Unfair Trading Practices in Business-to-Business Relationships in the Agricultural and Food Supply Chain
Posted on 28th August 2021 at 12:10
EU Directive 2019/633 on Unfair Trading Practices in Business-to-Business Relationships in the Agricultural and Food Supply Chain (the “Directive”)
What is it?
The EU is concerned about the David versus Goliath nature of many of the commercial relationships in the food supply chain. The majority of EU farmers and other food suppliers work on small holdings and do not necessarily have the legal and financial means to litigate against unfair trading practices (“UTPs”). The aim of the Directive is to improve protection for farmers and small/medium/mid-range food producers by setting out mandatory rules which outlaw certain unfair trading practices. The Directive was implemented in Ireland by the EU (Unfair Trading Practices in the agricultural and food supply chain) Regulations 2021 (“Regulations”) which came in to force on 1 July 2021.
MEP and then Vice President of the EU Parliament, Mairead McGuinness commented that the passing of the Directive was a stepping stone in correcting power imbalances in the food supply chain and it comes at a critical time when sustainability, environmental issues and climate action are on the agenda.
Will my food supply business benefit from this legislation?
Yes, if you are a Supplier of agricultural and food products or perishable agricultural and food products and your business and the buyer’s business fall in to the following categories:
|
Supplier Turnover |
Buyer Turnover |
|---|---|
|
Not exceeding €2 million |
More than €2 million |
|
Between €2 million and €10 million |
More than €10 million |
|
Between €10million and €50 million |
More than €50 million |
|
Between €50 million and €150 million |
More than €150 million |
|
Between €150 million and €350 million |
More than €350 million |
The turnover referred to above is the annual global turnover, including all Linked Enterprises.
Prohibited UTPs
Black List
The Regulations provides for a black list of clauses that are abusive and prohibited in all circumstances, which are as follows:
1. late payments (later than 30 days after the end of the agreed delivery period or the date on which the payment is due for perishable products, or later than 60 days for non-perishable products);
2. last-minute order cancellations;
3. unilaterally changing the terms of the supply agreement;
4. requiring payments from the supplier that are not related to the sale of the products;
5. requiring the supplier to pay for the deterioration or loss of the products on the buyer’s premises;
6. refusing to enter into a written agreement;
7. unlawfully acquiring or using trade secrets of the supplier;
8. threatening to carry out acts of commercial retaliation;
9. A Buyer shall not threaten to carry out, or carry out, acts of commercial retaliation against a Supplier if the Supplier exercises its contractual or legal rights, including by filing a complaint with enforcement authorities or by cooperating with enforcement authorities during an investigation; and
10. A Buyer shall not require compensation from the Supplier for the cost of examining customer complaints relating to the sale of the Supplier's products, in the absence of negligence or fault on the part of the Supplier
Grey List
The Regulations also provides for a grey list of UTPs that are prohibited unless they have been agreed “in clear and unambiguous terms in the supply agreement or in a subsequent agreement between the supplier and the buyer”, which provide that a Buyer shall not:
1. return unsold products to the Supplier without paying;
2. charge payment as a condition for displaying or listing the Supplier’s products;
3. require the Supplier to bear the costs of discounts on products sold by the Buyer as part of a promotion (unless prior to the promotion that is initiated by the Buyer, that it specifies the period of the promotion and the expected quantity of the agricultural and
food products to be ordered at the discounted price);
4. require the Supplier to pay for advertising by the Buyer;
5. require the Supplier to pay for marketing by the Buyer; and
6. charge the Supplier for staff to fit out premises used for the sale of the products.
The Regulations apply to sales where either the Supplier or the Buyer, or both, are established in the EU.
What are the dates for compliance?
The Regulations provide for two deadlines by which buyers and suppliers must ensure that they are in compliance with the Regulations:
All supply agreements (oral or written) between suppliers and buyers entered into on or after 28 April 2021 must be in compliance with the Regulations by 1 July 2021; and
All supply agreements concluded prior to 28 April 2021 must be in compliance with the Regulations by 28 April 2022.
What action will you need to take to comply with the Regulations?
1. Review any template contracts to ensure that they do not contain prohibited UTPs.
2. Review and update any of your existing arrangements with trading partners. If they contain prohibited UTPs, then update those arrangements by 28 April 2022.
3. Review the payment terms and ensure that Suppliers are paid in accordance with the legislation.
Enforcement
The Regulations provide for the establishment of an enforcement authority and the Minister for Agriculture, Food, and the Marine is designated to carry out this function. However, a National Food Ombudsman may be established who is then likely to be tasked with enforcement of the Regulations.
The enforcement authority will have powers to instigate and conduct investigations whether arising from complaints or otherwise. It willl also have powers to publish its decisions and issue compliance notices.
Where an offence is committed under the Regulations, individuals, body corporates or their officers and shareholders may face prosecution for such offences and substantial penalties imposed.
Get in touch! If you would like to discuss how we can help your business, contact us at:
T: 01 546 1072
E: gboland@bolandlaw.ie | info@bolandlaw.ie
This briefing is for general guidance only and should not be regarded as a substitute for professional legal advice. Legal advice should always be taken before acting on any of the matters discussed.
Definitions
‘agricultural and food products’ means products listed in Annex I to the TFEU as well as products not listed in that Annex, but processed for use as food using products listed in that Annex; [Note: this Annex seems to cover a very wide range of food stuffs]
‘buyer’ means any natural or legal person, irrespective of that person's place of establishment, or any public authority in the Union, who buys agricultural and food products; the term ‘buyer’ may include a group of such natural and legal persons
“Linked Enterprises” is relevant for the purposes of calculating global turnover. Linked Enterprises are those that form a group through the direct or indirect control of the majority of voting rights of an enterprise by another or through the ability to exercise a dominant influence on an enterprise.
‘perishable agricultural and food products’ means agricultural and food products that by their nature or at their stage of processing are liable to become unfit for sale within 30 days after harvest, production or processing.
‘supplier’ means any agricultural producer or any natural or legal person, irrespective of their place of establishment, who sells agricultural and food products; the term ‘supplier’ may include a group of such agricultural producers or a group of such natural and legal persons, such as producer organisations, organisations of suppliers and associations of such organisations;
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