New Rules to Improve Fairness in the Agri-Food Supply Chain

The Oireachtas recently passed legislation to improve fairness in the agri-food supply chain. These rules are based on the Unfair Trading Practices Directive, which was adopted by the European Union in 2019. Our Products team explains these new measures and how they might impact your business when they come into force.

Small- and medium-sized food producers are at the core of the Irish agri-food sector. However, their commercial partners are often much larger wholesalers and retailers, resulting in a significant imbalance of power which affects their contractual arrangements. The EU adopted a Directive in 2019 on unfair trading practices in business-to-business relationships in the agriculture and food supply chain, known as the UTP Directive. Having implemented the UTP Directive using secondary legislation in 2021, the Oireachtas has now enacted the Agricultural and Food Supply Chain Act 2023 to give it further effect. We review the key features of the 2023 Act and how they might impact businesses when they come into force.

A new regulator

The 2023 Act establishes a new regulator, An Rialálaí Agraibhia, to promote fairness and transparency in the agricultural and food supply chain and enhance understanding of and compliance with agri-food unfair trading law. In addition, the regulator is obligated to publish analysis of information about data relating to the agricultural and food supply chain in the State. It will also be required to advise the Minister for Agriculture, Food and the Marine about the agricultural and food sector and agri-food unfair trading law. The regulator is empowered to publish guidelines about supplier protection and trading practices. The regulator succeeds the Unfair Trading Practices Enforcement Authority which was set up on an interim basis in the Department of Agriculture, Food and the Marine in 2021.

Unfair trading practices

Under the 2023 Act, the Minister is empowered to regulate commercial practices, and prohibit certain unfair trading practices, in the agri-food supply chain. The Minister may only prohibit an unfair trading practice if it:

• Deviates from good commercial conduct
• Disproportionately transfers economic risk from one party to another, or
• Results in a significant imbalance of rights and obligations

The regulations may therefore ultimately prohibit practices such as:

• Requiring certain forms of payment for agri-food products
• Requiring certain changes to terms and conditions of supply
• Refusal to comply with certain contractual formalities
• Certain commercial malpractices like the misuse of trade secrets

Further measures may also include:

• Mandating compliance reports by buyers or suppliers in the agri-food supply chain
• Exemptions from the requirements laid down in the regulations in specific circumstances or for specified classes of buyer or supplier

Enforcement

On commencement of the 2023 Act, the regulator shall be designated as the enforcement authority under the UTP Directive, with all of the functions of the Unfair Trading Practices Enforcement Authority transferring to the regulator. Authorised officers will have extensive enforcement powers, such as inspecting records, entering premises to investigate offences and issuing compliance notices. These enforcement powers may ultimately result in prosecution for violating the regulations. While the regulator may investigate, on its own initiative, potential infringements of the regulations, it will also be able to receive and investigate complaints.

Conclusion

The UTP Directive is described as providing a ‘floor’ of rights but not a ‘ceiling’. The 2023 Act therefore provides the Minister with significant powers to draw up wide-ranging and detailed regulations governing commercial relationships in the agri-food supply chain. Stakeholders should monitor for future developments and statements from the Minister and the regulator in order to gain a clearer sense of how and to what extent these new powers are to be exercised.

While the 2023 Act has yet to be commenced, we understand that the appointment process for the chairperson and board of the regulator is underway.

For more information on the impact of the new regulations, contact a member of our Food, Agriculture & Beverage sector team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

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