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Unfair trading practices in the agricultural and food supply chain

Companies acting in the food supply chain for 2021 should revise their supply agreements and harmonise their business practices with the new national laws implementing Directive (EU) 2019/633 on unfair trading practices in B2B relationships in the agricultural and food supply chain. The unfair trading practices (so-called UTPs) scheme must be transposed to national legislations by 1 May 2021.

WHAT?

The UTPs scheme seeks to combat B2B practices in the agricultural and food supply chain that grossly deviate from good commercial conduct, are contrary to good faith and fair dealing, and are unilaterally imposed by one trading partner on another. In short, the intention of the rules is to shield agricultural producers or any natural or legal person selling agricultural and food products from UTPs. The Directive envisages that national laws will appoint competent authorities to enforce the UTP rules.

WHO?

The rules are not automatically applicable to all supplier-buyer relationships. The rules apply when there is a significant imbalance in negotiation power, which is assessed by comparing the annual turnovers of the parties.

HOW?

Precautionary measures for determining business relationship conditions must be applied since national laws have a wide discretion in defining the UTPs, provided that at least those specified in the Directive are included. The list of UTPs is divided into practices that are always forbidden (e.g., payment periods longer than 30 or 60 days (depending on the type of products), unilaterally changing certain terms of a supply agreement, etc.) and those forbidden depending on the circumstances (e.g., requiring the supplier to bear the costs of discounts or advertising, or to accept back unsold products without the obligation of the buyer to pay for them or for their disposal).

Food

IF NOT?

The fines, other penalties, and interim measures will also be defined through national legislation. Additional powers such as carrying out unannounced on-site inspections will be useful in helping national authorities to enforce the UTP rules.

WHEN?

While the deadline for transposing the Directive into national legislation is 1 May, the national law may postpone applying the adopted measures until 1 November 2021. The national measures will be applicable to all supply agreements concluded after the national law enters into force. When it comes to supply agreements that are already in place, the respective companies will have a period of 12 months to bring their business practices into compliance with the new rules. 

With the deadline for transposing the rules on prohibiting UTPs rapidly approaching, food sector companies should press pause and assess the conditions agreed with suppliers to lower the risk of penalties and other sanctions to zero.

EU/NON-EU?

To prevent companies trying to circumvent the obligation to refrain from UTPs by transferring their seat to another country, the Directive clearly stipulates that the rules apply to cases where either the supplier or the buyer, or both, are established in the EU. 

This overview aims to provide the status of Directive implementation in EU jurisdictions, indicating whether a new UTPs law has been adopted or an existing law amended to meet the Directive’s goals. It should be noted that the overview does not represent an exhaustive list of all laws applicable to the supplier-buyer relationship (such as general trade laws, etc.).

As the companies operating in the CEE region are interested in the status of the regulation of UTPs in non-EU countries, the overview provides relevant information for some non-EU countries as well. If there are no specific UTP laws in non-EU countries, the overview provides a wider picture and refers to the rules that should, nevertheless, be taken into consideration in such supplier-buyer relationships. 

The status of UTPs laws in certain CEE countries can be checked in the table below: 

EU jurisdictionStatus of implementationLink to the law – official sourceCompetent authority
Austria

N*

(*Engaging in behaviors that constitute UTPs is already regulated by several existing laws; however, there is currently no concrete (publicly available) information on the status of the UTP Directive’s implementation. For an overview of the existing UTP laws in Austria (in one of which the UTP Directive will most probably be implemented), see the “Guidance for fair conduct in business” published by the Austrian Federal Competition Authority (FCA), available here (English language version).)

To be definedTo be defined
BulgariaYЗакон за защита на конкуренциятаBulgarian Commission for the Protection of Competition (Комисия за защита на конкуренцията)
CroatiaN*
(*A Law on UTPs has been in place since December 2017 and is currently being adapted to the Directive.)
 
Zakon o zabrani nepoštenih trgovačkih praksi u lancu opskrbe hranom (nn.hr)
 
Croatian Competition Agency (Agencija za zaštitu tržišnog natjecanja)
SlovakiaN*
(*The Law on UTPs was adopted in March 2019 and is currently being adapted to the Directive.)
 
91/2019 Z.z. - Zákon o neprimeraných podmienkach v... - SLOV-LEX (slov-lex.sk)Ministry of Agriculture and Rural Development of the Slovak Republic (Ministerstvo  pôdohospodárstva a rozvoja vidieka Slovenskej republiky) 
SloveniaN*
(*Amendments to the Agriculture Act have been prepared, but not yet adopted.)
Zakon o kmetijstvu (ZKme-1)
 

Slovenian Competition Protection Agency (Javna agencija Republike Slovenije za varstvo konkurence)

      

 

Non-EU jurisdictionUTPs lawLink to the law – official sourceCompetent authority
Bosnia and Herzegovina

N*

(*Although there is no law on UTPs, there are laws on trade in place that contain rules on unfair competition regarding trade in general.)

Zakon o trgovini Republike Srpske 
Zakon o unutrašnjoj trgovini Federacije Bosne i Hercegovine 
Zakon o trgovini Brčko Distrikta Bosne i Hercegovine
Implementation and enforcement of the relevant laws on trade is generally in the competence of the entity-level ministries of trade and entity-level market inspections. 
North MacedoniaN*
(*There is a general Law against Unfair Competition in force.) 
 
Zakon protiv nelojalna konkurencija The Law against Unfair Competition does not regulate the competent authority and it only indirectly refers to the Ministry of Trade (Министерство за трговија), now Ministry of Economy (Министерство за економија).
Serbia N*
(*Although there is no law on UTPs in the agricultural and food supply chain, the trade law contains rules on unfair competition regarding trade.)
Zakon o trgoviniMinistry of Trade, Tourism and Telecommunication (Ministarstvo trgovine, turizma i telekomunikacija)
Ukraine

N*

(*Since there is no specific legislation that regulates unfair trading practices, competition legislation applies.)

Закон України «Про захист економічної конкуренції»Закон України «Про захист від недобросовісної конкуренції»
 
The Antimonopoly Committee of Ukraine (Антимонопольний комітет України) 
    

 

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Unfair trading practices in the agricultural and food supply chain
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Authors

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Robert Kordić
Robert Kordić
Associate
Ljubljana
Dieter Zandler
Dieter Zandler
Partner
Attorney-at-law
Vienna
Vanessa Horaceck
Vanessa Horaceck
Associate
Vienna
Zlatan Balta
Zlatan Balta
Senior Associate
Sarajevo
Ivan Gergov
Ivan Gergov
Senior Associate
Attorney-at-law
Sofia
Marija Zrno Prošić
Marija Zrno Prošić
Partner
Zagreb
Karmen Sinožić
Karmen Sinožić
Attorney-at-Law
Zagreb
Lucija Vraneševic
Lucija Vraneševic
Attorney-at-Law
Zagreb
Zlatko Kujundjiski, CMS Skopje
Zlatko Kujundjiski
Associate
Skopje
Srđan Janković
Srđan Janković
Attorney-at-Law
Belgrade
Soňa Hanková
Soňa Hanková
Partner
Attorney-at-Law for Corporate/M&A
Bratislava
Maria Orlyk
Maria Orlyk
Managing Partner Kyiv
Kyiv (CMS RRH)
Oleksandra Prysiazhniuk
Oleksandra Prysiazhniuk
Senior Associate
Kyiv (CMS RRH)