The concentration of the distributors vs. production fragmentation has created an imbalance in market power, and is at the origin of strains in the food chain. This weak bargaining position of food production produces serious socioeconomic consequences that may affect the maintenance of food production quality. The question is how to build a supply chain that provides sustainable added value to all participants that interact therein.

1. Towards a sustainable European
Food Chain: The fight against
abusive practices.
Hacia una cadena alimentaria
sostenible en Europa: la lucha contra
las prácticas abusivas
Francisco González Castilla
Catedrático acreditado de Derecho mercantil
Presidente de la Comisión de Defensa de la Competencia
Comunitat Valenciana

2. Synthetic and approximate representation of the
food chain in the EU by actors involved*
* Where the number of holdings/enterprises per food chain
stage and number of consumers are represented by the size of
each shape.
T
th
p
E
dConsumers
Food and beverage
processing industry
Farmers
Food service Food retail

3. I. Diagnosis: imbalance in commercial
relationships along the food supply chain and
unfair trade practices (UTPs)
II. Treatment: hard Law vs. soft Law:
regulatory action and voluntary measures
against unfair practices
III. Example of a legislative action: The
Spanish Law on Measures to Improve the Food
Supply Chain (Ley 12/2013)

4. DIAGNOSIS: imbalance in commercial
relationships along the food supply
chain
Increased concentration and vertical integration of
the retailers and food processing industry vs.
great fragmentation of the producers
= asymmetries in bargaining power
Increased role of the supermarkets compared to
other retail formats
= Reduction of the farmers’ commercial channels
Increased market share of the distributor brands
= A sharp decline of the weaker manufacturer
brands

5. Lack of market transparency, especially in
contracts and price agreements
Unfair trading practices that grossly deviate
from good commercial conduct and are contrary
to good faith and fair dealing
DIAGNOSIS: consequences of
asymmetries in bargaining power in
the food supply chain
Anticompetitive practices that distort the
market

6. Antitrust Law (European Commission and National
Authorities)
Private law: general civil and commercial law
against abusive contract clauses
Private law: unfair competition law
DIAGNOSIS: consequences of
asymmetries in bargaining power in
the food supply chain

7. IS THIS REGULATION INSUFFICIENT?

8. DIAGNOSIS: European reports and measures on
the structure of the food supply chain
European Commission
Communication of 28 October 2009: «A better functioning food
supply chain in Europe» (COM(2009)0591)
Communication of 15 July 2014: «Tackling unfair trading practices
in the business-to-business food supply chain» (COM(2014)0472)
European Parliament
Resolution of 7 September 2010 on fair revenues for farmers: A
better functioning food supply chain in Europe, (2009/2237(INI))
Resolution of 19 January 2012 on the imbalances in the food supply
chain

9. Green Paper of 31 January 2013 on «Unfair trading
practices in the business-to-business food and non-
food supply chain in Europe» (COM(2013)0037)
Commission Decisión of 30 July 2010 establishing the High
Level Forum for a Better Functioning Food Supply
Chain (2010/C210/03)
DIAGNOSIS: European reports and measures on
the structure of the food supply chain

10. TREATMENT: regulatory or self-regulatory
frameworks?
Concentration in the food processing
industry and retail sectors, endowing
downstream actors with higher bargaining
power is not illegal

11. TREATMENT: regulatory or self-regulatory
frameworks?
Is the asymmetry between the
counterparts a market failure or a
characteristic of the food chain?

12. What should be the policy response to
Unfair Trade Practices?
TREATMENT: regulatory or self-regulatory
frameworks?

13. What should be the policy response to
Unfair Trade Practices?
Self-regulation (Principles of Good
Practice, voluntary dispute
settlement mechanisms)
Legislative action
(private or public enforcement? The Fear Factor)
Enforcement of existing law
TREATMENT: regulatory or self-regulatory
frameworks?

14. What should be the policy response to
Unfair Trade Practices?
Self-regulation (Principles of Good
Practice, voluntary dispute
settlement mechanisms)
Legislative action
(private or public enforcement? The Fear Factor)
Enforcement of existing law
TREATMENT: regulatory or self-regulatory
frameworks?

15. Goals:
Protection against unfair practices:
Definition of unfair practices and its
enforcement
Transparency and legal certainty:
The requirement of a written
contract and its (fixed) content
TREATMENT: regulatory or self-regulatory
frameworks?

