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ΕλληνικάCASE STUDY
The difficult application of CSR in bargaining between small and big companies
Context:
Thanks to CSR, companies should understand their positive and negative impacts on society and the environment, and prevent and mitigate any negative impact they might cause, including their global supply chains. The fashion industry is dominated by large-size retailers, making the bargaining capacities among the different levels of the supply chain limited. This situation makes difficult the application of CSR policies. Indeed, there is no EU legislation on unfair business practices in the supply chain between small and big companies.
Description:
EU competition law deals with abuse of a dominant position and anti-competitive practices, but most reported unfair business practices do not fall within the scope of competition law, as many of the operators in question occupy a strong but not dominant position. As consequence, major retailers having a strong position are able to fix prices and determine conditions for the distribution of goods at the expense of the fashion manufacturers.
The Commission proposed in April 2018 the Directive on unfair trading practices in business-to-business relationships in the food supply chain to ensure fairer treatment for food and farming businesses with relatively weaker bargaining power for unfair practices by larger enterprises. Still, according to COM(2016)32, four unfair practices, in particular, should be avoided:
- a party should not unduly or unfairly transfer its own costs or risks business to the other party;
- a party should not ask the other party for benefits or benefits of any kind without performing a service related to the requested benefit or benefit;
- a party should not introduce unilateral or retroactive changes to a contract unless the contract specifically allows it under equitable conditions;
- it should not be possible to unfairly end a contractual relationship or threaten unjustifiably with ending a contractual relationship.
Source: image by mrsiraphol on Freepik
Lesson Learnt:
These general principles were established for the food industry, for which unfair practices are particularly strong. However, can be extended to any business relationship when the nature of bargaining parties is unbalanced. Also, if you are a small company having to negotiate with a larger size company, you should be aware of your right and make sure that those are respected. For this, inform yourself about your rights at the national level. If you suspect that you are unfairly treated, you should react and seek for mediation. You can for instance contact your business association, and ask for assessment and support, eventually for a demand.