German grocers Edeka and Rewe worry new EU rules that would ban the cooperation between retailers and wholesalers, the bedrock of their business model, could spell their demise.
The EU aims to pass the Unfair Trading Practices directive next year to better protect farmers’ interests. If the rules are implemented in the amended form approved by the EU Parliament’s agriculture committee, they would “destroy functioning cooperative structures in the grocery supply chain,” warned Edeka CEO Markus Mosa.
The usually reticent head of Rewe, Lionel Souque, said: “A directive that was originally intended to protect farmers will end up banning the cooperative retail trade.”
Rewe and Edeka are cooperatives of independent supermarkets. The directive in its current amended form would ban joint purchasing by wholesalers and retailers, a practice that allows small grocery traders to compete with the big retail chains.
The directive also would give multinational corporations like Nestlé or Unilever the same rights as farmers in their dealings with retailers. “The market is being made to make way for regulation to the detriment of retailers and consumers,” said Mr. Souque.
The directive, proposed by EU Agriculture Commissioner Phil Hogan, is aimed at shielding farms from the might of big grocery chains. Its measures include banning the unilateral cancellation of an order of perishable products less than 60 days from the agreed delivery date. The EU estimates that farmers suffer losses of some €11 billion ($12.7 billion) every year because retail chains change contracts after they’ve been agreed upon or cancel orders at short notice.
“In this David against Goliath fight, we are arming the weakest in the grocery supply chain,” Italian MEP Paolo de Castro declared grandly.
But the parliamentary amendments have undermined the intended effect, critics warn, noting that big retailers have skilfully lobbied the parliament into including them in a list of market participants classified as eligible for protection.
The amended draft directive has also been criticized for switching the burden of proof: It would not be up to suppliers to prove that they have been treated unfairly but up to retailers to prove their innocence.
Retailers are also furious that the European Parliament has called for a ban on companies setting their own animal protection and environmental standards. In future, the trade must only adhere to state certificates and regulations. “This would counteract all our efforts to improve animal welfare and achieve more sustainable consumption,” Mr. Souque said.
The idea behind the amendment is that suppliers must not be subjected to tougher requirements than are set by authorities. In effect, though, it would significantly weaken animal welfare because most retailers employ far stricter standards than required by law.
The Austrian government, which holds the rotating presidency of the EU, has come out in support of retailers such as Rewe and Edeka. Austria’s sustainability minister, Elisabeth Köstinger, told Handelsblatt that the European Council, made up of the leaders of the EU member states, did not intend to stop retailers in cooperative groups from engaging in joint purchasing in future.
Her position carries weight because she is leading negotiations on the directive between the parliament and the EU Commission. She also said big retailers won’t be included in the protection the directive intends to give farmers.
“We’re at the start of negotiations on the details,” Ms. Köstinger said. The market is dominated by a number of very big retail chains that are exerting pressure on farmers, in some cases with very problematic methods, she said. The EU simply wants to to stop that — no more and no less.
Florian Kolf leads a team of correspondents covering the trading and consumer sector for Handelsblatt. Hans-Peter Siebenhaar is Handelsblatt’s correspondent in Vienna. To contact the authors: email@example.com, firstname.lastname@example.org