European Union Passes New Laws to Protect Farmers from Unfair Trade Practices

Trade Practices

The European Union on Wednesday approved a new set of laws that are aimed at protecting European farmers from unfair trade practices. Initially, Phil Hogan, Agricultural Commissioner in the European Union, proposed the laws for protecting the European farmers. However, the proposal was later extended to include mid-sized food manufacturing companies whose annual revenue was less than or equal to €350 million.

According to the legislation passed the following practices will be deemed unfair:

  • Delayed payments for perishable foodstuffs
  • Cancellation of orders at the last minute
  • Unilateral changes to a contract
  • Making changes to a contract that affect the past transactions or deals
  • Suppliers being forced to pay for wasted products by buyers
  • Refusal to commit to written contracts or agreements

While the European Union has applauded the decision, supermarkets across the continent fear it would negatively impact their sales and will ultimately affect the end-users or consumers. In their argument, supermarket owners stated that the implementation of the new laws will benefit food manufacturers and processing units more than farmers. According to supermarket owners, retail chains buy the majority of their supplies from food processors and manufacturers and not farmers. Further, retail owners are complaining that their profit margins have already dropped to a range between 1% to 3% owing to increased expenditure on wages, transportation, and refrigeration of the products. The added protection offered to food processors will further cause a decline in the already depreciating profit margins according to retail store owners.

Retail store owners also countered the approval of the legislation suggesting that over 15 countries in the Union already have stringent laws in place to protect farmers from unfair trade practices. Adding another set of new rules to shield manufacturing businesses with up to €350 million annual revenue will only complicate the business for them. The impact that the new legislation will have on the overall economy of Europe is still unclear. The accurate estimation of the impact is still unknown and people deeply involved in the process of devising the new laws are unable to comprehend the likely outcome. Although the impact of the new legislation is still unclear, the European retail continues to struggle after registering below par sales during the holiday season. Both online and offline businesses in the continent are struggling to keep up the pace in terms of revenue generation and sales as compared to the previous years. An anticipated hike in groceries is expected to hit the markets if the new legislation is adopted.