Ireland: UTP Regulations To Protect Agricultural And Food Producers

On 28 April 2021, the Government published the European Union (Unfair Trading Practices in the agricultural and food supply chain) Regulations 2021 (the "UTP Regulations"). The UTP Regulations implement the EU Unfair Trading Practices Directive and aim to protect suppliers of agricultural and food products where there is an imbalance in bargaining power between those suppliers and the buyers of their products.

The UTP Regulations come into effect on 01 July 2021 and will be in force alongside the existing Grocery Goods Regulations. Unlike the Grocery Goods Regulations, the UTP Regulations apply to supply agreements with all buyers of agri-food products which, as well as retailers and wholesalers, can include, for example, food processors and food distributors. There is also a lower minimum turnover threshold for the UTP to Regulations to apply than there is for the Grocery Goods Regulations. The UTP Regulations will therefore capture a far greater number of agreements than are currently caught by the Grocery Goods Regulations.

Any agreements for the sale or supply of agri-food products entered into after 28 April 2021 must be in compliance with the UTP Regulations by 01 July 2021 and, importantly, any agreements entered into before 28 April 2021 must be brought into compliance by 28 April 2022.

A dynamic approach to turnover

In contrast with the Grocery Goods Regulations which require a buyer to have an annual worldwide turnover of €50 million before they apply, the application of the UTP Regulations to a particular agreement depends on the relative turnover of the supplier and the buyer involved. The UTP Regulations introduce the following tiers which buyers' and suppliers' turnovers must fall into for the UTP Regulations to apply:-

For example, if a supplier's turnover is €3 million then the buyer's turnover must exceed €10 million for the UTP Regulations to apply.

Prohibited practices

The UTP Regulations provide for an absolute ban on 10 "black" practices which are unconditionally prohibited. These are:-

1. A buyer paying a supplier more than 30 days after delivery of perishable products;
2. A buyer paying a supplier more than 60 days after delivery of other agricultural and food products;
3. A buyer cancelling an order of perishable goods on short notice with a period of less than 30 days' notice always being considered to be short notice;
4. A buyer unilaterally changing the terms of an agreement;
5. A buyer requiring a supplier to make payments that are not related to the sale of agricultural and food products of the supplier;
6. A buyer requiring a supplier to pay for the deterioration or loss of products that occur after the products have been delivered or ownership has passed to the buyer;
7. A buyer refusing to provide written confirmation to a supplier of the terms of the agreement between them;
8. A buyer unlawfully acquiring, using or disclosing the trade secrets of a supplier;
9. A buyer threatening or carrying out acts of commercial retaliation against a supplier, such as filing a complaint with enforcement authorities; and
10. A buyer requiring compensation from a supplier for the cost of examining customer complaints relating to the sale of the supplier's products despite the absence of negligence or fault on the part of the supplier.

The UTP Regulations also prohibit 6 "grey" practices unless the supplier and the buyer have previously agreed to them in clear and unambiguous terms:-

1. A buyer returning unsold products to a supplier without paying for those products or their disposal;
2. A buyer charging the supplier for stocking, displaying or listing a supplier's products or making them available on the market;
3. A buyer requiring a supplier to bear all or part of the costs of discounts on the products;
4. A buyer requiring a supplier to pay for the advertising by the buyer of agricultural and food products;
5. A buyer requiring a supplier to pay for the marketing by the buyer of agricultural and food products; and
6. A buyer charging a supplier for the cost of the buyer's staff fitting-out premises used for the sale of the supplier's products.

Enforcement

For the time being, the enforcement authority for the UTP Regulations will be the Minister for Agriculture, Food and the Marine. This is a temporary arrangement as the Government have committed to the establishment of a National Food Ombudsman who will be tasked with enforcing the UTP Regulations.

Suppliers will be able complain to the enforcement authority which will have extensive powers of investigation. If the enforcement authority is of the opinion that the UTP Regulations are not being complied with, it can issue a Compliance Notice to buyers. A Compliance Notice can require a buyer to take appropriate action, including:-

• To cease a practice prohibited by the UTP Regulations;
• To pay for an order of perishable products which was cancelled at short notice;
• To return a payment to a supplier; or
• To cease a specified operation or activity on a premises.

Failure to comply with a Compliance Notice will be a criminal offence which will be punishable:-

• On summary conviction by a class A fine or up to 6 months' imprisonment or both; or
• On conviction on indictment by a fine not exceeding ?500,000.00 or up to 3 years' imprisonment or both.

A buyer will however have a right to appeal a Compliance Notice to the District Court within 7 days of service of the Notice.

Next steps

Prior to the coming into force of the UTP Regulations:-

• Suppliers and Buyers should review their agreements to ensure that they are compliant with the UTP Regulations.
• Suppliers and Buyers should find out their trading partners turnover to determine whether the UTP Regulations apply.
• Suppliers should familiarise themselves with the UTP Regulations and the protections afforded to them.
• Buyers should review their agreements with their suppliers to ensure that none of the "black" practices are included. If suppliers wish to include any of the "grey" practices in their agreements with buyers, they should ensure that the language used is clear and unambiguous.

Suppliers and buyers should also be aware that a public consultation is currently underway in respect of the establishment of a National Food Ombudsman and in respect of what stricter rules, if any, should be implemented beyond the UTP Regulations.

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.