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The reform of the Food Chain Law was approved in December 2021 with the aim of becoming a key element in achieving fairer, more balanced and transparent trade relations. Following the list published by the Food Information and Control Agency (AICA) -an autonomous body attached to the Ministry of Agriculture, Food and Environment-, in which it has reflected the first 69 sanctions for non-compliance and infringements by different companies, we review what this Law consists of and how it affects the sector and consumers.
The main mission of this initiative was to improve food procurement legislation and to regulate all unfair trading practices in the food chain. This would lead to fairer prices for all operators, in particular the weakest, the producers. For example, this rule prohibits the destruction of value, whereby each operator in the food chain must pay the next operator upstream a price equal to or higher than the assumed cost of production. This basically means that selling at a loss, i.e. selling below cost and charging less than what has been paid, is prohibited.
In addition to regulating the contracts of all parties in order to promote commercial transparency, it also added new practices considered abusive, including demanding payments unrelated to the sale of the products, unilaterally changing the terms of a contract, divulging company secrets, or cancelling an order for perishable products within a month before the indicated time, among other measures.
To carry out control tasks, the role of the Food Information and Control Agency (AICA), recognised as the national enforcement authority to ensure compliance with the Law on the Chain, was strengthened. It is the contact point for cooperation between the enforcement authorities of the Autonomous Communities and with the European Commission.
Among the main reasons for the penalties that have been published recently are non-compliance with payment deadlines (set at a maximum of 60 days), cases where the contract was not formalised in writing, or where the price agreed by the parties was not included. In other cases, changes had been made to the price included in the contract, but were not agreed. On the other hand, there were no penalties for selling at a loss, which is one of the main objectives of the law, as mentioned above.
How does this affect consumers?
Although this law ends its scope of application at the distributor, in a certain way it also ends up affecting the consumer in one way or another. As José Miguel Soriano, head of Andersen’s Agrifood team, told Newtral at the time, “the strict application of the chain law is going to mean that the consumer is going to have to pay more. Distribution has to respect the obligation to buy above the objective cost of production, if it buys more expensive, it will sell more expensive. It is a chain”.
For their part, the Unión de Pequeños Agricultores y Ganaderos (UPA) explained that the consumer would be affected if the Law was not applied correctly, as it could benefit certain parts of the chain to the detriment of others. “The large-scale distribution sector has accumulated so much power that it uses food as a lure product, making abusive offers. This has led to a context of falling prices throughout the whole chain, which in the end ends up stifling the first link”, added Newtral.
Currently, food prices are the most expensive since records have been kept. In January there was an increase of 15.4% year-on-year. One of the problems is the cost of food production, something that various associations in the sector have been denouncing for months. When it comes to growing crops, fishing or raising animals for consumption, the cost is much higher, due to the increase in the price of energy or climate change.
The Minister of Agriculture, Fisheries, Food and the Environment, Luis Planas, held a meeting with the Food Chain Observatory to analyse the rise in prices. In the press conference that followed, he stated that there were “objective reasons for food prices to fall and for a change in trend”.
Meanwhile, different associations in the agri-food sector are calling for lower VAT on meat and fish, and other products such as honey, preserves and yoghurts. These are measures that, for the moment, the government is not considering implementing. However, from Unidas Podemos Unidas Podemos they propose “a 14.4% discount on the basic shopping basket through a direct discount to alleviate the economy of many families”.