The Ministry of Agriculture plans to initiate a draft law aimed at banning unfair trading practices within the food supply chain by the end of July, as stated by the Director of the Directorate for Agriculture, Miroslav Cimbaljević, to “Vijesti”.

This directive is designed to shield farmers and smaller producers and suppliers from unfair practices inflicted by larger buyers, traders, or processors in the food supply chain.

“The directive prohibits various unfair tactics employed by large buyers against weaker partners, such as delays exceeding 30 days for payment of fresh and perishable goods; unilateral and retroactive contract alterations by the buyer-trader; last-minute order cancellations, particularly when the goods are already prepared; compelling suppliers to incur costs for product promotion, marketing, or storage with traders; and denying written contracts at the supplier’s request… These prohibitions aim to foster equitable relationships within the food supply chain and enhance the position of farmers,” Cimbaljević elaborated in response to inquiries from “Vijesti” regarding the law’s preparation.

He emphasized that Montenegro can emulate the EU’s approach and adopt legislation based on this EU directive.

“This could result in significant shifts in the agriculture and food sector, but it’s essential to recognize that Montenegro has existing laws protecting agricultural producers, such as the Law on Obligations. We understand that small producers would benefit from enhanced protections if contractual relationships were fair and documented, which would bolster legal certainty. Additionally, the Law on the Regulation of the Market for Agricultural Products provides a framework for contractual relations between producers and purchasers, offering producers a sense of security,” Cimbaljević remarked.

While this law is not categorized as mandatory for incorporation into the Montenegrin legal system under Chapter 11, he noted their readiness to collaborate with interested stakeholders in the law’s adoption, with the Ministry consistently mediating among the market participants.

Domestic Producers Advocating for the Law

According to reports from “Vijesti”, a coalition of Montenegrin farmers, bakers, and food producers intends to urge the Chamber of Commerce to expedite this legislation, due to their dissatisfaction with product placement and the additional conditions imposed by certain retail chains.

North Macedonia, as a candidate for EU membership, successfully enacted similar legislation in March of the previous year—overhauling prior regulations on food price limitations and establishing trade margins of 10 percent.

The European Parliament enacted this directive in April 2019. Member States were required to integrate it into their national frameworks by May 1, 2021, with implementation commencing in December 2021.

“The food supply chain is prone to unfair trading practices, leaving farmers and small businesses often lacking the bargaining power to counter these issues,” states the explanatory memorandum accompanying the directive.

This directive necessitates that all EU member states establish agencies to enforce these regulations, granting them the authority to launch investigations and impose penalties.

Sixteen Prohibited Unfair Practices

To better the circumstances for farmers and small food producers, the EU has established regulations prohibiting 16 unfair trading practices. The directive differentiates between “black” and “grey” practices—black practices are universally banned, while grey ones are permissible only when explicitly agreed upon by both supplier and buyer.

The ten black unfair trading practices defined in Montenegrin law as strictly forbidden will include: delayed payments for products with short shelf life beyond 30 days; payments for other products exceeding 60 days; short notice for canceling orders on perishable items; unilateral alterations to contracts by buyers; unrelated payment demands to goods transactions; shifting risk of loss and deterioration to suppliers; refusal by traders to provide written confirmation of supply contracts at the manufacturer’s request; misuse of manufacturers’ trade secrets; commercial retaliation by traders; and imposing costs of consumer complaint investigations onto manufacturers.

No Return Costs or Extra Payments

The six grey unfair trading practices are allowable under the directive only if clearly agreed to in advance, meaning that food manufacturers accept them without coercion from the traders.

These measures ensure manufacturers do not incur costs for returning unsold goods; do not pay extra for storage, display, or inclusion in the retailer’s stock; do not cover marketing, promotional, or advertising expenses; and do not shoulder additional payments for the retailer’s staff managing market space.

In June 2022, “Vijesti” published the initial article discussing this directive and its limitations, providing analysis from the bakery sector illustrating that five million loaves of bread are wasted annually in Montenegro due to retailers’ demands for full shelves of pastries, regardless of actual sales. Retailers have expressed concern over unsold pastries impacting bakers negatively. This analysis revealed that the cost associated with returning unsold bread is a significant expense in its production.

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