Vertical integration contracts in agriculture: fair trade and efficiency of the food chain

Research output: Chapter in Book/Report/Conference proceedingChapter

Abstract

The paper examines the regulatory instruments through which the law can enhance the efficiency and fairness of trade in the food chain. In this respect, vertical integration contracts play a key role in regulating the relationships in the supply chain, requiring farmers to comply with specific criteria and techniques of cultivation and breeding and to sell all their products to the other party. The other party, in turn, is obliged to purchase the products after having verified the compliance with all the agreed standards.However, this integrated system of production exposes farmers to the hazard of abuse because of their position of economic dependence. As a consequence, it’s necessary to develop legal instruments, which could prevent the abuses of bargaining power. In those systems that identify the foundation of law in ethical values and inalienable rights incorporated in the Constitution, it would be unacceptable a reading of the rules governing economic relations as exclusively aimed to promote market efficiency. The protection of other interests calls for a mandatory discipline of contractual relationships, coherent not only with the economic, but also ethical function of the market. In the free market, however, the law does not impose authoritatively a contractual settlement, considered as an a priori right; but it corrects the imbalances generated by abuse of bargaining power that would limit the freedom of the economically weaker party, forcing it to accept unfair conditions. Differently from the neo-liberal model, this public intervention is not limited to establishing organizational and procedural rules, with reference to a principle of formal equality of contracting parties, but aims at removing social and economic barriers that, by limiting the freedom and equality of the parties, prevent the full development of the human person even in the context of contractual relationships.
Original languageEnglish
Title of host publicationEnviosioning a future without food waste and food poverty
Pages89-93
Number of pages5
DOIs
Publication statusPublished - 2015

Keywords

  • bargainng power
  • fair trade
  • farming contracts
  • framework agreements
  • supply chain

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