The Ministry of Agriculture will begin working on a draft law on the prohibition of unfair trading practices in the food supply chain by the end of July, in accordance with European Directive 2019/633, the Director of the Directorate for Agriculture told "Vijesti". Miroslav Cimbaljević.
This directive aims to protect farmers and small producers and suppliers from unfair behavior by larger buyers, traders and processors in the food supply chain.
"The directive prohibits a number of unfair practices that large buyers use towards weaker partners, such as delays in payment for fresh and perishable food products for more than 30 days; unilateral and retroactive changes to contracts by the buyer-trader; last-minute cancellation of orders, especially when the goods have already been produced; forcing suppliers to pay for promotion, marketing or storage of products with traders; refusing a written contract if the supplier requests one... These practices are prohibited in order to establish a fairer relationship in the food supply chain and improve the position of farmers," said Cimbaljević when asked by "Vijesti" about the preparation of this law.
Montenegro, as he stated, can follow the example of the EU and adopt a law based on this EU directive.
"This could bring certain changes in the agriculture and food sector, but we must point out that Montenegro already has laws that protect agricultural producers, such as the Law on Obligations. We are aware that there would be greater protection for small producers, if contractual relations were fair and in writing, which would increase legal certainty. I must also point out that the Law on the Regulation of the Market for Agricultural Products, which offers the possibility of contractual relations between producers and purchasers, can also provide a sense of security for producers," said Cimbaljević.
He states that this law is not recognized as an obligation to be transposed into the Montenegrin legal system from Chapter 11, but that they are ready to work together with interested parties on the adoption of this regulation, and that the Ministry takes on a daily mediating role between actors in the agricultural products market.
Domestic producers interested in the law
According to information from "Vijesti", a group of Montenegrin farmers, bakers and food producers will request, through the Chamber of Commerce board, that such a law be passed as soon as possible, because they are dissatisfied with the status and placement of their products by some retail chains, as well as their additional demands for payment for positions in markets, conditions with rebates and payment periods.
North Macedonia, as a candidate for membership, adopted this law in March last year, and it replaced the previous regulations on limiting food prices, i.e. it defined trade margins at 10 percent.
The European Parliament adopted this directive in April 2019. Member States had to transpose it into national law by 1 May 2021 and start applying it from December 2021.
"The food supply chain is vulnerable to unfair trading practices. Farmers and small businesses in the food supply chain often do not have sufficient bargaining power to defend themselves against these practices," the explanatory memorandum to the directive states.
The directive also stipulates that all EU member states must have agencies to enforce these rules, which must have the authority to initiate investigations and impose penalties.
Sixteen black unfair practices
In order to improve the situation of farmers and small food producers, the EU has adopted regulations prohibiting 16 unfair trading practices. The directive distinguishes between “black” and “grey” practices. Black unfair trading practices are prohibited regardless of the circumstances, but grey practices are only permitted if they are clearly agreed upon between the supplier and the buyer.
Ten black unfair trading practices, which will have to be defined in Montenegrin law as absolutely prohibited and punishable, are: payments for products with a short shelf life after more than 30 days; payments for other products after more than 60 days; short cancellation periods for orders for perishable products; that the buyer unilaterally changes the contract; payments that are not related to the transaction for the purchase of goods; transfer of the risk of loss and deterioration to the supplier; that the trader, despite the manufacturer's request, refuses written confirmation of the supply contract; that the trader abuses the manufacturer's trade secrets; commercial retaliation by the trader and transfer of the costs of investigating consumer complaints to the manufacturer.
No return costs or additional payments
The six grey unfair trading practices are only possible under the directive if they are agreed in advance in a clear and unambiguous manner, that is, if the food manufacturer accepts them without pressure from the trader.
These measures prohibit the manufacturer from suffering damage for the return of unsold products; from paying additionally for storage, display and inclusion in the retailer's offer; from paying for marketing; promotion; displaying and advertising goods in markets and from paying additionally for the retailer's staff who equip the market space.
In June 2022, "Vijesti" had the first article about this directive and its limitations, as well as an analysis from the bakery industry that five million loaves of bread are thrown away annually in Montenegro due to retailers' requirement that their shelves be full of pastries regardless of how much bread they sell. Retailers also complain that unsold pastries are detrimental to bakers. This analysis showed that this return of unsold bread constitutes one of the most significant costs in its production.
Bonus video:
