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Non-exhaustive listing of (potential) Unfair and abusive commercial practices and contractual conditions HLF platform B2B contractual practices meeting Marc Rosiers, Copa-Cogeca, Brussels, 9 March 2011. Structure of the presentation. Introduction
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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
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
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
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.
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.
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
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
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
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
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
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
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
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
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
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.
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
4. Ultimate objective • to achieve a • Fair, functional and transparent food supply chain
Copa-Cogeca: Defending and developing the European Model of Agriculture
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