The EU Commission published a proposal this week for a regulation on payment terms that removes the ability for companies to agree payment terms beyond 30 days.
EuroCommerce has warned that it is 'very concerned' that the proposal will severely affect the established practices of retailers and wholesalers who rely on negotiating payment terms that offer advantages to all parties.
The organisation said this will particularly be the case for products that sell over longer periods or seasonal products.
Payment terms in the food sector are already prescribed by the directive on unfair trading practices, but EuroCommerce said this proposal overrides those rules before their evaluation is even started.
The principal European organisation representing the retail and wholesale sector said this is to the detriment of legal certainty.
EuroCommerce said in a value chain, being able to freely negotiate payment terms is crucial.
The organisation noted retailers and wholesalers have to order goods months in advance before selling them, and agree payment terms with their suppliers to remain competitive.
Lack Of Flexibility
However, EuroCommerce warned that by imposing a strict term of 30 days, the proposed regulation will deprive businesses of the flexibility to enter into mutually beneficial arrangements.
The organisation also said it will cut off supply chain financing, taking away a 'positive form of finance' that fills the gap for companies who struggle to find affordable traditional bank finance.
'Distress Rather Than Relief'
“We support a culture of prompt payment in Europe, but restricting payment terms to address late payment issues is the wrong answer to a real problem," said Christel Delberghe, director general at EuroCommerce.
"Agreeing payment terms with suppliers is a crucial element of commercial negotiations."
"Taking away the chance for buyers who operate with low margins to make sales over a period of time to meet their costs risks distress rather than relief."