Ireland: Marketing, Sales And Distribution Arrangements In Ireland For Groceries And Alcohol Products

From 1 February 2016 Irish law places new limits on the commercial arrangements between wholesalers, retailers and suppliers of grocery goods and alcohol products in the Irish marketplace whose worldwide turnover exceeds €50 million.

Conor Pope, Consumer Affairs Correspondent for The Irish Times, wrote on 02/02/2016 under the banner headline "Protection for Suppliers in New Retail Law" that:

"Large grocery chains are now prohibited from charging suppliers for shelf space or forcing them to pay for promotions as part of a major overhaul of retail rules which were signed into law yesterday."

At the Global Advertising Lawyers' Alliance Annual Global Meeting held April 2016 in Chicago, USA, Duncan Grehan presented to GALA lawyers from over 85 countries worldwide the following key information on how the Grocery Regulation 2016 imposes mandatory terms in the contracts between wholesalers, suppliers and retailers of grocery goods and alcohol.

A. Background

On 31 October 2014 the Competition and Consumer Protection Act, 2014 came into force in Ireland, and it set up the new Competition and Consumer Protection Commission (CCPC) and abolished the former Competition Authority and the National Consumer Agency. On 1 February 2016, the same day that the Grocery Regulation 2016 came into force, the CCPC commenced its role as policeman and enforcer of the 27 or so unfair business-to-consumer commercial practices which had been blacklisted by the EU Directive 2005/2009/EC and which are now classed as criminal offences by the Consumer Protection Act, 2007 which implements the Directive into Irish law. Also in February 2016 the CCPC, as the Regulator, published its Consumer Protection List detailing 62 enforcement actions taken by it in 2015 against misleading commercial practices often involving "distance contracts" concluded via the Internet, electronically, and in breach of the general requirement to provide truthful information in plain intelligible language.

B. Key Limitations

The Grocery Regulation, which has effect from 30 April 2016, sets out the following key points.

1. General Terms

The Grocery Regulation, which, with effect of 30 April 2016, requires all contracts between wholesalers, suppliers and retailers to be signed and in writing by all parties:

a) Applies to any arrangement for sales or supply of food and alcoholic drink products in Ireland between parties whose worldwide turnover exceeds €50 million.

b) Applies to food or drink intended for human consumption including any additive ingredient or processing aid and all intoxicating liquor.

c) Excludes food and drink served or supplied by caterers, in a restaurant or food take-out premises.

2. Mandatory Terms

Imposed contract terms, which cannot be waived, are:

1. Written Agreements

a) The arrangements must be in writing,

b) signed by all the parties,

c) in understandable language, and

d) the parties must be given a pre-contract vetting opportunity.

2. Supply Lines

A retailer or wholesaler cannot compel a supplier to obtain goods or services from a third party from whom the retailer or wholesaler receives payment except where the supplier's own supplier fails to meet reasonable quality standards or charges more than is charged by the supplier having an equivalent quality or quantity by the third party proposed by the retailer or wholesaler.

3. Sales Forecast

A retailer or wholesaler shall on the supplier's request provide a written forecast of the quality and quantity of goods to be required by the retailer or wholesaler with a clear explanation for the basis on which it is prepared.

4. Shelf Display Premium

A retailer or wholesaler may not seek payment from a supplier in return for stocking, displaying or listing the supplier's grocery goods unless the payment is based on an objective and reasonable estimate of the cost thereof.

5. Advertising Premium

A retailer or wholesaler may not compel a supplier to make payment for the advertising or display of grocery goods of the supplier in the retailer or wholesaler's premises.

3. Implied Terms

These terms, set out below, can be excluded by agreement but, if not, will be implied to have been agreed otherwise:

1. Variation, Termination, Renewal

A retailer or wholesaler cannot vary, terminate or renew a contract with a supplier unless the contract expressly provides. The contract must provide for a notice period before any change occurs and notice has to be reasonable having regard to all of the circumstances of the contract.

2. Payment

The retailer or wholesaler shall pay the supplier within 30 days of receipt of the supplier's invoice or delivery of the goods, whichever is later.

3. Promotions

A retailer or wholesaler may not require a supplier to make any payment in respect of the promotion of the supplier's grocery goods in the retailer's or wholesaler's premises.

4. Marketing Costs

A retailer or wholesaler shall not seek payment from a supplier for marketing costs. These include costs in relation to visits by a retailer or wholesaler to the supplier, artwork, packaging design, marketing research, marketing in relation to the opening or refurbishment of a retail premises or hospitality for staff and/or representatives.

5. Shelf Space

A retailer or wholesaler shall not require a supplier to make any payment for the retention, increased allocation or better positioning of shelf space for the supplier's goods.

6. Wastage

A retailer or wholesaler shall not seek payment from a supplier for wastage, that is, for grocery goods that become unfit for sale after their delivery.

7. Shrinkage

A retailer shall not seek payment from a supplier for shrinkage, that is, losses arising as a result of theft, loss or accounting error after the goods have been delivered to the retailer's premises.

C. Compliance and Reporting

Retailers and wholesalers are now obliged to appoint a Compliance Officer to train staff in how to comply with these new laws and to liaise with the CCPC. They must submit annual compliance reports by the end of March of each year using the CCPC template, and documents of record are required to be held for six years from the end of the financial year to which they relate.

D. Enforcement

Compliance is essential as the Grocery Regulation introduces penal provisions in default. Breaches may be prosecuted by "anyone," that is by the CCPC, any competitor or any aggrieved consumer. There is no locus standi requirement.

E. Penalties

Summary Conviction:

First offence – a fine of €3,000.00 and/or imprisonment for max. 6 months or both. Second or subsequent offence – max. €5,000.00 and/or imprisonment for max. 12 months. If after conviction the offender continues to offend, then for each day he will be liable to fines of max. €500.00.

Conviction on Indictment:

A person on first conviction will be liable to a fine of max. €60,000.00 and/or imprisonment for max. 18 months. On any subsequent conviction of the same offence to a fine not exceeding €100,000.00 or imprisonment of a term not exceeding 24 months or both.

F. Private Remedies

Anyone aggrieved by the failure of a retailer or wholesaler to comply with the new law may bring court proceedings to the Circuit Court and claim reliefs such as Interlocutory Orders, Injunctions, damages, exemplary damages, Anton Pillar Orders for the production of documents.

G. Summary

The Grocery Regulation 2016 places affected players in the Irish market for locally and internationally sourced food products and alcohol beverages at considerable risk unless arrangements are compliant. The risk exposes parties to expensive consequences because of void or invalid contractual arrangements including criminal convictions, fines and imprisonment, injunctions and damages.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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