Authors: Tom Walters and Ed Worsdell

In our monthly series, Window on Europe, we look at some of the best policy ideas emerging from the rest of the continent and consider potential opportunities for implementing similar ideas here in the UK. In this piece, we consider how Spain’s Ley de la Cadena Alimentaria (LCA), or Food Chain Law, has improved fairness for producers in the supply chain and what can be learnt from the introduction of this legislation on the Iberian Peninsula. 

Aims and objectives of the LCA

The LCA, which refers to Ley 12/2013, amended by Ley 16/2021, aims to improve how the agri-food system works and correct imbalances between actors including farmers, processors, distributors, and retailers. It looks to address structural inequalities between operators, ensuring both market efficiency and social justice and recognises that private law alone is insufficient to guarantee fairness, thus justifying intervention to correct imbalances and regulate private contractual relationships in the public interest.

The LCA also promotes working towards broader structural goals such as improving efficiency, encouraging innovation and developing shorter supply chains. The explanatory memorandum of the amending 2021 legislation highlights that a ‘decisive push’ is required by public authorities and through legislation to support food producers who are particularly vulnerable to certain commercial practices whilst also being greatly exposed to energy and raw material price fluctuations. It notes that legislative measures are needed to prevent the abandonment of farms and ensure a fair distribution of social, environmental and sustainability costs.

Key elements of the LCA

The LCA sets out a requirement for formalisation and transparency in contractual relationships. Under Article 9, all transactions within the food chain must be governed by written contracts that clearly set out essential elements such as price, payment terms, delivery conditions, and duration. This obligation seeks to eliminate informal arrangements and reduce the risk of abusive practices. Complementing this, Article 11 requires contracts to be retained for four years, meanwhile Article 11 (bis), introduced by Law 16/2021, mandates their registration in the Food Contracts Registry, managed by the Ministry of Agriculture, which serves as a key enforcement and transparency mechanism.

The law substantively intervenes in price formation and commercial practices to ensure fairness across the supply chain. Article 12 establishes that prices must exceed the effective cost of production, preventing operators, especially farmers, from being compelled to sell at a loss. This Article also prohibits the destruction of value by requiring every actor at each stage of the chain, from producer to distributor, to preserve economic value rather than transfer losses downstream. Article 12 (bis) further regulates promotional activities, ensuring that discounts do not devalue agricultural products, and prohibits the use of food as a loss leader in ways that harm producers.

In parallel, Article 14 addresses unfair trading practices, banning behaviours such as late payments, unilateral contract modifications, and last-minute cancellations, in line with EU Directive 2019/633. The buyer is also required to justify the agreed price based on actual production costs, presumed valid unless challenged. The LCA is compatible with EU competition law and the recent evaluation (2025) of the Directive (EU) 2019/633 on unfair trading practices in business-to-business relationships in the agricultural and food supply chain specifically commends Spain’s ‘considerable experience’ with legislating on Unfair Trading Practices noting that Spain’s original LCA was a forerunner to the directive.

A 2025 EU study on the regulatory and voluntary schemes for fair agricultural remuneration found that ‘the comprehensive national regulatory measures in place in Spain (and France) are better placed to address the issue of price transmission compared to measures which operate downstream the supply chain where the connection back to the farmer is weaker’. The study also noted that making written contracts a legal requirement and promoting long term agreements could help encourage investment by producers, and, contrary to certain views, actually increase efficiencies in the sector and boost competitiveness. 

Monitoring and enforcement

To monitor pricing, ensure compliance and sanction malpractice, the LCA introduced: 

(1) The Observatorio de la Cadena Alimentaria (OAC) [Food Chain Observatory] which monitors, advises, consults, informs, and studies the functioning of the food chain, including costs and prices received and paid, as well as the factors driving their evolution.

(2) The Agencia de Información y Control Alimentarios (AICA) [Food Information and Control Agency] which is the primary enforcement authority responsible for ensuring compliance.  

AICA can issue fines ranging from as low as €250 euros for “minor” infractions, and up to €1m for “very serious” breaches of the law. Importantly, fines must exceed any economic benefit gained from the infringement. From the outset, there have been complaints in farming communities that the lack of inspections and low number of fines were limiting the potential effectiveness of the law. However, AICA imposed 991 sanctions in 2025, nearly four times the amount handed out the previous year, which suggests improvements in enforcement. Similarly, the number of fines nearly doubled year on year in 2025 in Spain’s regional autonomous communities, which can conduct their own investigations.

IEEP UK analysis further suggests that this trajectory in enforcement is continuing in recent months, with over €700,000 in fines passed down by AICA in the first quarter of 2026 in comparison to just €200,000 during the same period of 2023. 

However, concerns remain around price formation and the destruction of value in the market. The majority of fines imposed on supply chain operators have been for late payments or failing to formalise contracts in writing. Just eight fines were handed out in 2024 for transactions that fell below the operating costs of producers.

Álvaro Areta of Coordinadora de Organizaciones de Agricultores y Ganaderos (COAG), a professional association representing farmers and agricultural workers, explained in an interview with IEEP UK that it was very difficult to prove the destruction of value within the supply chain. Álvaro highlighted the importance of introducing a reference price index, which, similar to the housing price index used to cap rental prices, would serve to determine how much it costs to produce food at origin. This was also highlighted by Eduardo Montero from the Spanish Union of Consumers and Users (CECU), which believes that the lack of such an index means that farmers continue to start negotiations at a disadvantage, making it more likely that they will still accept an unfair price.

It has also been recognised that despite the provision of anonymous reporting mechanisms, many producers remain hesitant to report malpractice for fear of losing future contracts. Álvaro and COAG believe there is a need for more AICA inspections to tackle the destruction of value in the supply chain.   

Potential environmental impact of the LCA

Whilst the law contains little direct mention of sustainability, it could indirectly lead to wide reaching and positive environmental improvements. In the interview with COAG, Álvaro stressed that the environmental costs of production need to be included in the supply chain and emphasised that if farmers and producers are paid fairly, there will be less pressure to apply intensive and potentially environmentally damaging production methods. Preventing the destruction of value throughout the supply chain and ensuring producers receive a just price is widely seen as crucial to encouraging more sustainable production methods and is being promoted at an EU level.

Lessons for the UK

In the UK, supply chain fairness is addressed through a more limited and fragmented system than Spain’s LCA. The Groceries Code Adjudicator oversees relationships between supermarkets and their direct suppliers, but this often excludes farmers. The Agriculture Act 2020 has introduced “fair dealing” powers, leading to the creation of an agricultural supply chain adjudicator in 2024 and sector-specific rules such as the Fair Dealing Obligations (Milk). However, these measures apply on a sector-by-sector basis, making the UK approach narrower and less comprehensive. The UK, for instance, currently lacks legislation preventing the sale of food products below the cost of production. Indeed, a recent Esmée Fairbairn report called on the UK to ‘look to the EU Unfair Trading Practices Directive’ for inspiration and work more closely with European partners. More widely, NGOs have called for increased transparency in UK agri-food supply chains to give farmers greater bargaining power, and argued that the UK would benefit from broader legislative approach, similar to Spain’s LCA. 

Photo by Carles Rabada on Unsplash