Brussels declares war on supermarkets :-: Politics
Politics
Supermarkets are now squarely in the EU’s crosshairs.
Brussels dithered for years over how to respond to complaints from farmers that they have almost no bargaining power against titans such as Britain’s Tesco and France’s Carrefour. The farmers’ key demand is that the EU should roll out legislation to end so-called unfair trading practices, such as late payments by supermarkets and abusive contracts.
Until now, the Commission tried to present itself as a neutral broker in these bitter, complex feuds over the food supply chain.
That all changed Friday, when European Commissioner for Agriculture Phil Hogan launched an unexpected attack on supermarkets in a speech at Dublin Castle and announced he would aim to draft legislation to protect farmers from hypermarket kingpins. Hogan was categorical about who was to blame.
“Concretely, supermarkets in particular now enjoy ‘super power’ due to the twin effect of increased globalization and a high level of concentration within Europe,” he said. “This gives them disproportionate leverage over primary producers.
“The imbalance of bargaining power between price setters and price takers is stark, leading to a situation where there is a real ‘fear factor’ for farmers of commercial retaliation, late payments and other headaches,” he told his audience in Dublin.
“This is a narrative which has been built up by the farming community — that all their problems can be blamed on retailers” — Neil McMillan, director at EuroCommerce
Retail analyst Kantar says the Tesco, Sainsbury’s and Asda chains control nearly 60 percent of the U.K. grocery market. In France, Carrefour, E. Leclerc and Intermarché command more than 55 percent.
Hogan’s aides later tweeted an image of a farmer in green dungarees struggling under the weight of a food processing plant and a supermarket. The commissioner’s hard-line speech against food retailers triggered a flurry of phone calls and emergency meetings of supermarket lobbyists in Brussels concerned about an assault on what they argue should remain a free market.
Purveyors or profiteers?
Hogan’s legislative proposal is expected early next year and will include new rules aimed at improving price transparency in the market and increasing the power of agricultural cooperatives so that farmers face fewer problems with late payments, poorly negotiated contracts or limited bargaining power, people familiar with the plan say.
Hogan insists it is time to give farmers a “fair share of the pie” | Julien Warnand/EPA
Another idea that Brussels considered after it received recommendations from an independent group of experts last year would oblige countries to set up so-called groceries’ adjudicators that could fine supermarkets should they treat farmers unfairly. The U.K. has already activated such an initiative, and in 2015 found evidence that Tesco failed to pay farmers for their goods for more than a year after disagreements over the amount they owed.
Supermarket chains like Lidl and Carrefour, however, say they are being unfairly targeted. They actually buy very little directly from farmers and instead deal with large processors such as Arla, Nestlé and Danone. Many of the retailers insist the bumper margins are made in the processing businesses, not by supermarkets.
“This is a narrative which has been built up by the farming community — that all their problems can be blamed on retailers,” said Neil McMillan, director at EuroCommerce, an industry lobby representing supermarket groups such as Carrefour, Tesco and Lidl.
McMillan said 95 percent of what supermarkets buy comes from processors, not farmers. He also noted that net margins among supermarket chains were between 1 percent and 3 percent due to extensive spending on wages, transportation and refrigeration.
Paying farmers better prices requires agricultural workers to “add value” by supplying local markets and consumers with what they want, he added. For example, he said, farmers in France were not satisfying high domestic demand for organic pork and beef, leaving supermarkets no option but to import from Germany.
Securing a legacy
The stakes for Hogan are high. The Irish commissioner knows he will be hard pressed to see through a serious reform of the Common Agricultural Policy — the bedrock of European farm policy that represents some 40 percent of the EU budget — before the end of the current Commission’s mandate in 2019.
The bottom line is that there is likely to be less money for farm subsidies available after Britain’s departure from the bloc.
French riot police stand guard in front of a Carrefour during a farmers’ protest in Le Mans, France | Jean-François Monier/AFP via Getty Images
This means that his legacy among farmers could well depend on whether he can protect them from supermarkets. Legislation on unfair trading practices could help make up for that funding loss.
Pekka Pesonen, secretary-general of Copa & Cogeca, the lobby representing farmers in the EU, said there is widespread support among his members for tough action to rein in supermarkets.
“Suppliers big in number are very small in negotiating power and have been squeezed by the retailers,” he said.
Last year, an independent Agricultural Markets Taskforce set up by the Commission concluded that the EU should “introduce a harmonized baseline of prohibited UTPs [unfair trading practices] in member states.” It recommended that no payment periods should take longer than 30 days. It also insisted that there should be no retroactive changes to contracts, no contributions to marketing costs, no claims for wasted products, no last-minute cancellations and no demands for upfront payments.
Hogan was unimpressed and insisted it is time to give farmers a “fair share of the pie.”
Any such policy proposal will not be implemented without a stern fight from supermarkets.
In August, EuroCommerce submitted its feedback on the issue of UTPs, insisting that regulation at EU level was not the right tool.
“We furthermore do not see added value of further EU level regulation as all member states have basic regulation covering contractual relationships,” it said. “A significant majority have adopted complementary schemes to address alleged UTPs, including enforcement provisions.”
Hogan was unimpressed and insisted it is time to give farmers a “fair share of the pie.”
