Mr. Joe Healy:

I thank the committee for inviting the IFA to discuss unfair trading practices, UTPs, in the food supply chain and the draft EU directive on this area. I acknowledge the initiative by Commissioner Phil Hogan in prioritising the imbalance in the food supply chain and recognising the vulnerability of producers in it.

Some members may be asking what a UTP is. Everyday examples of UTPs are late payment for goods, cancellation at short notice of perishable food product orders, changing the terms of a contract without any notice, or a retailer charging the supplier for wastage of food products incurred on the shop floor. The IFA has campaigned for many years, both at home with Governments and throughout Europe, for a rebalancing of power in the food supply chain to deliver a viable price for farmers and a return on their work and investment.

In November 2016, the Agricultural Markets Task Force, AMTF, made recommendations on how to improve the position of farmers in the agrifood supply chain. It was recommended, among other things, that the European Commission would take steps to introduce a harmonised baseline of prohibited UTPs in member states and further increase market transparency of processors and retailers' prices, especially in the meat, dairy, fruit and vegetable sectors, by collecting and reporting such data in the chain. It was also recommended that the Commission foresee effective enforcements of UTPs by an independent public body to be set up by the member states.

In Brussels, I, as chairman of the COPA 1 and COGECA 2 group on the food supply chain, have been leading the campaign on retail dominance and UTPs on behalf of European farmers. The 2017 CAP consultation showed that 97% of EU consumers are in favour of the farmer getting a better share of the retail price.

To quantify the economic impact of UTPs in the agrifood sector, COPA and COGECA commissioned an independent study that showed that 94% of farmers and 95% of agrico-operatives had been exposed at least once to UTPs. The most striking finding of this study, however, is that UTPs have cost farmers and agrico-operatives €10.9 billion annually in the European Union. In recent years, we have had an intensive lobby campaign to curb this activity, targeting members of the European Parliament, the College of Commissioners and a number of directorates general in Brussels, primarily those concerned with agriculture and competition.

Across member states, there is recurring evidence of large retailers dominating the market with excessive buying power and dictating price levels to farmers, often driving prices to uneconomic levels and even below the cost of production. In Ireland, for example, the biggest three retailers – Tesco, Supervalu/Centra, and Dunnes Stores – have almost 70% of the market share. When Aldi and Lidl are included, this brings the figure up to 94%. In Finland, two retailers have an 85% market share, and, in France, the top three have a 56% market share. The message is clear: we need unequivocal and immediate action to curb UTPs at EU level.

The directive we are discussing provides for the introduction of a minimum common standard of protection across member states, which is welcome. This is but a first step in reining in retailers and rebalancing power in the food chain. It should form part of a wider effort in recognising powerful actors in the supply chain, which contribute to the imbalance between downstream and upstream players in the chain. The European Parliament, under the stewardship of rapporteur, Mr. Paolo De Castro, an Italian MEP, has approved the draft legislation. I recently chaired the COPA-COGECA food chain meeting in Brussels, where Mr. De Castro took our members through the European Parliament amendments and positions. There has been a call for the scope to be broadened to include all actors in the food supply chain. The EU Council has also supported the Commission's proposal, with a view to adoption in December.

Members will be aware that, in 2016, the Government introduced the grocery goods regulations, which provide for the control of certain UTPs between large supermarkets and wholesalers and their direct suppliers of food and drink products in the grocery goods sector in Ireland. It is the remit of the CCPC to enforce these regulations. Specifically, the Irish regulations relate to the direct business relationship between suppliers and wholesalers and retailers of food and drink operating in the country that have a worldwide turnover in excess of €50 million.

The scope of the draft EU directive will apply to certain UTPs that occur in regard to the sales of food products by a supplier that is a small or medium-sized enterprise to a buyer that is not such an enterprise. It will, therefore, apply to the sales of food products only by a supplier that has a turnover of less than €50 million to a buyer that has a turnover of more than €50 million. This means it will apply to a farmer supplying a co-operative or meat factory, but not to the co-operative or meat factory supplying a retailer. The IFA's position is that the EU directive should apply to the entire food supply chain. This is also the position of COPA and COGECA.

