According to Euractiv, amidst calls from several EU leaders to reassess the balance of power in the supply chain, the retail association Eurocommerce has called for avoiding stricter rules against transnational purchasing alliances.

Reactions following European farmers' protests

In recent months, farmers have protested on the streets of several EU countries due to rising costs and insufficient trade protections, with political leaders in Spain, France, and Germany committing to addressing the market power of supermarkets and the food industry.

Spanish Prime Minister Pedro Sánchez was the latest to make a move as protests escalated in southern Europe, stating that his government would strengthen national food supply chain law.

At the end of January, German Economy Minister Robert Habeck denounced the pricing power of the food industry amid nationwide protests.

But the firmest stance came on February 5 from French President Emmanuel Macron, who called for stronger EU legislation to ensure greater protection for farmers, the weaker economic players in the food chain.

French President Emmanuel Macron called for greater protection for food producers through a "European Egalim" law, a reference to French legislation regulating commercial negotiations with supermarkets and producers.

Macron proposed shaping the new EU rules based on the national "Loi Egalim 3," which is the strictest in Europe, preventing retailers and wholesalers from sourcing food and other products from other EU countries.

In doing so, the law targets retail alliances, namely those with different national players coming together to establish purchasing centers in other EU countries.

Pushing back

The retail industry quickly reacted and shifted blame. Retail alliances, intended to increase contractual power in commercial negotiations with major food processors, are beneficial to consumers and have had "no demonstrated negative effects on farmers," said Eurocommerce – the European association representing retailers and wholesalers – in a press release.

A 2020 study by the European Commission's Joint Research Center acknowledged that farmers are typically the weaker stakeholders in the food chain, facing increasingly concentrated processing or retail sectors.

The report also suggested that the impact of retail alliances on farmers is difficult to assess and likely indirect since these alliances in Europe usually do not deal with fresh produce and do not negotiate directly with producers.

Eurocommerce urged decision-makers to "refrain from taking hasty action under pressure," adding that their companies have "few direct relationships with farmers, less than 5%."

The business association highlighted "major international suppliers of processed products" – such as cola producers – and their "strong market positions."

"These global suppliers continue to obtain significant margins," the press release stated, adding that European retail alliances are a way to address this.

"Pointing fingers at certain actors in the food chain will not solve the issues many farmers and processors in Europe face today," said the food industry association FoodDrinkEurope to Euractiv in a statement.

"We need to move beyond these oversimplifications and focus our efforts on strengthening the value chain from farm to fork," FoodDrinkEurope added.

The French case

In France, the 2023 Egalim law, aimed at supporting farmers in negotiations with other stakeholders in the food supply chain, requires all products sold in France to comply with French laws, even if the products were purchased from European buying centers in France. Spain, the Netherlands, or Belgium.

Last December, Eurocommerce urged the European Commission to "act as a matter of priority" against the French law "which restricts the freedom of retailers and wholesalers to source on the single market, violating EU law."

The Egalim laws require operators to take into account the rising production costs of farmers (raw materials, energy, etc.) during commercial negotiations. The latest Egalim law, Egalim 3, goes further by imposing a limit on promotions for distributors (maximum 34%). The cost of agricultural raw materials such as meat and milk can no longer be negotiated.

At the EU level

Farmers' contractual power in food markets has been a longstanding policy issue in EU debates.

In 2010, the Commission established a high-level forum for better functioning of the food supply chain, then launched the Supply Chain Initiative (2013-2019); in 2016, a working group for agricultural markets worked on this issue, and eventually, the EU adopted an EU directive defining a common list of unfair trading practices in the food chain in 2019.

In a debate in the European Parliament yesterday (February 7), Commission Vice President Maros Šefčovič told MEPs that the EU executive is currently inspecting the directive's implementation in the EU, aiming for "uniform implementation" of the rules.

The directive was fully transposed into national law only in 2022, and it is unlikely that the Commission will reopen the Pandora's box of an extremely controversial subject in the short term.

"Indeed, the issue is controversial," said MEP Paolo De Castro to Euractiv. De Castro was the EP rapporteur for the 2019 directive.

"It wasn't easy," he recalled, "because the divergence between the views of stakeholders was very strong, as well as between Member States and also within the Commission itself."

"Now we have minimum EU rules, and we hope that Member States will fully implement them," De Castro concluded.