Edeka, Rewe, Aldi and the Schwarz Group with Lidl are the leading retailers in Germany and, according to the Federal Cartel Office, together control more than 85 percent of the food market. This market power allows them to dictate the conditions for farmers and producers and, for example, to change the place, scope or frequency of deliveries unilaterally or at short notice. At the beginning of the year, Federal Agriculture Minister Julia Klöckner (CDU) announced that she would be strengthening the suppliers’ side by implementing the EU directive on unfair trading practices. Her bill passed the cabinet on Wednesday.
“We will implement the UTC directive in Germany one-to-one,” the minister announced. This is intended to prohibit certain practices, such as sudden cancellation of perishable food ordered or unilateral changes to delivery and payment conditions. It should also be prohibited that perishable products are paid for later than 30 days, non-perishable products later than 60 days after delivery, or that dealers demand payments from suppliers for the storage of products.
At some points the draft from the Ministry of Agriculture goes beyond the EU directive. It should also be generally forbidden to be able to send back products that have not been sold or can no longer be used without paying for them and without assuming the costs of disposal. The law provides for fines of up to 500,000 euros for violations.
“Smaller suppliers have little chance of fair contractual relationships with the big ones in the grocery trade,” said Klöckner at a press conference on Wednesday. The law also strengthens regional production and competition. Small suppliers often had no choice but to accept unfair conditions if they did not want to be “delisted”. Klöckner’s party colleague, Federal Minister of Economics Peter Altmaier, spoke of a “good compromise”. Fair and reliable contractual relationships are essential for both sides. The bill did justice to this goal.
Joachim Rukwied, President of the German Farmers’ Association (DBV), welcomed the new regulations that strengthened the position of farmers in the supply chain. “Unfair trading practices must finally come to an end,” said Rukwied. Nevertheless, from the DBV’s point of view, the regulation remains incomplete, for example the threatened fines are too low. In addition, the area of protection is limited to suppliers with a maximum turnover of 350 million euros, but this must apply to everyone regardless of the size of the respective actors.
The German Trade Association (HDE), however, rejects the law. It leads to less competition and, as a result, to rising consumer prices. “With the strict restrictions, the federal government is embarking on an economic wrong path,” said HDE managing director Stefan Genth. The decision of the federal government to generally prohibit contractually permissible design forms beyond the EU requirements is unnecessary and wrong.
The measures are not enough for the Greens spokesman for agricultural policy Friedrich Ostendorff. Unfair trading practices should also be banned among the main buyers of agricultural products such as dairies, slaughterhouses and mills, “above all the common practice of dairies to fix the milk delivery price afterwards.”
The draft law is now going to the Bundestag and Bundesrat. Klöckner announced that the Agricultural Market Structure Act should come into force in April 2021 at the latest.