Levelling the Field in Agri-Food – Unfair Trading Practices Regulations 2021Friday, 23 July 2021
In January 2021, Irish exports of agricultural produce amounted to €483 million, comprising approximately 4% of total exports.1 The agri-food sector is big business for Ireland and recent legislative changes under the EU (Unfair Trading Practices in the agricultural and food supply chain) Regulations 2021 (“Regulations”)2 attempt to level the playing field between smaller suppliers and larger buyers throughout the agricultural and food supply chain. While the Regulations apply in tandem with the Grocery Goods Regulations, their application is much broader.
The Regulations apply to sales where at least one of the parties to the transaction are established in the EU. As such, the Regulations provide the same protections to non-EU suppliers as EU suppliers selling into the EU. It also applies to non-EU buyers who are purchasing from EU suppliers such as UK buyers, who as a consequence of Brexit, are non-EU established for the purposes of the Regulations, and with whom Ireland does the greatest amount of its agri-food trading.
On 1 July 2021, the Regulations, which transposed the minimum requirements of the Unfair Trading Practices Directive3 (the “UTP Directive”) into Irish law, came into force. The Regulations provide for two deadlines by which buyers and suppliers must ensure 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.
While this requires all new supply contracts from 28 April 2021 to be in compliance with the Regulations by 1 July 2021, where a contractual relationship predates 28 April 2021, the parties have until 28 April 2022 to align their contractual terms to the requirements of the Regulations. Failure to review supply agreements and make the necessary changes before this date may invite substantial penalties for the unprepared buyer.
Little v Large
The Regulations are intended to provide protection to those suppliers in the agri-food supply chain who may have a weaker bargaining power in negotiating contractual terms with larger wholesale or retail buyers by reason of their size. The protections are for the benefit of the smaller supplier only and do not apply where the supplier’s size exceeds that of the buyer.
The definition of suppliers in the Regulations is expansive and extends to natural and legal persons (including groups of them) who sell agricultural and food products. A buyer includes any natural or legal person, or any public authority in the EU, who buys agricultural and food products.
The application of the Regulations to a supply agreement depends on the relative sizes of the supplier and the buyer calculated by reference to annual turnover. The buyer must always be larger than the supplier for the Regulations to apply.
While the Regulations do not specify that an enterprise’s “total worldwide annual turnover” is to be included, where an enterprise comes within a group structure, the turnover of the group entities may be taken into account when calculating annual turnover.4
The turnover levels above are the minimum requirements of the UTP Directive. However each Member State can incorporate greater protections into national law. Italy has done this in its national laws5 by placing no upper limit on the turnover of suppliers so that the protections afforded apply to all transactions in the agri-food supply chain.
Black and Grey Practices
There are 10 “black” practices that are prohibited and cannot be contracted out of by a buyer and 6 “grey” practices which are prohibited unless agreed in clear and unambiguous terms between the parties.
The most notable of the black practices are:
- Payment for perishable agri-food products (e.g. vegetables) must be within 30 days of delivery6;
- Payment for other agri-food products (e.g. powdered milk) must be within 60 days of delivery;
- Prohibition of short notice cancellations of perishables (e.g. less than 30 days’ notice);
- Prohibition of unilateral contract changes by the buyer;
- Prohibition on charging the supplier for wastage, deterioration, or loss of products after delivery (in the absence of supplier negligence);
- Buyer refusal to provide written confirmation of the terms of supply when requested;
- Unlawful acquisition, use, or disclosure of a supplier’s trade secrets by the buyer;
- Commercial retaliation by a buyer against a supplier for exercising their legal rights (including filing a complaint or cooperating with enforcement authorities); and
Examples of the grey practices that a buyer cannot undertake (unless clearly agreed) are:
- Return unsold products without paying for them or for their disposal;
- Require the supplier to pay for stocking, displaying7, and listing the agri-food products;
- Require the supplier to bear the cost of promotional discounts or pay for advertising or marketing for the buyer.
Contravention of a black or a grey practice is an offence under the Regulations.
The Regulations provide for the establishment of an enforcement authority. The Minister for Agriculture, Food, and the Marine is currently designated to carry out this function although it is envisaged that a National Food Ombudsman will be established who will be tasked with enforcement of the Regulations.
The enforcement authority has powers to instigate and conduct investigations whether arising from complaints or otherwise. It also has the powers to publish its decisions (which may have a reputational impact on non-cooperating buyers), and issue compliance notices.
Substantial penalties may be imposed where an offence under the Regulations is committed and individuals, body corporates or their officers, and shareholders may face prosecution for such offences.
For more information or general advice on what the Regulations might mean for you or your business, please contact Helen Gibbons from the ByrneWallace LLP Litigation and Dispute Resolution Team or your usual ByrneWallace LLP contact.
Please note that the content of this summary is for information purposes and does not amount to professional advice. Legal and tax advice should be sought in respect of specific queries.
5 Italian 2019-2020 European delegation law (Law No. 53 of 22 April 2021)
6 The 30 and 60 day periods for payment for goods or services runs from delivery or invoice date for those goods, and where deliveries are regular the parties may agree to delivery periods and payment must be within 30/60 days of the delivery period/invoice for the delivery period.
7 The Grocery Goods Regulations 2016 extend beyond the Regulations as they prohibit a supplier paying for the advertising or display of their products in the premises of the grocery goods undertaking