Major retailers are accusing a Renaissance deputy bill of wanting to raise prices. The large agri-food producers believe it is necessary.
Inflationary “scandal” or necessary measure to preserve businesses? A bill that aims to change the balance of power in trade negotiations divides major retailers and major industrialists in the agri-food sector. But what exactly are we talking about?
• What does this bill say?
This bill contains four articles. From its official name, “bill aimed at securing the supply of consumer products to the French”, it is borne by the deputy Frédéric Descrozaille (Renaissance). It contains several provisions, such as the extension until 2026 of the promotion monitoring experiment and the resale at a loss threshold, measures provided for in the Egalim law, which expire on April 15, or the application of the French law on purchasing centers which were established outside France by the distributors.
But it was the third article that set things on fire: the latter proposes giving food manufacturers more weight in trade talks with major retailers. Frédéric Descrozaille explains that he wants to restore a “balance of power that is structurally unfavorable to suppliers” in these “fierce” discussions between the two sides. According to the rapporteur, this should make it possible to avoid a proliferation of bankruptcies in the agri-food sector, especially among the tens of thousands of small businesses.
• What does she want to change?
Every year, at the beginning of the year, the prices of food products are fiercely negotiated between suppliers and distributors before they hit the shelves. Specifically: how much is Auchan willing to pay for McCain fries? Crossroads for Herta ham? It is a legal obligation: each manufacturer must send its sales conditions before December 1, ie all the necessary information, such as the claimed prices. Manufacturers and distributors have until March 1, as provided by French law, to agree.
Currently, prices negotiated in the previous year will continue to apply if no agreement is reached by the deadline. The balance of power is therefore much more favorable to large retailers, who do not have to rush to agree on purchasing prices. Especially since it is organized in large purchasing groups, some of which unite several distributors: it is difficult for an industrialist to miss out, because a delisting in only one of these centers means a significant loss of turnover.
However, with the surge in production costs over the past year, maintaining input prices from the previous year could weaken small manufacturers. Article 3 proposes to rebalance this balance of power by giving more weight to the agri-food industry: in the absence of agreement in trade negotiations, the tariffs demanded by the industrialists would be applied by default. The boards would thus be forced to accept the significant price increases demanded by their suppliers.
• What are the distributors suing?
The big distribution doesn’t mince words, denouncing a “scandal” that it sees as inflationary. If passed, the bill, according to distributors, would be responsible for a very strong double-digit price increase, which would hurt French consumers. Until this Sunday, almost all the brands present in France come together in a joint press release calling on the delegates to “responsibility” – we find there Auchan, Carrefour, Casino, Cora, E.Leclerc, Intermarché, Lidl or System U .
The distributors accuse the concerned deputies of giving in to the lobby of the industrialists of the agri-food sector. For them, it is the big multinationals that are behind the bill, not the small companies. “This bill is madness for consumers. In every match there are two teams and a referee who determines the rules. This is the first time that a team can write the rules itself”, the current boss of the Mousquetaires group (Intermarché) is indignant on the set of BFM business.
The brands also point to the risk of stock shortages in their stores. Their suppliers could stop deliveries if they did not accept the new tariffs. These large multinational industrialists, for them, France represents 1-2% of their balance sheet, they have nothing to do with it, they will not hesitate to reduce deliveries if we do not accept without discussion,” prophesied Didier Duhaupand. Lidl France, Michel Biero , said from his side RMC that the adoption of Article 3 would mean the “end of trade negotiations”.
• What do the manufacturers answer?
The big industrialists reject “disproportionate” accusations. The texts governing trade negotiations “date from a deflationary era” and are no longer adapted to the current context, said Richard Panquiault, president of the Liaison Institute of Consumer Companies (ILEC), which represents manufacturers of major brand products. For the latter, not passing the law would be “a denial of economic reality” in the face of the “year-on-year” erosion of manufacturers’ margins due to the “price war” between distributors.
In addition, the fear of supply interruptions is considered exaggerated. Such situations would represent “an infinitely small number of cases,” continued BFM business Jean-Philippe André, President of the National Association of Food Industries (Ania). “Everyone would be a loser” in such a situation, guaranteed Richard Panquiault, who saw it only as a “deterrent” because delisting is always “dramatic” for an industrialist. The FNSEA, France’s largest agricultural union, also lent its support and accused the practices of large retailers.
Unlike large companies, some SME representatives have spoken out against the bill. A false good idea, according to the Federation of Companies and Entrepreneurs of France (Feef), which fears that we now have to choose between a sharp price increase or the elimination of products. If a multinational company can afford to stop supplying for a while during a confrontation with a distributor, that is not the case for a smaller company, which does not have the cash to do so.
• Will this bill be passed?
Examined last Wednesday in the Committee on Economic Affairs, it has already been amended and rewritten, in particular the famous Article 3. A one-month transitional period under the auspices of the Business Mediator is now provided for in case of no agreement; it will make it possible to agree on the terms of a new contract or, on the contrary, on a notice of commercial break. If the two parties have still not reached an agreement at the end of this additional month, the supplier’s terms and conditions will apply.
In fact, it is difficult to say whether or not it will be passed by the National Assembly, and in what form it will be passed. The government would not be in favor of it at all, but the text is supported by representatives of the presidential majority – the chairman of the Renaissance group, Aurore Bergé, has defended himself. In addition, the bill has been quite well received by environmentalists and socialists and is inspired by an earlier bill by a deputy Les Républicains, Julien Dive.
• What will happen next?
The legislative journey continues in the National Assembly. The Descrozaille bill will be discussed in plenary from Monday 16 January. The text can be further modified by Members of the European Parliament (71 amendments have already been tabled). The discussions will mainly focus on the experimental nature of the system. The government keeps an eye on things. Invited to BFMTV-RMC this Monday morning, Economy Minister Bruno Le Maire confirmed the executive’s unwillingness and called for “rework” of the text to find a “balance”.
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