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The Department of Agriculture, Food & the Marine invites submissions to a public consultation on the transposition of Directive (EU) 2019/633 of the European Parliament and of the council of 17 April 2019 on unfair trading practices in business-to-business relationships in the agricultural and food supply chain.
EU Directive 2019/633 on unfair trading practices in business to business relationships in the agricultural and food supply chain (the Directive) entered into force on 30 April 2019. EU Law requires that the Directive must be transposed into national law by 1 May 2021 and will apply in national law no later than from 1 November 2021 for new contracts. Any existing contracts at the time of publication must be brought into compliance within 12 months of the date of publication of the measures transposing the Directive.
Please note that this consultation document does not cover all aspects of the Directive and therefore should be read in conjunction with the Directive; a link is provided here for your convenience.
The Directive:
allows MS to promote the voluntary use of effective and independent alternative dispute resolution mechanisms, such as mediation
Suppliers with an annual turnover of greater than €350m are not protected under the Directive
The Directive does not address issues of price negotiation or determination.
The Commission Explanatory Note on the UTP Directive (link here) outlines the protection offered along the agri-food supply chain depending on the relative size of operators. It uses a “step approach” based on turnover figures as a proxy that reflects the different bargaining powers of suppliers and buyers. This approach protects a supplier from unfair trading practises engaged in by an economically stronger buyer. The Directive sets out specific categories of supplier and buyer turnover, providing protection for suppliers who are sufficiently smaller in turnover from the buyer in question, e.g. a supplier with less than €2m turnover is protected against buyers with a turnover exceeding €2m; smaller suppliers with a turnover exceeding €2m and not exceeding €10m are protected against buyers with a turnover higher than €10m. The protective effect covers suppliers having turnovers of up to €350m.
Annual Turnover Categories Covered Not Covered as Suppliers
Added 17.10.19
Notwithstanding the above, the Directive also applies to sales of agricultural and food products by suppliers which have an annual turnover not exceeding €350m to all buyers which are public authorities.
##Prohibited Trading Practices (Article 3)
The Commission Explanatory Note on the UTP Directive explains that there are 10 UTPs, which are prohibited in Member States in all circumstances, generally referred to as “black” UTPs, and 6 UTPs, which are prohibited unless the parties agree clearly and in an unambiguous manner beforehand, these are generally referred to as “grey” UTPs.
The EU Commission summarises the “black” and “grey” UTPs as follows:
Black UTPs:
1. Payments later than 30 days for perishable agricultural and food products
2. Payment later than 60 days for other agri-food products
3. Short-notice cancellations of perishable agri-food products
4. Unilateral contract changes by the buyer
5. Money not related to a specific transaction
6. Risk of loss and deterioration transferred to the supplier
7. Refusal of a written confirmation of a supply agreement by the buyer, despite request of the supplier
8. Misuse of trade secrets by the buyer
9. Commercial retaliation by the buyer
10. Transferring the costs of examining customer complaints to the supplier
Grey UTPs:
11. The buyer returns unsold products to the supplier without paying for those unsold products
12. Payment by the supplier for stocking, display and listing
13. Payment by the supplier for promotion
14. Payment by the supplier for marketing
15. Payment by the supplier for advertising
16. Payment by the supplier for staff of the buyer, fitting out premises
The Directive requires the designation of an enforcement authority, which can be an existing or a new authority. The authority must be invested with the following powers:
While it is for the enforcement authorities to decide how they will use these powers in the individual cases that they investigate, the Directive allows Member States to promote the use of effective and independent alternative dispute resolution mechanisms, such as mediation, with a view to the settlement of disputes between suppliers and buyers.
The UTP Directive must be transposed into national law by 1 May 2021.
The Directive allows Member States to go further than the mandatory minimum duties and powers set out in the UTP Directive itself. However, for any extra protections to be provided, Irish law requires either an EU Law (such as an EU Directive) or a primary Irish Act to give a Statutory Instrument (SI) the authority to provide those extra protections. Irish law only permits the Minister to draft a SI to give effect to solely those powers set out in the UTP Directive itself.
As a result, any further powers and protections, beyond those set out in the UTP Directive itself, would require primary legislation to be passed by the Oireachtas, which may be challenging to complete ahead of the deadline for transposition of the Directive.
In order to meet the deadline for transposition, the Directive could be transposed directly into Irish law by way of statutory instrument under the 1972 EC Act and could establish an enforcement authority, which can be an existing one or an independent authority. Such a statutory instrument, on its own, could not add additional powers or widen the scope beyond the exact terms of the Directive.
Further powers and protections could be added by way of primary legislation, at a later date following the transposition of the UTP Directive. Such powers or protections could include, but are not limited to, expanding the powers of the Enforcement Authority, expanding the scope of the Directive, adding to the list of “black” or “grey” unfair trading practices or moving UTPs from the “grey” list to the “black” list.
