New Rules for the Agri-Food Sector
The European Union (Unfair Trading Practices in the agricultural and food supply chain) Regulations 2021 (the “Regulations”) came into force on 1 July 2021. The Regulations transpose the EU Directive on unfair trading practices in business-to-business relationships in the agricultural and food supply chain into Irish law.
The aim of the Regulations is to protect small suppliers in the agri-food sector in circumstances where larger buyers may have greater negotiating power. The Regulations aim to achieve this by the creation of a list of unfair trading practices (“UTPs”), which are categorised in the Regulations as prohibited and conditional, as well as through enforcement of the Regulations by the Minister for Agriculture, Food and the Marine (the “Minister”).
What are the relevant timelines?
Supply agreements entered into on or after 28 April 2021 must already be in compliance with the Regulations. Supply agreements concluded prior to 28 April 2021 must be in compliance with the Regulations by 28 April 2022.
What is covered?
The Regulations apply to both oral and written agreements 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 Regulations overlapped significantly with the Consumer Protection Act 2007 (Grocery Goods Undertakings) Regulations 2016 (the “Grocery Goods Regulations”). The Grocery Goods Regulations were revoked on 1 April 2022 by the Consumer Protection Act 2007 (Grocery Goods Undertakings) (Revocation) Regulations 2022.
Who is covered?
A buyer under the Regulations includes retailers, wholesalers, food processors, food distributors and co-operatives when buying from primary producers. Suppliers include farmers, agricultural producers, co-operatives, food distributors and wholesalers and food processors.
The application of the Regulations to a particular agreement depends on the relative turnover of the supplier and the buyer involved. The buyer must always be larger than the supplier for the Regulations to apply. The Regulations introduce the following tiers which buyers’ and suppliers’ turnovers must fall into for the Regulations to apply:
|Less than €2 million||>€2 million|
|€2 million – €10 million||>€10 million|
|€10 million – €50 million||>€50 million|
|€50 million – €150 million||>€150 million|
|€150 million – €350 million||>€350 million|
In the event the supplier or buyer is part of a group, the annual turnover of the group may be taken into consideration for the purposes of the turnover thresholds outlined above.
What are the UTPs?
The Regulations specify certain trading practices that are prohibited unconditionally, i.e. they are prohibited in all circumstances. Examples of unconditional UTPs include, amongst others, unilaterally changing certain terms of a supply agreement or payment for perishable agricultural and food products later than 30 days after the end of the agreed delivery period or after the date on which the payable amount is set, whichever is the later (with the 30 day period being extended to 60 days for non-perishable agricultural and food products).
In addition, the Regulations provide for prohibited trading practices that are conditional in nature. Unlike unconditional UTPs, which are prohibited in all circumstances, conditional UTPs are permitted only where the buyer and supplier have previously and unambiguously agreed to same. Examples of conditional UTPs include, amongst others, requiring payment from a supplier for stocking, displaying, listing or placing on the market its agricultural and food products.
Enforcement and Offences
Pursuant to the Agricultural and Food Supply Chain Bill 2022 (which is yet to be enacted), it is proposed that the Office for Fairness and Transparency in the Agri-Food Supply Chain will act as Enforcement Authority for the Regulations. The Enforcement Authority may conduct investigations on the basis of complaint or on its own initiative. In circumstances where the Enforcement Authority forms the view that a buyer has not or is not operating in compliance with the Regulations, the Enforcement Authority may issue a compliance notice requiring the buyer to take appropriate action. Failure to comply with a compliance notice is an offence.
A person who commits an offence under the Regulations is liable:
- on summary conviction, to a fine not exceeding €5,000 or to imprisonment for a term not exceeding 6 months or to both, or
- on conviction on indictment, to a fine not exceeding €500,000 or to imprisonment for a term not exceeding 3 years or to both.
For further information and guidance on what the Regulations mean for your business, please contact a member of the Competition and Regulated Markets Group or a member of the Food and Agri Group of Arthur Cox.