Last year, the French legislature passed the “Loi EGalim”, intended to re-establish fairness between food producers and retailers. But none of the “fairness” measures have made anything fairer. Quite the contrary.
In a piece for FEE back in February, I went through the different dispositions in the bill. One of the flagship policies included was an increased margin for food producers of 10 percent. This means that the government is coming down on behalf of farmers in the negotiation between retailers and producers. In that article, I elaborated on the provision that forces retailers to increase the margins on all food products sold at no profit. For most of them, this entailed an increase of 10 percent, which would necessarily increase the prices paid by consumers by 10 percent and only make money for the government through VAT (value added tax).
That is precisely what the French Senate has now concluded following a set of hearings with experts. The French Institute for Liaison and Research on Industry and Consumption (ILEC) found that prices in supermarkets have increased as a result of the “Loi EGalim” and that the gains for companies have been 600 million euros, as opposed to the anticipated 300 million.
This measure, which institutes the "runoff" system, was singled out by the distributors, according to Nicolas Girod, Secretary General of the Farmers Confederation. "The +10% SRP (the threshold for resale at a loss) does not have the same effects depending on the size of the companies [...] The SRP restores profitability to the major brands, which are in a strong position to negotiate with larger counterparties. So at the expense of others, and especially at the expense of small and medium-sized businesses," explained Dominique Amirault, President of the Federation of Entreprises and Entrepreneurs of France (FEEF).
Secretary General of the E. Leclerc group Stéphane de Prunelé was also extremely critical: "We have always said that raising the threshold for resale at a loss at best would be useless, at worst would be harmful. We maintain that position. Because no one knows how to make the benefits flow to farmers."
Article 44 of the Egalim Act prohibits products that do not comply with European standards. But it's not only non-EU foods that are being scrutinised; while not the subject of the bill, food producers saw as an equivalent threat organic carrots from Belgium at Carrefour or from Italy at Aldi, courgettes and tomatoes from Spain, and mushrooms from Belgium, to name just a few examples. "Here again, organic products from other countries or French organic products do not meet the same rules," says Anne Jeanne of the National Federation of Agricultural Holders' Union, which urges consumers to eat locally sourced foods.
Essentially, French producers are asking for even more protectionism than that which is already in place through the EU's Common Agricultural Policy (CAP) and tariffs for non-EBA countries, as well as existing food standards.
But the Loi Egalim will help them no more than any other intervention in the French food sector. Government meddling in the relationship between producer, distributor, retailer, and consumer only tilts the balance in favour of one group at the expense of the other. In most cases, it will result in loss on the part of consumers, who are always obliged to bear the financial burden.
Attribution 2.0 Generic (CC BY 2.0), Jacques Paquier