Fair business practices

Retailers and suppliers negotiating B2B contracts create value. But sometimes unfair outcomes occur due to power imbalances. How to prevent or remedy these unfair commercial practices in B2B relations?  

The challenge

Suppliers and retailers create substantial economic value: for themselves, for their customers and stakeholders, for the economy on the whole. But sometimes negotiations can get nasty; especially when there is a power imbalance in the commercial relationship, because one of the parties controls a substantive share of the market for the other party.

Unilaterally extending the term of payment, retrospective changing the contract, requiring co-funding of promotions, and applying disproportional sanctions are just a few examples of unfair business practices, which have been a cause for concern to many Dutch and European companies, trade organisations, competition authorities and governments.

There is no big deficit in substantive law here; most national rules are pretty clear about the rights and obligations of contract parties. Some norms can be clarified, however, and the law is not always known and internalized as norms in the daily contacts between the buyers and sellers.

The biggest problems, however, are enforcement of contracts and dispute resolution, if things don’t work out as agreed. The weaker party simply does not dare to raise issues or file a complaint to his business partner because of the fear of losing the contract now or in the future and, on the long run, losing his business.

The response

The Dutch Ministry of Economic Affairs, Agriculture and Innovation commissioned TISCO to facilitate an interactive consultation process involving two pilot sectors. Trade organisations representing retailers and suppliers from the agrifood and fashion sectors convened in focus groups and in a closing Round Table to discuss:

  • Experiences with fair and unfair business practices in Dutch commercial relationships;
  • Ways to promote fair practices, and to tackle unfair practices;
  • The possible role of self-regulation (code of conduct) as a means prevent problems;
  • Alternative forms of conflict resolution, such as mediation and dispute boards.

The consultation process has yielded rich insights in the needs and wishes of the trade organizations involved, although no commitment could be reached on the development of a code of conduct. Yet, promising avenues have been explored. In particular, terms of reference for a dispute resolution process have been discussed. The TISCO report Eerlijk, Scherp en Betrouwbaar containing the results of the consultation will be discussed in Dutch Parliament in April 2012 and has already caught the attention of EU's DG Internal Market, which is considering measures to improve the climate for B2B transactions.

Project details

Project leader: Corry van Zeeland
Duration: July 2012 - January 2013
Contact: Corry van Zeeland