WORKSHOP IN ISRAEL ON UNFAIR TRADING PRACTICES

IN THE FRESH FRUITS AND VEGETABLES SECTOR

The second national workshop in the frame of the ENPARD South Support Programme in Israel was held on the 14th and 15th of September in Tel Aviv, following a first meeting in May which was focused on the reform of the Israeli farmers’ support policy. Through these workshops, the Israeli government aims to discuss and find solutions, with the relevant stakeholders, in order to tackle the issue of high food prices while maintaining farmers’ income.

After first exploring possible options to replace price support policy with other measures to support farmers, the stakeholders involved in the dialogue initiated by the ENPARD South Support Programme in Israel have focused during the two day workshop on the unfair trading practices in the fresh fruits and vegetables sector as a possible cause of price distortion and as a source of problems for producers. The main goal was to discuss possible measures that the government could implement and possible private voluntary tools to adopt in order to fight against these practices, drawing especially on the European experience.

The seminar was carried out in two stages, a first open day devoted to expert presentations followed by a broad discussion and then, on the second day, a more in-depth technical workshop with a limited number of participants representing different categories of actors to draw conclusions and move towards practical solutions. To fuel the debates and exchanges on the tools and concrete measures to implement in Israel, three European experts specialised in the fresh fruits and vegetables sector were mobilised by the ENPARD South Support Programme team:

Professor Jean-Marie CODRON, from the French National Agriculture Research Institute;

Mr. Raymond TANS, Dutch consultant in the sector of fruits and vegetables;

Mr. Yvon AUFFRET, Director of CERAFEL, an organisation grouping fruits and vegetable growers associations in Britany, France.

The open meeting co-organised by the Ministry of Agriculture of Israel and the ENPARD South Support Programme team gathered more than 80 people from the different groups of stakeholders involved in the fresh fruits and vegetables value chain (producers, farmers organisations, trade unions, retailers, wholesalers, ministries and Israeli public bodies…).

After an introductory speech by Mr. Shlomo BEN ELIYAHU, Director General of the Ministry of Agriculture, the three European experts made their presentations:

Professor Jean-Marie CODRON analysed during his presentations the specificities of the fresh fruits and vegetables sector (wide heterogeneity of products, constraints due to the “fresh” nature of the products…). Thus, he explained the necessity to ensure a significant degree of flexibility to the actors of the sector and not to multiply binding rules. The stakeholders are forced to adapt to the circumstances they are unable to control, hence the value of using private tools and mechanisms.

Raymond TANS presented the European experience on regulation of this sector. The issue remains current and omnipresent in discussions in particular within the European institutions. In this context, the Commission had decided to give priority to voluntary approaches, competition and public arbitration instead of new regulations regarded as inadequate for this sector. The Dutch experience, whose legal tradition is close to Anglo-Saxon countries, has demonstrated that private mechanisms are a suitable tool to fight against unfair practices.

Yvon AUFFRET focused on the French example and the difficulties met by the government in the implementation of regulation tools in this particular sector. The struggle against unfair practices must be based on well-structured and powerful producers’ organisations to ensure that they stand together in negotiations with other actors.

Then, Yael KACHEL, ENPARD Israel Focal Point, gave the results of a wide consultation of the fruits and vegetables growers aiming to identify the difficulties they face during the negotiations with retailers. This survey revealed the imbalance between producers and retailers who are said to impose many constraints and conditions on farmers and are often perceived as acting in a discretionary manner. This is exacerbated by the concentration of retailers (large supermarket chains) and the fragmentation of farms.

In light of the previous observations, the Israeli government is pondering different options to improve these transactions: the "French" model based on public regulation or the "Anglo-Saxon" one relying more on private initiatives and codes of conduct adopted on a voluntary basis, sometimes with public arbitration mechanisms.

Debates with the audience following the presentations allowed the participants to express several points of view and proposals:

They reaffirmed the excessive weight of retailers in negotiations particularly due to their concentration;

They asserted the necessity of developing wholesale markets;

They mentioned the need to come back to the old Israeli values of union and solidarity for the producers and to restructure the farmers’ organisations and cooperatives;

They recalled the necessity of enforcing effectively existing laws and to complement public regulations with voluntary initiatives and private standards based on the “Anglo-saxon” model, which would enable a certain amount of flexibility to be retained.

The second day was devoted to discussing the ideas and remarks expressed the day before in order to move forward on the elaboration of concrete measures to tackle unfair practices. This technical workshop gathered some thirty participants from the main categories of actors of the fresh fruits and vegetables’ value chain in Israel, the ministries concerned by the issue and the academic community with the purpose of finding solutions to the challenges and constraints outlined during the previous day.

As an introduction, Yael KACHEL presented the main themes to be tackled concerning the issue of unfair commercial practices identified the previous day (concentration of retailers, fragmentation of farms, perishability of products and the heterogeneity of its quality, sales consignment…). Discussions followed this presentation revealing clear-cut positions and a certain lack of confidence between the actors of the sector. However, the participants agreed on different principles to be adopted to tackle these issues:

The need to implement a step by step approach favouring private mechanisms and tools based on voluntary schemes and to entrust the Ministry of Agriculture with the role of mediator during negotiations and disputes;

The definition of different quality scales for fresh products in order to ease transactions and the possibility of independent arbitration in the case of conflicting opinions.

Certain difficulties persist and it is challenging to reach a consensus especially on the issue of loss leaders which, while beneficial to the consumer in the short term, may be detrimental to alternative supply chains and to the sustainability of Israeli agriculture and thus ultimately harmful to the consumers. The issue of margin formation is also delicate, in particular because of the lack of objective information and, moreover, it seems uneasy to legislate on this subject.

Finally, it was stressed the need to adopt clear principles and rules in transactions to avoid certain biases on the basis of the following principles:

Risk sharing between actors in the chain;

Adoption of written contracts between producers and retailers;

Approval of clear principles for pricing;

Proof of the non-saleable nature of products delivered in the case of quantity deductions and immediate information provided to producers;

Greater transparency in relations and prohibition of unilateral changes to the contract.

In order to continue the work and move towards the formulation of concrete measures to struggle against unfair practices, the adoption of a step-by-step approach could help build trust between the different actors in the sector notably under the supervision and mediation role that the State could play, for example by setting up a multi-stakeholder decision-making body chaired by the Ministry.