In recent years, European farmers have been facing two new phenomena: agricultural commodity price volatility and a decrease in agricultural added value. These issues led the High Level Forum to censure low transparency in relationships between firms and frequently unfair commercial practices, after the European Commission had recognized that the agri-food supply chains were functioning imperfectly. Economic theory considers contracts as a means of coordinating entrepreneurs’ decisions (e.g. in terms of time, quantity, prices and product quality). Nevertheless, in the presence of oligopsony, buyers use contracts to improve and exercise their market power, for example by imposing vertical restraints. This situation is typical of European food supply chains, where highly concentrated sectors (food industry and retail) use their bargaining power against agriculture. In this context, antitrust authorities and eu Member States have sought to resolve the situation by stipulating appropriate competition policy measures. In Italy, Law 27/2012 has recently introduced new mandatory rules regarding sales contracts for agriculture and food products, in order to increase trading transparency and reduce payment times. Using an embedded multiple-case study, carried out through interviews and direct observations, this article analyses the initial effects of the application of the law on the Italian agri-food system.
Keywords: Contracts, market power, antitrust, agri-food system, Italy
Jel Code: Q13, Q18, L14