Netherlands: Compensation for cucumber growers Coforta
The case revolves around the "board system", which was introduced in 1997. In that year, the cucumber sector was in a bad state. Overproduction on the European market and Spanish competition led to poor prices and poor prospects. Because there was market demand for a large, uniform provision for a stable price, nine horticultural cooperatives merged into VTN (now Coforta) in 1996. The sales went through The Greenery.
VTN tried a new marketing scheme to improve the situation: the board system. This involved contract sales at a Gross Product Price (GPP) at a predetermined weekly rate. VTN deducted its commission and the cost of destroying a number of batches from the price. Around 40-65% of cucumbers were sold through this system. Another 20-50% was pre-sold. The remaining 10-15% was traded through clock auctions.
The new system was not a success. Other market organizations could respond to the GPP, which led to lower prices for the VTN growers. VTN growers also sold produce outside the system, although that was not allowed. The projections were unreliable and the prices bad. After the 1997 season, the system was adjusted and growers were partially offset.
Now, the Court held that with introducing the system, VTN took unacceptable risks. It acknowledges that the system also failed because of the actions of the growers involved, as well as rival parties. Still, VTN should have adjusted its course after the first five weeks. "The first five weeks of difficulties with the board system in 1997 were in fact unavoidable. However, maintaining the system and failing to adjust it is a lack of good management," observes one expert. Therefore VTN (now Coforta) must compensate the damage sustained by growers following the first five weeks of the systems introduction.
You can read the ruling here.
