Farmers, processors, traders, wholesalers, retailers and consumers are all actors in the food supply chain. In the context of supplier-customer relations, there is often an uneven position and distribution of the participant´s forces. As far as unfair trading practices are concerned, smaller participants in the agricultural and food supply chain are more often exposed to unfair practices, mainly because of their generally weak negotiating position compared to large participants. The weaker party of a commercial transaction is often afraid to raise an objection on the grounds that it will disrupt existing business relationships with a stronger party, and the unfair practices of the stronger chain participants remain unaffected.
The approach regarding unfair practices in the individual Member States of the European Union is diverse. Because so far no EU legislative framework has been introduced to deal with unfair trading practices between suppliers and buyers in the agricultural and food supply chain, the European Commission is now proposing a harmonization of European legislation in this respect through the intended Directive of the European Parliament and of the Council of on unfair trading practises in business-to-business relationships in the agricultural and food supply chain (the “Directive”).
The Directive seeks to address the above issues and sets out a minimum list of prohibited unfair trading practices between buyers and suppliers in the agricultural and food supply chain, minimum enforcement rules and coordination measures between enforcement authorities. The Directive applies to sales where either the supplier or the buyer, or both, are established in the European Union. The Directive does not apply to agreements between suppliers and consumers.
The Directive specifically defines the entities to which it applies and defines and classifies those entities into five groups according to their mutual relationship based on supplier’s and buyer’s turnover.
The Directive also sets out a minimum list of unfair trading practices which must be prohibited in each Member State. These include, in particular, unfair trading practices relating to various payments between buyer and supplier, cancellation of perishable orders of agricultural and food products in short notice, unilateral changes to the terms of the supply agreement by the buyer, buyer’s refusal to confirm in writing the terms of the supply agreement, unlawful disclosure of business secrets by the buyer, conducting commercial retaliation against a supplier, claiming compensation for the costs of examining customer complaints by the supplier although there is no negligence or fault on the part of the supplier, and others. The Directive also provides for certain exceptions or other provisions, for example, for payments made by public entities providing healthcare, in the framework of the school scheme or regarding suppliers of grapes and musts for wine production.
According to the Directive, one or more authorities should be set up to ensure compliance with the prohibition of unfair trading practices at national level, and to assess individual complaints. In the case of transposition of the Directive in the Czech Republic, the Office for the Protection of Competition, or the Ministry of Agriculture, may be entrusted with such a competence.
The Directive allows individual Member States to introduce stricter rules designed to combat unfair trading practices than those laid down in the Directive to ensure a higher level of protection.
Regarding the obligation to transpose the Directive into the national legal order, the legislation implementing this Directive must be adopted within 24 months of the entry into force of the Directive, where this measures should be implemented by the Member States within 30 months of the Directive´s entry into force. This Directive shall enter into force on the 5th day following its publication in the Official Journal of the European Union, whereas the publication is expected during May 2019.
The form in which the Directive will be transposed into the Czech law is not clear yet. It could probably be done by amending the Act on Significant Market Power or by adopting a completely new separate law on unfair trading practices in business-to-business relationships in the agricultural and food supply chain.
Mgr. Bc. Štěpánka Vajdová, junior lawyer – vajdova@plegal.cz
Mgr. Jakub Málek, partner – malek@plegal.cz
01. 04. 2019