16. EXAMPLE OF A LEGISLATIVE ACTION: The Spanish
Law on Measures to Improve the Food Supply
Chain (Ley 12/2013)
Legal certainty in trade relations: Agreements should
be in writing and cover relevant elements
Public Enforcement to prevent the abuse of
bargaining power in the food chain
Elimination of unfair trade practices:
legal identification of the main
categories and clear penalties
(public enforcement)
Self-regulation:
codes of conduct (like the Principles of Good Practice)
using a mixed approach

17. «Los contratos alimentarios deberán formalizarse por
escrito. Dicha formalización deberá realizarse antes del
inicio de las prestaciones que tengan su origen en los
mismos»
Legal certainty in trade relations: Agreements should
be in writing and cover relevant elements

18. The written agreement is mandatory but it does not
affect the existence and validity of the contract
Which agreements should be in writing?
Contents of the contract (art. 9)
Which are the consequences?
Legal certainty in trade relations: Agreements should
be in writing and cover relevant elements

19. The Law reinforces Legal certainty in relations
between the parties But will it change the parties’
behaviour under the contract, or will
it only introduce a new bureaucratic
element?
Legal certainty in trade relations: Agreements should
be in writing and cover relevant elements

20. Which are they?
a) Unspecified or ambiguous contractual terms
b) Retroactive contract changes
c) Transfer of commercial risk
d) Unfair use of information
e) Unfair termination or disruption of a commercial relationship
Elimination of unfair trade practices: legal identification of the
main categories and clear penalties (public enforcement)

21. Art. 12. Unilateral changes and additional payment requirements
Art. 13. About providing relevant essential information to the
other party in contractual negotiations and ensuring that
information is not misused
Art. 14. Brand Management
Elimination of unfair trade practices: legal identification of the
main categories and clear penalties (public enforcement)
Which are they?

22. What is the main tool of this Law against UTPs?
The Administration will be able to impose penalties on
operators for their contractual behaviour
The Fear Factor prevents Private Law from being effective:
the weaker party fears than initiating litigation may lead the
stronger party to terminate the commercial relationship
Elimination of unfair trade practices: legal identification of the
main categories and clear penalties (public enforcement)

23. What about the penalties?
All breaches of the Law are qualified as only minor
Confluence of different administrations, rules and procedures on
the same behaviours
Erroneous gradation of penalties
The procedure is not regulated in detail
Risk of generating anticompetitive effects
in the market.
Elimination of unfair trade practices: legal identification of the
main categories and clear penalties (public enforcement)

24. The Law includes administrative penalties for
contractual behaviour Paternalistic administration?
Elimination of unfair trade practices: legal identification of the
main categories and clear penalties (public enforcement)

25. CÓDIGO BUENAS PRÁCTICAS MERCANTILES EN LA CONTRATACIÓN
ALIMENTARIA
La Ley 12/2013, de 2 de agosto, de medidas para mejorar el funcionamiento de la
cadena alimentaria tiene entre sus fines el hacer posible un mayor equilibrio y
transparencia en las relaciones comerciales que se registran entre los diferentes
operadores que la integran, el mejorar el acceso a la información y la trazabilidad
a lo largo de la cadena alimentaria, así como la regulación de las prácticas
comerciales, promoviendo para el logro de dichos objetivos, entre otras medidas,
la formalización de códigos de buenas prácticas mercantiles en la contratación
entre los operadores.
El Título III de la citada ley está dedicado a los sistemas voluntarios de control,
establecidos bajo la fórmula de códigos de buenas prácticas, y en concreto el
Capítulo I se centra en la regulación de un Código de Buenas Prácticas
Mercantiles en la Contratación Alimentaria. Se encomienda su impulso al
Ministerio de Agricultura, Alimentación y Medio Ambiente, junto con el Ministerio
de Economía y Competitividad, las Comunidades Autónomas y las organizaciones
y asociaciones representativas de la producción, la transformación, la industria o
distribución.
En el artículo 15 de la citada Ley se establecen los aspectos que habrán de
tenerse en cuenta en relación con su finalidad, alcance y proceso de elaboración.
MINISTERIO DE
AGRICULTURA, ALIMENTACIÓN
Y MEDIO AMBIENTE
SECRETARÍA GENERAL DE AGRICULTURA
Y ALIMENTACIÓN
DIRECCIÓN GENERAL DE LA INDUSTRIA
ALIMENTARIA
Self-regulation:
codes of conduct (like the Principles of Good Practice)

26. Muchas gracias
Francisco González Castilla
Catedrático acreditado de Derecho mercantil
Presidente de la Comisión de Defensa de la Competencia
Comunitat Valenciana
Codes of conduct and Principles of Good
Practice: just good intentions?
The Law includes administrative penalties for
contractual behaviour Paternalistic administration?
The Law reinforces Legal certainty in relations
between the parties only a new bureaucratic element?

27. Muchas gracias
Francisco González Castilla
Catedrático acreditado de Derecho mercantil
Presidente de la Comisión de Defensa de la Competencia
Comunitat Valenciana