the ten biggest UK grocery retailers are protected by the UK’s Groceries Supply Code of Practice (“the Code”).

4.5Regarding the concerns about the regulatory costs of increasing the remit of the national regulator, the Minister assures the Committee that the UK is actively engaged in Council discussions and is openly sharing its national experience of running its domestic regulator (the Groceries Code Adjudicator), including the costs involved.

4.6In response to the Committee’s queries about the quantitative impact of the proposal on the number of businesses covered by the UK’s Code, the Government estimates that there are 240 non-SMEs (buyers) and 22,936 SMEs (suppliers) involved in “the manufacture of food products” in the UK. This suggests, says the Minister, that the proposed Directive may result in a significant increase compared to the current coverage of the ten largest retailers and approximately 10,000 suppliers.

4.7The Committee noted that the proposed payment limit of 30 calendar days would be more stringent than current practice in the UK. The Minister responds that payment terms beyond 60 days are unacceptable and the Code encourages 30 days as a norm.

4.8The Minister reports that there is “near consensus” among Member States that the transposition period should be the standard two years rather than the proposed six months with a further six months to apply the transposed legislation. On the assumption that the legislation is unlikely to be agreed by the end of the year, a two-year transposition deadline would fall outside the proposed post-Brexit implementation period lasting until 31 December 2020.

4.9Finally, the Minister explains that he does not consider that the proposal breaches the principle of subsidiarity (whereby action should only be taken by the EU where it is better placed to act than Member States) because the delivery of an EU-wide approach cannot be achieved by the Member States acting alone.

4.10The Minister has responded helpfully to our queries. We repeat, however, our query as to how sympathetic the Minister is to the potential benefits of a coherent EU approach for those UK suppliers trading with buyers elsewhere. We asked, too, what engagement the Government had with such suppliers in formulating its position on this proposal. While the Minister covered businesses trading across the Irish border, his response did not cover UK SMEs trading with suppliers beyond the UK and Ireland.

4.11We look forward to a response on the above query in due course and to an update on negotiations. The proposal is retained under scrutiny. We draw this chapter to the attention of the Environment, Food and Rural Affairs 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

Twenty-eighth Report HC 301–xxvii (2017–19), chapter 1 (16 May 2018).


11 Letter from George Eustice to Sir William Cash, dated 7 June 2018.

12 The Consumer Protection Act 2007 (Grocery Goods Undertakings) Regulations 2016.




Published: 3 July 2018