Structure of the presentation

1. Non-exhaustive listing of (potential) Unfair and abusive commercial practices and contractual conditionsHLF platform B2B contractual practices meetingMarc Rosiers, Copa-Cogeca, Brussels, 9 March 2011

2. Structure of the presentation • Introduction • Unfair and abusive practices and contractual conditions • 2.1. Access to retailers • 2.2. (Potential) unfair contractual conditions or unilateral changes to contract terms • 3. Conclusions • 4. Ultimate Objective

3. 1. Introduction • An unbalanced food chain – a result of: • a very concentrated and consolidated input supply sector (e.g. fertilisers, seeds, plant protection products) • a large number of farmers (13.4 million), small in dimension and in economic power • an agri-food industry with (some 300000 enterprises) of variable dimension and economic power • a very concentrated and consolidated retail sector very small in number but with an impressive economic power

4. 1. Introduction • Unbalanced food chain - the causes: • Increasing globalisation; • Retail consolidation; • Processing Consolidation; • Ferocious competition amongst retailers; • Farmers are weak sellers; • Unfair and abusive commercial practices; • Oversupply in some sectors.

5. 1. Introduction • Unbalanced food chain- the consequences: • Relentless downward pressure on prices; • Farmers, in many cases, do not cover production costs; • Insufficient investment in farm business; • Alarmingly low level of R & D; • Farmers abandoning sector and activity; • Risk for the consumer of a reduced choice, reduced flexibility of supply and possibly food safety.

6. 2. Unfair and abusive practices and contractual conditions • 2.1. Access to retailers • Advance payment for accessing negotiations • (disproportionate) Listing fees • Shelf space pricing • Imposition of promotions • Pricing • Payment delays • Most favoured client clause

7. 2. Unfair and abusive practices and contractual conditions • 2.2. (Potential) unfair contractual conditions or unilateral changes to contract terms • Unilateral and retrospective changes to contractual conditions • Unilateral breach of contract • Exclusivity clauses/fees • Imposing private brands • Imposing standard model contracts

8. 2. Unfair and abusive practices and contractual conditions • 2.2. (cont’ed) • “Forced” contribution to the opening of new stores or their decoration • Retaliatory practices to force suppliers to sign contracts • Non-written contractual agreements to impose unfair practices • Margin recovery • Over-riding discounts

9. 2. Unfair and abusive practices and contractual conditions • 2.2. (cont’ed) • (advanced) extra price reductions by the supplier without any commitment to buy • Unilateral imposition of quality standards • Retailer collecting advance deduction of penalties for delays • Buying products for which 2/3 of their shelf life has already elapsed • Sales without price for perishable products

10. 2. Unfair and abusive practices and contractual conditions • 2.2. (cont’ed) • Imposing payment for waste processing/removal • Group buying/joint negotiation • Unrealistic delivery terms (cost or non-cost wise) • Non-transparent and discriminatory reverse auctions • Incorrect measurement of volumes

11. 2. Unfair and abusive practices and contractual conditions • 2.2. (cont’ed) • Invoicing suppliers for services related to the marketing of the product not specifically related to the selling of it • Imposing the use of a specific package supplier or packaging material • Imposing the use of a specific logistic platform or operator

12. 2. Unfair and abusive practices and contractual conditions • 2.2. (cont’ed) • “Forced’ payment to cover on-store promotions using suppliers’ own material • Payment to cover non previously agreed promotions • Over-ordering a product intended for promotion • Extracting payment for not reaching certain sales levels

13. 2. Unfair and abusive practices and contractual conditions • 2.2. (cont’ed) • Unilateral removal/withdrawal of products from store shelves • Imposing an unconditional return of (unsold) products • Imposing unreasonable costs related to customers’ complaints • Imposing to suppliers costs related to product shrinkage or theft even when occurring in the retailers’ premises

14. 2. Unfair and abusive practices and contractual conditions • 2.2. (cont’ed) • Imposing contributions to the operation of retailers’ loyalty cards/systems • Imposing contributions to cover costs of the operation of electronic debit/credit payment systems • Buyer enacting a pre-approval of public statements by suppliers

15. 2. Unfair and abusive practices and contractual conditions • 2.2. (cont’ed) • Further to these one can often find unacceptable situations whereby through a combination of pricing and other actions a retailer sells products bellow its cost.

16. 3. Main Conclusions • Imbalanced food chain; • Lack of business ethics and strategies based mainly on pricing • Lead to unfair and abusive trading and contractual practices • Need to have a B2B (food chain approach) Unfair commercial practices directive

17. 4. Ultimate objective • to achieve a • Fair, functional and transparent food supply chain

18. Copa-Cogeca: Defending and developing the European Model of Agriculture

19. Thank you! www.copa-cogeca.eu