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14 May 2019 / news

FoodBit: EU bans unfair trading practices in the food sector

A year after the publication of the EU Commission’s proposal, the final text of the Directive 2019/633 on unfair trading practices (UTPs) in business-to-business relationships in the agricultural and food supply chain was published on 25 April 2019. The Directive introduces a common standard of minimum protection against the occurrence of UTPs in the food supply chain across the EU.

Changed tax reporting obligations for benefits received from foreign based group companies

The protection covers micro, small and medium-sized enterprises (SMEs) and mid-range enterprises (including their producer organisations) that have an annual turnover below EUR 350 million, provided that they sell agri-food products to buyers which are larger businesses.

The new Directive establishes a minimum list of prohibited unfair trading practices which includes:

  • late payments and/or last minute order cancellations with regard to perishable products and/or other agri-food products,
  • certain unilateral or retroactive changes to contracts,
  • forcing a supplier to pay for wasted products,
  • payments unrelated to the sale of agri-food products,
  • refusal of a supplier’s request to confirm in writing the terms of a supply agreement,
  • unlawful use of trade secrets of a supplier,
  • buyer’s retaliation against a supplier for the exercise of contractual or legal rights, and
  • forcing compensation for the cost of the examination of customers’ complaints related to the sale of a supplier’s products regardless of the absence of a supplier’s negligence or fault.

Other practices are also prohibited unless there has been a clear and unambiguous upfront agreement between the parties. Such practices include:

  • a buyer returning unsold food products to a supplier,
  • a buyer charging a supplier payment to secure or maintain a supply agreement on agri-food products,
  • a supplier paying for the promotion, advertising or marketing of agri-food products sold by the buyer and
  • a supplier paying for staff for fitting-out premises used for the sale of supplier’s products.

Each Member State is required to designate a public authority to enforce the prohibitions. The designated authorities have to be properly equipped in terms of resources and expertise, and vested with the necessary powers to perform their duties.

Suppliers have the possibility to bring their complaints either to the enforcement authority of the Member State where they are established or where the buyer is established. Upon request of a complainant, their identity as well as any information which they consider sensitive should be treated with confidentiality. In addition to the possibility to submit complaints, Member States may also promote the voluntary use of alternative dispute resolution mechanisms, such as mediation.

The new rules are complementary to measures which already exist at national level. Member States can adopt further measures that go further and beyond the minimum standard of protection of the new Directive, provided that those measures respect the rules on the functioning of the internal market.

Member States are required to implement the new Directive in their national laws by 1 May 2021 and immediately communicate those implementing measures to the European Commission. The national implementing measures must be applicable by 1 November 2021 at the latest.

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