Unfair Trading Practices in Business-to-Business Relationships in the Agricultural and Food Supply Chain
Posted on 8th October 2020 at 16:10
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 this Directive is to improve protection for farmers and small/medium/mid-range food producers by setting out mandatory rules which will outlaw certain unfair trading practices.
MEP and then Vice President of the EU Parliament, Mairead McGuinness commented that the passing of the Directive is 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:
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.
The Directive provides for a black list of clauses that are abusive and prohibited in all circumstances:
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; and
9. requiring compensation from the supplier for the cost of investigating customer complaints when there is no negligence or fault on the supplier’s part.ation from the supplier for the cost of investigating customer complaints when there is no negligence or fault on the supplier’s part.
The Directive 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”:
1. returning the unsold products to the supplier without paying;
2. charging payment as a condition for displaying or listing the supplier’s products;
3. requiring the supplier to bear the costs of discounts on products sold by the buyer as part of a promotion (unless the buyer, prior to the promotion, specifies the period of promotion and the expected quantity of products to be ordered at the discounted price);
4. requiring the supplier to pay for advertising by the buyer;
5. requiring the supplier to pay for marketing by the buyer; and
6. charging the supplier for staff to fit out premises used for the sale of the products.
This Directive will apply to sales where either the supplier or the buyer, or both, are established in the EU.
Supply agreements concluded before the date of publication of the measures transposing the Directive in to Irish law must be brought into compliance with the Directive within 12 months of the date of publication.
When will this become law in Ireland?
EU countries have two years to transpose the Directive into their national laws (i.e. by 1 May 2021) and the measures are to be effective no later than 1 November 2021. Member States are free to implement further protections and it will be important to review any draft legislation and the actual implementing legislation for any measures over and above those contained in the Directive.
What action will your Company need to take to comply when the requirements are transposed in to Irish law?
1. Review and possibly update contractual arrangements 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 within 12 months of the transposition in to Irish law of the Directive.
3. Review the payment terms and ensure that Suppliers are paid in accordance with the legislation.
4. Review the Irish implementing legislation to check if it contains any additional measures over above those contained in the Directive.
Each EU country will have to designate a competent authority to enforce these rules and these authorities will have the power to launch investigations and fine entities found guilty of breaking them.
Get in touch! If you would like to discuss how to use this legislation as a lever to ensure timely payment or would like to discuss how we can help your business, contact us at:
T: 01 546 1072
E: firstname.lastname@example.org | email@example.com
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.
‘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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