The marketing system for Fairtrade and non-Fairtrade products is identical in the consuming countries, using mostly the same importing, packing, distributing and retailing firms. Some independent brands operate a virtual company, paying importers, packers and distributors and advertising agencies to handle their brand, for cost reasons. In the producing country Fairtrade is marketed only by Fairtrade certified cooperatives, however if there is not enough market demand, those products are sold onto the conventional market at market prices, marketed by Fairtrade certified cooperatives (as uncertified), by other cooperatives and by ordinary traders. This mode of operation has led to criticism of the foundation. It is argued that, because retailers and cafes in the rich countries can sell Fairtrade coffee at any price they like, nearly all the extra price paid by consumers, 82% to 99%, is kept in the rich countries as increased profit. There is evidence that dishonest importers do not pay the full Fairtrade price, so an even smaller proportion reaches the Third World. Fairtrade operates a system whereby such allegations are reported to
FLOCert for investigation. Cooperative traders and exporters can only sell produce on Fairtrade terms if they meet the set of standards set by
Fairtrade International that demand minimum requirements to criteria such as pricing and terms of trade. Farmers pay FLOCERT a certification and inspection fee. Other administration costs and production costs are incurred to meet these standards. Commodity prices can drop when the world market is oversupplied. A minimum price, which is paid to producers, acts as a safety net for farmers at times when world markets fall below a sustainable level. An additional sum of money, called the Fairtrade Premium, is paid to farmers for products sold on Fairtrade terms. Some cooperatives can sell only a third of their output as Fairtrade, because of lack of market demand, and sell the rest at world prices. As the additional costs are incurred on all production, not just that sold as Fairtrade, cooperatives sometimes lose money on their Fairtrade membership. After the certification fees have been subtracted from the overall income earned on Fairtrade terms, the rest goes into a communal fund for workers and farmers to use as decided democratically within the farmers' organisation, or by a workers' committee on a plantation. The additional sum (Fairtrade Premium) is invested in ‘social projects’ such as clinics, women's groups and baseball pitches. Critics therefore argue that farmers do not get any of the higher price under Fairtrade. Nor is there any evidence that they get higher prices as a result of better marketing: the cooperatives sometimes pay farmers a higher price than farmers do, sometimes less, but there is no evidence on which is more common. Farmers do, however, incur extra costs in producing Fairtrade, so they certainly do lose money from Fairtrade membership in some cases. There is little or no research on the extra costs incurred, or the effect of Fairtrade membership on the income of farmers. However, research by Overseas Development Institute found that a "wide variety of qualitative studies have found positive effects of Fairtrade certification on the incomes of producers". Other economists have argued that the existence of a fair trade marketing route benefits producers by raising producer prices generally, and there is evidence of such an effect at least among coffee producers; according to Podhorsky, the critics of the Fairtrade Foundation err by assuming that fair trade producers receive the world price for coffee, when that is in general not so. To become certified Fairtrade producers, the primary cooperative and its member farmers must operate to certain Fairtrade standards, set by the organisation. FLO-CERT, the for-profit side, handles producer certification, inspecting and certifying producer organisations in more than 50 countries in Africa, Asia, and Latin America. In the
Fair trade debate there are many complaints of failure to enforce these standards, with Fairtrade cooperatives, importers and packers profiting by evading them. == Organisational links==