“The complete stranglehold that the factories have on the livestock industry in Ireland is a gross example of the Unfair Trading Practice which this Directive should be addressing” – ICOS Marts

ICOS Marts have welcomed the European Commission’s proposal for a Directive on Unfair Trading Practices (UTPs) in the food supply chain, published yesterday.

The Directive has the potential to enhance harmonisation of regulations at EU level without endangering existing systems already in place where member states will have flexibility in terms of how to implement it.

It proposes a minimum list of prohibited unfair trading practices between buyers and suppliers in the food supply chain. It also lays down minimum rules concerning their enforcement and arrangements for co-ordination between enforcement authorities.

The Directive is limited to sales by an SME to a buyer that is not an SME.  According to the EU definition (which is currently up for revision), an SME is an enterprise that has less than 250 employees; a turnover of less than €50 m or a balance sheet of less than €43 m. Additionally it is limited to companies that have their base in the EU.

ICOS Marts Committee Chairman, Michael Spellman said:

“We’re concerned to ensure that meat factories must come under the scope of this Directive due to their dominant market position and the role that is exercised by a small number of large entities in the overall supply chain.

“The complete stranglehold that the factories have on the livestock industry in Ireland is a gross example of the Unfair Trading Practice which this Directive should be addressing. Measures currently being enforced by Irish meat factories in their buying practices are subverting the free trade of cattle in Ireland, controlling prices and stifling competition.

“Brexit is an additional complication where it’s uncertain as to the impact this Directive may have on the  UK and Northern Ireland jurisdictions and on the requirements and actions of Irish owned factories and British retailers.  Any divergence or weakening in the protections or regulations currently afforded to producers under existing legal frameworks must be challenged at all costs”

“We welcome the fact that Commissioner Hogan has stated to MEPs, when presenting the proposals, that the list of infringements could be added to.  I would urge the Commissioner to look to Ireland where he could easily add to the list through an examination of the trading practices currently enforced by the meat industry in this country, and most particularly the spurious penalties that are levied on producers based on unreasonable conditions such as limitations on livestock movements. This has a further knock-on effect in curtailing trade by marts which are one of the last bulwarks of free trade and competition in the Irish meat industry,” said Michael Spellman.

NOTES

The Irish factory ‘Quality Payment System’ penalises more than 4 movements of livestock between farms prior to slaughter, ostensibly for quality and animal welfare reasons. Cattle that have moved farms in the last 70 days before slaughter are also penalised and don’t qualify for a QPS bonus, even if all farms are quality assured under the provisions of the national Bord Bia Beef and Lamb Quality Assurance Scheme. This is in spite of the fact that the Bord Bia scheme allows for multiple movements between quality assured farms before and during the final 70 day period prior to slaughter.

The factories contend that the basis for their restrictions is consumer driven but there is no factual basis for this.  As recently as 2015, ICOS, together with the Livestock Auctioneers Association (LAA) in England and the Institute of auctioneers and appraisers in Scotland (IAAS) consulted with major UK retailers (a key destination for beef from Irish owned factories) who confirmed that they have no requirement to penalise livestock movements in the manner conducted by the factories. They do however want all beef to be quality assured either through via Bord Bia’s scheme in Ireland or the ‘Red Tractor’ scheme in the UK.

There is also a further anomaly in Ireland where the Irish national Animal Identification and Movement System (AIM) is open to third parties to view and access all prior animal movement data.  Other EU countries do not allow third parties to access all prior movement data, and for good reason. Enabling third parties to record information onto the AIM system is necessary and acceptable but the AIM data is being used in reverse by factories and retailers to penalise farmers based on the number of movements of their livestock.

Currently the Unfair Trading Practices listed in the draft Directive include late payments for perishable food products, last minute order cancellations, unilateral or retroactive changes to contracts and forcing the supplier to pay for wasted products.

Other practices will only be permitted if subject to a clear and unambiguous upfront agreement between the parties: for example, a buyer returning unsold food products to a supplier; a buyer charging a supplier payment to secure or maintain a supply agreement on food products; a supplier paying for the promotion or the marketing of food products sold by the buyer.

Sanctions can be imposed by national authorities where infringements are established. An investigation can be initiated on the national authority’s own initiative or based on a complaint. Parties filing a complaint will be allowed to request confidentiality and anonymity.

ICOS represents over 130 co-operatives in Ireland – including the Irish dairy processing co-operatives and livestock marts – whose associated businesses have a combined turnover in the region of €14 billion, with some 150,000 individual members, employing 12,000 people in Ireland, and a further 24,000 people overseas.

ENDS