Four years after the government banned loss-leading sales, first by decree and later through an amendment to the Food Chain Law, inspectors from the Ministry of Agriculture began a detailed review of how effectively the rule is being followed. Until now, there have been no firm sanctions tied to this practice, long identified as a major farming problem and a persistent trigger of protests by Spanish farmers.
The Food Information and Control Agency (AICA), a department of the Ministry tasked with ensuring the smooth functioning of the food chain, has issued a total of 195 penalties since January 2023, totaling 641,398 euros in fines.
The penalties publicly detailed by company and amount are only the ones that are settled administratively or judicially, explains Álvaro Areta of the Coordinating Body of Farmers and Ranchers (COAG). He notes that serious or very serious violations are recorded publicly, while minor penalties are not. Although the food chain law dates from 2013, fines became public only after a late-2021 amendment. This transparency was a long-standing goal for farmer associations: if people know which companies engage in abusive practices, they can decide whom to support or avoid.
“Although the monetary amounts may not seem large, they carry a strong deterrent effect and influence the reputation of the companies involved,” says the Ministry.
Most sanctions arise from failures to meet payment deadlines or from failing to formalize written contracts, and they tend to target intermediaries or supermarket chains. Yet to date, no fine has addressed the destruction of value in the supply chain, the term the law uses for loss-leading sales and the core focus of the regulation.
The regulation specifies that no link in the chain — producer, intermediaries, or retailers — may sell products below cost, except for perishables nearing expiry. The aim is to shield farmers and livestock producers who are often forced to accept industry-set prices. One expert notes that the industry previously did not recognize production costs. A shift in mindset is underway, with a call to buy at prices that cover costs.
To prove compliance, buyers and sellers must document production costs in the contract. Yet this measure is imperfect because buyers can still set prices. A producer recalls contracts that simply state the price covers costs or complies with the law. In areas with many crops, if one farmer refuses to sell, the industry can turn to another supplier, leaving many sellers and few buyers.
To prevent abusive situations, the Ministry pledged to strengthen AICA and publish cost studies that guide inspectors in detecting misalignments. For example, if producing a liter of milk costs 0.33 euros and a contract states a lower sale price, inspectors have a basis to request more information and take action.
The challenge lies in producing these studies, often commissioned to universities and consulting firms, which can take time and may become outdated by the time they are published. A commentator cites the olive oil sector as an example where conditions changed between study and publication, with drought and rising prices appearing after initial overproduction. In four years, the ministry has issued only five such reports, four on olive oil and one on milk.
Moreover, studies are only a starting point. If a formal complaint is filed, farmers must bring their own evidence. A farmer explains that stating cost parity with a study during negotiations is not the same as filing a complaint, where cost proofs must be provided. In many cases, the market allows a single buyer in a region to pull prices downward, so many farmers sell while a few still sell at higher prices.
To prevent abuses, the ministry arranged for organizations and farmers to file complaints accompanied by cost studies. At the same time, AICA inspectors are examining the commercial relations between companies and their suppliers to ensure compliance, a fact confirmed by the agriculture minister in response to recent inquiries.
Minister Planas encouraged organizations to report abuses and share the cost studies so the ministry can publish them online. Farm representatives urged the ministry to conduct proactive inspections as well.
One farmer union leader notes that inspectors have typically relied on supplier invoices to check payment deadlines and whether contracts exist. Yet proving that the price is above the cost requires the seller’s involvement. If the cost of producing a liter of milk is known, and a member’s product is bought below that cost, a complaint can be filed. When detailed cost data are available, the case can be supported more robustly and the necessary investigations can proceed.
All of these developments occur against the backdrop of protests that have been underway for about two weeks and are expected to continue through February. Organizers persuaded the government to promise stronger enforcement of the supply chain law. The ministry plans to elevate AICA’s status and empower it with greater authority and resources to oversee and enforce compliance.
Anonymous Complaints
From the farm associations, there is cautious optimism about the longer timeline for penalties tied to loss-leading sales and a belief that enforcement progress will continue. The early laws set the framework for behavior, and now the sector must allow time for the rules to take root. AICA has demonstrated that it can enforce rules and apply sound judgment. In the past, late payments were common; now penalties are more frequent, signaling a shift from easier to more challenging enforcement tasks.
Asaja argues that the cost studies should be updated regularly and given greater weight. The call is for stronger laws since, in many cases, producers are paid below the true cost of production, which indicates a fault in the system.
The ministry urges organizations and farmers to file complaints to enable action, but the issue remains sensitive. The process hinges on protecting the anonymity of complainants to avoid retaliation, a point stressed by farmers’ representatives and supported by the sector and inspectors alike.