Green paper on unfair trading practices in the business-to-business

food and non-food supply chain in Europe

General remarksThe Danish government supports the European Commission’s focus onproviding an appropriate framework for more efficient markets in thebusiness-to-business supply chain.In the opinion of the Danish government the trade between the actors inthe supply chain is generally well-functioning. Most trade is based ongood, solid, long-term relations where trust is a key factor and annualcontracts and payment terms are respected. The Danish government how-ever also recognizes that markets in some respects do not function in anoptimal way and the UTPs described in this Green Paper are among themain reasons.As presented in the Green Paper general competition law addresses manyof the issues concerning UTPs. Some behaviour is not covered by thecurrent legislation but the Danish government is worried that increasedregulation may have unwanted negative consequences on contractualfreedom and make otherwise well-functioning markets more rigid.That being said, the European Commission may have a role in facilitatingvoluntary agreements between the actors of the food and non-food supplychain that can reduce current impediments to more well-functioning mar-kets.1. Do you agree with the above definition of UTPs?It can be hard to give a precise definition of an unclear conceptsuch as UTPs. Overall the Danish government however agreeswith the definition used in the Green Paper. There may be a thinline between fair and unfair practices and care should be taken be-fore practices that are a normal part of cooperation between trad-ing partners are labelled as “unfair”. In this context the Danishgovernment stresses that it is important to clearly distinguish be-tween illegal behaviour from dominant firms and unfair practices.2. Is the concept of UTPs recognised in your MemberState? If yes,please explain how.The relationship between producers and suppliers has receivedsome attention in Denmark. Several suppliers express that retail-ers have started to force tougher conditions on them. Ambiguouscontract terms, retroactive contract changes and transfer of com-

mercial risk seem to be the most common examples. The experi-ence of the Danish government is however that payment condi-tions and annual agreements are generally respected. In Denmark,no specific regulatory framework for UTPs exists.3. In your view, should the concept of UTPs be limited to contrac-tual negotiations or should they include the pre- and/or the post-contractual phase as well?The experience of the Danish government is that suppliers primar-ily experience what they see as unfair treatment during the annualnegotiations between suppliers and retailers. There are howeveralso examples of suppliers that report that strong retailers intro-duce non-agreed fees and fines during the year. The concept ofUTPs should therefore not only be limited to the contractual nego-tiations.4. At what stage in the B2B retail supply chain can UTPs occur?See answer to question 3.5. What do you think of the concept of "fear factor"? Do you sharethe assessment made above on this issue? Please explain.The Danish government has experienced that companies havebeen reluctant to complain due to among others a fear of retalia-tion from their stronger trading partners.This is seen in the rela-tionship between suppliers and retailers.6. In your experience, to what extent and how often do UTPs occurin the food sector? At which stage of the commercial relationshipdo they mainly occur and in what way?The Danish government does not have sufficient information onhow often unfair practices occur but the impression is that theagreed terms with some exceptions are followed in most trade re-lationships.The examples of UTPs that are listed in the Green Paper are to alarge extent however also observed in Denmark. Some suppliersreport that they are faced with retrospective margin claims andother claims that is not part of actual contract. Other examples aremarketing fees for activities that are carried out and producers ofprivate label products that demand to receive information aboutthe suppliers’ input prices. Risk sharing may in some cases im-prove market efficiency but there are examples of risk transferthat may only benefit the stronger party.7. Are UTPs present in non-food retail sectors as well? If so, pleaseprovide concrete examples.The examples of UTPs that have been highlighted in Denmark areall from the food sector. Sectors that deal with perishable goods

may be more exposed to unfair practices but there is no reasonwhy UTPs should not be present in other sectors in our view.8. Do UTPs have an adverse impact in particular as regards theability of your company to invest and innovate? Please provideconcrete examples and quantify to the extent possible.Not applicable.9. Do UTPs affect consumers (e.g., through influencing prices,product choice or innovation)? Please provide concrete examplesand quantify to the extent possible.The behaviour ofretailers may be the result of short term thinkingthat could lead to a smaller product choice and less innovation.The Danish government however is not able to give concrete ex-amples of this.10. Do UTPs have an impact on EU cross-border trade? Do UTPsresult in a fragmentation of the Single Market? If yes, please ex-plain to what extent UTPs impact the ability of your company totrade cross-border.Not applicable.11. Do the national regulatory/self-regulatory frameworks in placesufficiently address UTPs in some Member States? If not, why?The Danish government is not able to assess the efficiency of theframeworks that are in place in other Member States.12. Is the lack of specific national regulatory/self-regulatory frame-works addressing UTPs a problem in jurisdictions where they donot exist?In Denmark no specific regulation of UTPs exists. The Danishgovernment view is that general competition and marketing lawaddresses many of the issues concerning UTPs along the supplychain.13. Do measures that seek to address UTPs have effects only on do-mestic markets or also on cross-border trade/provision of ser-vices? If so, please explain the impact on the ability of your com-pany to trade cross-border. Do the differences between nationalregulatory/self-regulatory frameworks in place result in fragmen-tation of the Single Market?Not applicable.14. Do you consider further action should be taken at EU level?The Danish government can support initiatives that will improvecross border trade. Forcing additional legislation on the food andnon-food supply chain may have with negative consequences on