The proposed directive aims to reduce the occurrence of UTPs in the chain by introducing a minimum common standard of protection across the EU that consists of a shortlist of specific prohibited UTPs and leaves member states room to keep or provide for farther-reaching measures. It sets down provisions targeting minimum enforcement requirements applying to national competent authorities. It sets down a co-ordination mechanism between enforcement authorities facilitated by the Commission to enable the exchange of data concerning the number and types of infringement investigations carried out and of best practices with a view to improving the effectiveness of enforcement. It references the UK Groceries Code Adjudicator as a role model. It is going down the subsidiarity route, to complement existing arrangements in member states, which will have to transpose the UTP rules into national law. Twenty member states, including Ireland, have legislation in this area.

As the IFA understands it, the draft EU directive is not compatible with the grocery goods regulations 2016, primarily because of the scope of the proposed EU legislation. This was acknowledged by the CCPC earlier.

The proposed directive sets out to prohibit the following UTPs but makes no mention of a contract; payment later than 30 days; cancelling orders of perishable food products at short notice; the buyer changing unilaterally and retroactively the terms of the supply agreement on frequency, timing, or volume; and the supplier paying for the wastage of food products incurred on the buyer's premises. The IFA queries how, in the absence of a written supply contract, these four UTPs can be proven and outlawed.

The directive requires member states to ensure the following specified UTPs are prohibited, unless they are agreed in a supply contract: the buyer returning unsold food products; the buyer charging a supplier payment to secure or maintain a supply agreement; the supplier paying for the promotion of food products sold by the buyer; and the supplier paying for the marketing of food products by the buyer.

The grocery goods regulations provide for a greater list of UTPs. The IFA has called on the European Parliament to strengthen the legislation by adding other UTPs in order that producers have clear written contracts and to tackle abuses by retailers, including unsustainable discounting or below-cost selling, annual tendering by retailers, and payment for retention or better positioning of shelf space.

The draft directive provides for the designation of "a public authority" for the purpose of enforcement. The IFA's experience is that an independent retail regulator with a specific remit is required. It would be similar to the UK Groceries Code Adjudicator, which has proved to be a game-changer. In Ireland's case, this function is being subsumed in the CCPC, where its effectiveness is lost. The proposed directive holds up the UK model as best practice, and this is the model that the IFA wants the Government to follow. I imagine the meeting at the airport to which Deputy Cahill was referring was the one we organised and to which we invited the UK groceries regulator, Ms Christine Tacon.

The biggest issue for farmers is that they have no confidence in the CCPC to enforce the regulations. The IFA notes that, in September, the commission announced it is about to start inspections in the grocery sector to ensure traders are complying with their obligations. This is welcome but it should have happened much sooner.

The regulations were introduced in April 2016 and most farmers supplying the retailers, either directly or indirectly through a wholesaler, have no contracts. This is a blatant breach of the regulations and the commission has been invisible in the policing and enforcing of them. The establishment by the Government of a visible and active independent retail regulator would give confidence to suppliers that their complaints would be taken seriously and pursued.

Following this directive to address unfair trading practices, Commissioner Hogan is working towards bringing in an implementing Act that will address market transparency with the aim of having mandatory price reporting by member states. The IFA has called for this at all levels in the food chain so that margins and the profitability of processors and retailers are clearly visible. The figures do not lie. If we look at the euro the consumer spends on the various commodities across the European Union, the retailer gets 51 cent, the processor gets 28 cent, and the farmer is left with 21 cent.

In conclusion, it is clear that farmers are not getting a fair share of the retail price, retailers are the modern day dictators, abusing their power to accumulate vast profits and the current situation, whereby processors and retailers always make a margin while farmers are sometimes forced to produce at or below the cost of production, is totally unacceptable. We need the Government to transpose, without delay, the EU directive when it has been adopted in Brussels. To be effective this will require the appointment of an independent retail regulator with a specific remit - and I note the comments made by Ms Goggin in her presentation earlier - and that the regulator’s remit now be expanded to provide the European Commission with the mandatory price reporting required to comply with the transparency legislation that is to follow in the coming months. I ask the committee to support our request and to ensure a rebalancing in the food supply chain so that the farmer can get a fairer share.