knowledge | 11 May 2021 |
Reap What you Sow: Ireland Adopts Measures Tackling Unfair Trading Practices in the Food Supply Chain
On 1 July 2021, the EU (Unfair Trading Practices in the Agricultural and Food Supply Chain) Regulations 2021 (the “UTP Regulations”) come into force. The UTP Regulations, made by the Minister for Agriculture, Food and the Marine on 28 April 2021, transpose the Unfair Trading Practices Directive into Irish law. We examine the new legislative framework, which aims to combat unfair trading practices at EU level by strengthening the position of farmers and smaller suppliers in the food supply chain as against large operators.
Which agreements are covered by the new UTP Regulations?
The UTP Regulations, which transpose Directive 2019/633 on unfair trading practices in the agricultural and food supply chain (the “Directive”) into Irish law, apply to agreements (whether made orally or in writing) for the sale or supply of agricultural and food products by a supplier to a buyer where any one party is established in the EU. The UTP Regulations do not apply to agreements between suppliers and private consumers.
A ‘supplier’ for the purposes of the UTP Regulations includes farmers, agricultural producers or any other groups thereof such as producer organisations or co-operatives.
The UTP Regulations are primarily concerned with the protection of suppliers who have a weaker bargaining position by comparison to the buyers they contract with. Accordingly, the UTP Regulations apply to certain unfair trading practices which occur in relation to sales of agricultural and food products by:
- Suppliers with an annual turnover below €2 million to buyers with an annual turnover over €2 million.
- Suppliers with an annual turnover between €2 million and €10 million to buyers with an annual turnover over €10 million.
- Suppliers with an annual turnover between €10 million and €50 million to buyers with an annual turnover over €50 million.
- Suppliers with an annual turnover between €50 million and €150 million to buyers with an annual turnover over €150 million.
- Suppliers with an annual turnover between €150 million and €350 million to buyers with an annual turnover over €350 million.
- Suppliers with an annual turnover below €350 million to all buyers which are public authorities.
What is a prohibited unfair practice under the UTP Regulations?
The UTP Regulations set out certain practices which are prohibited in all circumstances (“Black UTPs”) and certain conditional unfair trading practices which are prohibited unless the parties agree in a clear and unambiguous manner beforehand, or in a subsequent agreement (“Grey UTPs”). Contravention of the regulations on prohibited unfair practices is an offence, which may be prosecuted summarily by the Minister for Agriculture, Food and the Marine (the “Minister”).
- Payments to a supplier later than 30 days for perishable agricultural and food product, or later than 60 days for other agricultural and food products;
- Short-notice cancellations of perishable agricultural and food products, such as the frequency, method, place, timing or volume of the supply or delivery of agricultural or food products;
- Unilateral contract changes of certain key terms by the buyer;
- Payments to the buyer that are not related to the sale of the supplier’s agricultural and food products;
- Risk of loss and deterioration transferred to the supplier;
- Refusal of a written confirmation of a supply agreement by the buyer, despite request of the supplier;
- Misuse of trade secrets by the buyer;
- Commercial retaliation by the buyer; and
- Transferring the costs of examining customer complaints to the supplier.
- The return of unsold products by the buyer to the supplier without paying for those unsold products or their disposal, or both;
- Payment by the supplier for stocking, display and listing the products;
- Payment by the supplier for any discounts as part of a promotion;
- Payment by the supplier for advertising;
- Payment by the supplier for marketing;
- Payment by the supplier for the buyer’s staff fitting out premises used for sale of the products.
Enforcement of the UTP Regulations
Suppliers making a complaint under the UTP Regulations can choose between filing a complaint with the enforcement authority in the Member State in which they are located or with the relevant authority in the Member State in which the buyer is located.
Part 4 (Enforcement) of the UTP Regulations provides that the Minister may appoint in writing ‘authorised officers’ to exercise the investigation and enforcement functions conferred under the UTP Regulations or the Directive. As an interim measure, the UTP Regulations establish an Unfair Trading Practices Enforcement Authority, pending the outcome of a public consultation on the establishment of an Office of the National Food Ombudsman or Regulator, under primary legislation.
That public consultation was launched on 26 April 2021 and is open until 26 May 2021. It is intended that, once established, the Ombudsman or Regulator will take over the enforcement functions under the UTP Regulations and the Directive.
New supply agreements must be in compliance with the UTP Regulations by 1 July 2021. Any such agreements concluded before 28 April 2021 must be brought into conformity with the UTP Regulations within 12 months.
The European Commission will present a first report on the transposition and implementation of the Directive by November 2021, and will present an evaluation on its effectiveness in 2025 based on stakeholder input and on annual reports which each Member State is obliged by the Directive to publish.
The progress of the enforcement of the UTP Regulations, and of the establishment of the Ombudsman or Regulator, will be monitored closely.
Also contributed by Ruth Hughes and Claire Bulman.
This briefing is for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.