The sharp fluctuations in agricultural commodity and food prices at a time of great uncertainty about the economic outlook illustrate the need to improve the functioning of the European food supply chain with a view to enhancing its efficiency and competitiveness. Better regulation and ensuring a vigorous and coherent enforcement of competition and consumer protection rules will contribute to limiting price increases for the benefit of European consumers, in particular lower income households. Moreover, it will also help overcome the present fragmentation of the food supply chain and remove artificial entry barriers for producers, which will help European consumers benefit from the widest possible choice of quality food products. Additionally, this could help rebalancing the bargaining power in the food supply chain. Global demand and supply developments have been one of the main determinants of the rapid increase in food prices observed. Nevertheless, problems in the functioning of the food supply chain, either in terms of the degree of competition or concerning regulation may have played an important role as well. In the present economic conditions, it is therefore particularly important to analyse how to improve the functioning of the food supply chain and, in particular, to better understand the transmission mechanisms linking commodity prices with producer and consumer prices. This would help identify appropriate measures in support of the consumer's purchasing power and the competitiveness of the sectors involved. The food supply chain connects three economically important sectors: the agricultural sector, the food processing industry and the distribution sectors. These sectors account for 6% of EU value added and 12% of EU employment. As the food processing industry and the distribution sectors have many interactions with other sectors, market malfunctioning along the food supply chain can have significant repercussions. The slow productivity growth in these sectors in comparison with the US indicates that there is room for efficiency improvements.