Counterproductive Regulation? EU (Mis)Adventures in Regulating Unfair Trading Practices in the Food Supply Chain

Ever since the 1970s, the grocery retail sector in the EU has experienced substantial concentration. Concentration has resulted in a change in the balance of power between retailers and producers. For decades, EU food producers have complained about increasing concentration on the purchasing markets for food in Europe, aggressive bargaining on the part of retail chains, including ever increasing demands for low prices and dubious commercial practices such as unfair use of proprietary information and unilateral changes to contract terms. Complaints have resulted in much discussion both at the EU level and at the Member State level. Members of the European Parliament have pressed for enforcement of the competition rules and for reform of the Common Agricultural Policy (CAP). Additionally, a pan-European private self-regulatory initiative has been in place since 2013. However, where complainants have had the most success is at the national level. Making use of the exception in Art. 3(2) of Regulation 1/2003, EU Member States have introduced of a variety of new laws, in particular stricter competition rules and rules on unfair B2B contractual practices, in order to regulate the exercise of buying power in the food supply chain. Yet, these laws deviate from ‘mainstream’ EU competition law and may even be seen as a form of protectionism-in-disguise. Today only 5 out of 28 Member States have no specific regulation, with some Member States having put several types of legislative instruments in place. This paper questions the appropriate role of competition law in comparison with alternative approaches for addressing concerns about unfair trading practices (UTPs) in the food supply chain in the context of an integrated market. I first explain the background to the problem and what the role of EU competition law has been until now. I then map the developments at the Member State level and will distinguish three main approaches: a stricter competition law approach, a stricter contract law approach, and a private regulatory approach. Next, the paper discusses some of the curious side effects which have surfaced in enforcing stricter national rules. Building on Grabosky’s typology of counterproductive regulation (1995), the paper will shed light on some of the important yet overlooked perverse side effects which arise when regulation of buyer power or UTPs occurs at the national level in the context of an integrated market like the EU. The paper concludes with the argument that EU competition law should perhaps play a more prominent role in regulating the conduct of powerful buyers operating in an integrated market.