contractual freedom and make otherwise well-functioning marketsmore rigid.The EU may however have a role in stimulating voluntary agree-ments such as a code of conduct between suppliers and retailers.Such an initiative has already been taken by the High Level Fo-rum for a better functioning food supply chain, who has had theirmandate extended to the end of 2014 to pursue voluntary agree-ments with organisations representing the food supply chain inEurope.15. Where it exists, does UTP regulation have a positive impact? Arethere possible drawbacks/concerns linked to introducing UTPregulation, for example by imposing unjustified restrictions tocontractual freedom? Please explain.As mentioned earlier the Danish government is not able to assessthe efficiency of the schemes that are in place in other MemberStates. In Denmark there is a general tradition of little regulationon contractual freedom and a belief that competition law suffi-ciently covers most of the issues related to UTPs. Further regula-tion could create more rigid markets where the dynamics thatcharacterize a well-functioning market is unnecessarily hampered.16. Are there significant discrepancies in the legal treatment of UTPsbetween Member States? If this is the case, are these discrepan-cies hindering cross-border trade? Please provide concrete ex-amples and quantify the impact to the extent possible.The Danish government does not possess the required knowledgeabout other countries’ legal treatment of UTPs that is required toanswer this question.17. In case of such negative impacts to what extent should a commonEU approach to enforcement address the issue?Not applicable.18. Should the relevant enforcement bodies be granted investigativepowers, including the right to launch ex officio actions, imposesanctions and to accept anonymous complaints?National competition authorities already have many of the pro-posed remedies. The right to accept anonymous complaints mayhave a positive effect on the will of the weaker party to complainbut the EU Commission should be careful not to introduce meas-ures that will significantly reduce the due process of the strongeractors.19. Does the above list detail the most significant UTPs? Are thereother types of UTPs?

The practises listed in the answer to question 6 are the most com-mon in Denmark.20. Could setting up a list of prohibited UTPs be an effective meansto address the issue? Would such a list have to be regularly up-dated? Are there possible alternative solutions?The Danish government supports the creation of a list of loyalpractices but setting up the list ought to happen in cooperationwith trade organizations and should be introduced on a voluntarybasis.21. For each of the UTPs and corresponding possible fair practicesidentifiedabove,please:a)Indicate whether or not you agree the analysis of the Com-mission. If applicable, provide additional information.The general and very broad list of practices that is found in chap-ter 5 of the Green Paper probably describes the issues that allmember states are facing. The Danish government agrees with theoverall analysis of each category of practice. It is however notedthat the transfer of risk in some cases can improve market effi-ciency - even if more risk is transferred to the weaker part in a ne-gotiation. An example of this is the use of listing fees that in somecases may lead to a more efficient allocation of shelf space fornew products by reducing the inefficiency that can be caused byasymmetry in information between suppliers and retailers. It istherefore important to be very precise in the definition of whichrisk transfers the Commission sees as unfair. The examples givenin the Green Paper are however good examples of risk transferthat is harmful for market efficiency.b)Explain whether the UTP is relevant for the sector in whichyou are active.Not applicable.c)Explain if the corresponding possible fair practice could beapplied across the board in different sectors?The Danish government considers it plausible that some of thefair practices could be applied across the board.d)Explain if the UTP should be prohibited per se or if its as-sessment should be made on a case by-case basis.The Danish government find assessment on a case-by-case basisvery hard to implement and resource demanding to enforce for alldescribed practices. A general code of conduct could be sufficientin reducing much of the mentioned undesirable practices.22.As regards specifically Territorial Supply Constraints, please ex-plain:

a)What would you consider to be objective efficiency groundsjustifying a supplier not to supply a particular customer? Why?The Danish Government considers this issue sufficiently coveredby the Guidelines on Vertical Restraints.b)What would be the advantages and disadvantages of pro-hibiting territorial supply constraints (as described above)? Whatpractical effects would such a prohibition have on how companiesset up their distribution systems in Europe?The Danish Government considers this issue sufficiently coveredby the Guidelines on Vertical Restraints.23. Should the above possible fair practices be embodied in a frame-work at EU level? Would there be any disadvantages to such anapproach?Fair practices might just as well be part of the framework but themain focus should be on the more specific types of practices thatshould not be part of the B2B supply chain.24. If you consider further action should be taken at EU level, shouldthis be a binding legislative instrument? A non-binding? A self-regulatory initiative?The Danish government would prefer a self-regulatory initiativethat could be facilitated by the European Commission, and no leg-islative instruments. Such an initiative has already been taken bythe High Level Forum for a better functioning food supply chain,who has had their mandate extended to the end of 2014 to pursuevoluntary agreements with organisations representing the foodsupply chain in Europe.25.This Green Paper addresses UTPs and fairness of B2B relation-ships in the B2B food and non-food supply chain. Do you thinkthat any important issues have been omitted or under-representedin it?We do not consider there to be omitted or underrepresented is-sues.