The Unfair Commercial Practices in Agriculture and Food Supply Chain Act implements a European directive1 on this subject and will take effect on 1 November 2021. The purpose of the Act is to strengthen the position of the farmer in the chain.
The law focuses on companies that are active in the agricultural and food supply chain. This includes suppliers, such as farmers and horticulturalists, and customers, such as supermarkets and retailers. If the supplier and the buyer are equivalent in terms of turnover, the Act does not apply to them. Therefore, the scope of the law is delineated by looking at the turnover of the supplier in relation to the turnover of the buyer, as specified in Article 5 of the law.
The law is not aimed at every producer or every customer. It is mainly concerned with small suppliers facing large customers. The Act does not operate with a general prohibition, but prescribes in detail which specific actions are not permitted and works with a black and grey list. Black listed activities are by definition unlawful. Grey listed actions are unlawful, unless unambiguous and clear agreements have been made between the supplier and the buyer. Below is an overview of the types of behaviour that fall under the black and grey lists respectively.
Black list (Article 2)
The following conduct of the buyer (mostly supermarkets and retailers) towards the supplier (mostly farmers and producers) is unlawful:
• Late payments (after 30 days for perishable products (such as vegetables and meat), and after 60 days for non-perishable products);
• Cancellation of orders for perishable products at too short a notice;
• Refusal of written confirmation of agreements made when supplier requests it;
• Obtaining and using and/or disclosing supplier’s trade secrets;
• Unilateral change of contractual conditions;
• (Threatening) retaliation (such as de-listing);
• Make supplier pay for:
o Matters not related to the sale of the products;
o Spoilage and loss if the products are already the property of the buyer;
o Investigation of customer complaints.
Grey list (Article 3)
The following conduct of the customer towards the supplier is unlawful, unless it has been previously, clearly and unambiguously agreed in writing:
• Returning unsold products to the supplier without payment for those products or for the disposal of those products (or both);
• Requesting fees for:
o Costs of storage, inclusion in the range, etc;
o costs of promotion such as marketing, advertising or display in shops;
o discounts on products from promotional campaigns;
o costs of employees for furnishing the premises where the supplier’s products are used.
Suppliers themselves can submit a dispute to a disputes committee to have a certain conduct declared unlawful. Suppliers are also authorised to go directly to the civil courts, instead of to the Disputes Committee. A customer can only go to the civil court after having gone through a procedure with the Disputes Committee.
The Authority Consumer and Market is in charge of public enforcement. The ACM has the following powers: i) starting an investigation on its own initiative or on the basis of a complaint, ii) requesting information from customers and suppliers, iii) carrying out unannounced inspections, iv) imposing fines and other sanctions, v) taking a decision that unfair trading practices are taking place and obliging parties to cease these practices and vi) publishing the enforcement decisions.
Effective date and transition period
By Royal Decree of 26 May 2021, the entry into force of the Act was set at 1 November 2021. For existing agreements, a transitional period of twelve months applies from the moment of publication of the Act, which took place on 15 April 2021. Therefore, by 15 April 2022, existing agreements must also be adapted to the Act.
Parties active in the food supply chain (such as suppliers, supermarkets and retailers) will have to investigate whether this Act is applicable to their business operations and, if so, to what extent. They may have to adjust their purchase or supply contracts in accordance with this Act.
1Directive (EU) 2019/633 of the European Parliament and of the Council of 17 April 2019 concerning unfair commercial practices in relations between businesses in the agricultural and food supply chain (OJ 2019 L 111/59)