In 2016, the Minister for Business, Enterprise and Innovation signed into law an initial set of regulations to regulate certain practices in the grocery goods sector. The regulations were introduced to rebalance commercial relationships between large supermarkets and wholesalers with an annual worldwide turnover of greater than €50 million and their direct suppliers who supply them with grocery goods. The regulations are limited to direct suppliers who have a written contractual relationship with a retailer or wholesaler and not to any other grocery goods undertaking as defined in Section 63A of the Consumer Protection Act 2007. The regulations do not apply to the supply of raw materials in the agriculture sector to processors (for instance supply of milk to creameries or animals or meat to processors) or animal feed.
SI No. 35 of 2016 (Consumer Protection Act 2007 (Grocery Goods Undertakings) Regulations 2016 entered into force on 30 April 2016. Should the transposition of the Unfair Trading Practices Directive result in the need for a review of the Grocery Goods Regulations, this will be done by the Department of Business, Enterprise and Innovation.
Relevant links to the regulations and guidelines are included below for convenience.
Views on the transposition of EU Directive 2019/633 are now sought from interested parties.
Submissions should be marked “EU Directive on UTPs in the Food Supply Chain” and can either be e-mailed to UTPViews@agriculture.gov.ie or sent in hard copy to Food Industry Development Division, 6W, Agriculture House, Kildare Street, Dublin 2, D02 WK12, no later than close of business on Friday 13 December 2019.
The following are questions you may wish to consider when making your submission. This is not an exhaustive list and you may submit views on any aspect of the Directive.
There is discretion* in the Directive to allow Member States maintain current law in this area or to include stricter rules when transposing the Directive. Should this discretion be exercised? If you think it should, in what area, how, and what do you consider should be included?
Relevant Articles in the Directive
Article 3.1(b) – “the buyer cancels orders of perishable agricultural and food products at such short notice that a supplier cannot reasonably be expected to find an alternative means of commercialising or using those products; notice of less than 30 days shall always be considered as short notice; Member States may set periods shorter than 30 days for specific sectors in duly justified cases;”
Article 7 – “Without prejudice to the right of suppliers to submit complaints under Article 5, and the powers of enforcement authorities under Article 6, Member States may promote the voluntary use of effective and independent alternative dispute resolution mechanisms, such as mediation, with a view to the settlement of disputes between suppliers and buyers regarding the use of unfair trading practices by the buyer.”
Article 9 – “1. With a view to ensuring a higher level of protection, Member States may maintain or introduce stricter rules aimed at combating unfair trading practices than those laid down by this Directive, provided that such national rules are compatible with the rules on the functioning of the internal market. 2.This Directive shall be without prejudice to national rules aimed at combating unfair trading practices that are not within the scope of this Directive, provided that such rules are compatible with the rules on the functioning of the internal market.”
Member States are required to designate an Enforcement Authority or Enforcement Authorities (either new or existing) to enforce the prohibitions laid down in the Directive. What form do you consider this authority should take? For example, should this be a new body or an existing body that is enhanced; should a type of hybrid approach be considered (e.g. one body for enforcement only, another for information/advice/mediation/arbitration); should the option of a self-funding body funded by a levy on buyers be considered. Is there a requirement for an independent regulator?
As a supplier or as a buyer, what are the practical implications for your business as a result of this Directive? In this regard you may wish to see the text of correspondence from the EU Commission in which some clarifications are provided in response to queries by the Department of Agriculture, Food & the Marine on certain aspects of the Directive. Please click to view EU Commission correspondence.
Are there any broader considerations you wish to highlight, for example, in relation to resources, value for money etc?
The links below are provided for your information and convenience:
Your attention is drawn to the fact that information provided to the Department may be disclosed in response to a request under the Freedom of Information Act 2014. Therefore, should you consider that any information you provide is commercially sensitive, please identify same, and specify the reason for its sensitivity. The Department will consult with you regarding information identified by you as sensitive before deciding on any Freedom of Information request. Any personal information, which you volunteer to this Department, will be treated with the highest standards of security and confidentiality, strictly in accordance with the Data Protection Acts 1988 and 2003.
In compliance with the General Data Protection Regulations (GDPR) this Department will not retain, store nor keep any personal data supplied beyond the necessary timeframe required for transposition of the Directive. All personal data will be destroyed in accordance with the GDPR Regulations.
The Department may also decide to place any submissions received by it on the Department’s website. A decision on any such placement may occur without prior consultation with respondents to this process. Thus, it is in the interests of respondents to highlight, in their submissions, any commercially sensitive or confidential information at the time of submission.
If you require further information, please contact Food Industry Development Division (FIDD) of this Department at the following email address: UTPViews@agriculture.gov.ie