New rules prohibiting unfair trading practices in the agricultural and food supply chain are entering into force

On 15 December 2021, a Belgian Act (the ‘Act’) was published that implements the European Directive 2019/633 on unfair trading practices in business-to-business relations in the agricultural and food supply chain (the ‘UTP Directive’). The Act’s scope is very broad and covers nearly all relationships between business partners in the food and animal feed supply chain. It goes further than the minimum standard of protection against unfair trading practices imposed by the UTP Directive. The Act enters into force on 25 December 2021. Existing agreements have to be amended within 12 months.

Context

Significant imbalances in bargaining power between suppliers and buyers of agricultural and food products are common in the agricultural and food supply chain and can lead to unfair trading practices being imposed by the larger and more powerful trading partners. The UTP Directive aims to introduce a minimum standard of protection against such unfair trading practices and was supposed to be transposed into national legislation by 1 May 2021 and apply by 1 November 2021 at the latest. With some delay, the UTP Directive has now been transposed into Belgian law by an Act of 28 November 2021 (the ‘Act’) that was published on 15 December 2021, and is now entering into force on 25 December 2021.   

By the B2B Acts of April 2019, the Belgian legislator had already introduced a prohibition on unfair trading practices and unfair commercial terms applying in all B2B relationships.  The Act now imposes additional specific obligations and prohibitions in the food supply sector.

Commercial risk is indeed particularly present in agricultural production because of its dependence on biological processes and its exposure to weather conditions. In addition, agricultural and food products are mostly perishable and seasonal. Therefore, the UTP Directive has introduced an additional protection against unfair trading practices by establishing a minimum standard of protection against unfair trading practices in order to combat those practices that can have damaging consequences on the standard of living of the agricultural population.

These provisions have been transposed into Belgian law in Book VI of the Code of Economic Law in a new section 4 entitled: “Unfair trading practices in business-to-business relations in the agricultural and food supply chain”.

The UTP Directive has required a minimum harmonization, which allows the member states to adopt or maintain stricter rules on other unfair trading practices than those listed in the UTP Directive or to expand the scope of application. The Belgian legislator has opted to broaden the new rules’ scope of application, but the lists of prohibited “black” and “grey” clauses largely correspond to those set out in the UTP Directive.

Scope of application

The UTP Directive provides for different thresholds that put into perspective the supplier’s annual turnover in relation to the buyer and that would apply only to the extent certain thresholds are met (for example: any supplier that has an annual turnover not exceeding EUR 2 000 000 in relation to a buyer that has an annual turnover of more than EUR 2 000 000). The Act’s scope of application is broader and does not include the UTP Directive’s various thresholds. The Act applies to relations in the agricultural and food supply chain, between buyers and suppliers regardless of their size. There is only one exception: the Act’s provisions do not apply if the supplier has an annual turnover of at least 350 000 000 euros, and this threshold is calculated on a consolidated worldwide basis. The Belgian legislator thus has wished to exclude the largest companies from the new rules’ protection. This exclusion does not apply, however, if the supplier is a recognised producer organization.

The Act will apply as soon as either the supplier or the buyer or both are established in Belgium and therefore it also offers protection to undertakings outside Belgium and even outside the EU when selling to Belgian purchasers.

It should be noted that the Act also does not include the distinction provided for in the UTP Directive between products intended for human consumption and products intended for animal consumption, nor between perishable and non-perishable products. The protection against unfair trading practices applies to all suppliers of any of these products in the same way.

Prohibited unfair trading practices

The new article VI.109/5 of the Code of Economic Law contains a “black list” of market practices that are considered unfair and prohibited in all circumstances:

• Payment terms that are longer than 30 days (with an exception made for schools, public health institutions and grapes used in wine production);
• Cancellation terms that are too short to find an alternative (less than 30 days before delivery is considered to be too short);
• The buyer unilaterally modifies the essential terms of the agreement;
• The buyer requires payments from the supplier that are not related to the sale of the products;
• The buyer requires payments from the supplier for deterioration or loss of the products on the buyer’s premises or after transfer of the property rights, without any fault on the supplier’s part;
• The buyer refuses to confirm in writing the terms of the supply agreement;
• The buyer unlawfully acquires, uses or discloses trade secrets;
• The buyer threatens or carries out commercial retaliation against the supplier for exercising its contractual or legal rights;
• The buyer requires compensation from the supplier for the cost of examining customer complaints despite the absence of negligence or fault on the supplier’s part.

The new article VI.109/5 of the Code of Economic Law contains an additional “grey list” of market practices that are considered unfair, unless they have been previously agreed in clear and unambiguous terms in the supply agreement or in a subsequent agreement between the supplier and the buyer:

• The buyer returns unsold agricultural and food products to the supplier without paying for the unsold products or without paying for the disposal of the products;
• The supplier is charged payment for its agricultural and food products to be stored, displayed or listed or made available on the market;
• The buyer requires the supplier to bear all or part of the costs associated with any discounts on agricultural and food products that are sold by the buyer as part of a promotion;
• The buyer requires the supplier to pay for the advertising by the buyer of agricultural and food products;
• The buyer requires the supplier to pay for the marketing by the buyer of agricultural and food products;
• The buyer charges the supplier for staff for fitting-out premises used for the sale of the supplier’s products.

These black and grey lists largely correspond to the lists included in the UTP Directive. It is, however, already provided that the lists can be extended by Royal Decree.

Procedure and penalties

The FOD Economie’s Directorate General of Economic Inspection is the appointed Belgian enforcement authority. It is competent to receive complaints, investigate, issue warnings to the buyer of agricultural and food products, propose a settlement or make infringement decisions, impose administrative fines and publication measures. As the UTP Directive requires that complaints are dealt with within a reasonable period of time, the Act provides for a period of 60 days for the complainant to be informed of the outcome of his/her complaint. Anonymous complaints are also possible.

Conclusion

The Act enters into force on 25 December 2021 and must be taken into account by all actors in the food (and animal feed) supply chain as from that date. Not only the agreements to be concluded, but also the commercial practices and negotiation methods used may have to be revised and amended and this could have a significant commercial and financial impact on the actors in the food supply chain. For agreements that were concluded before the Act’s publication on 15 December 2021, a transitional period of 12 months is provided to bring them into line with the new rules.

Written by

• Carmen Verdonck

  Partner