25 Mar UNFAIR COMMERCIAL PRACTICES – NEW DIRECTIVE
On 12 March 2019, was approved the Legislative Resolution by the European Parliament, regarding the proposal for a Directive from the European Parliament and the Council, which aims the unfair commercial practices in relations between companies in the food supply chain, seeking the harmonization resulting from the adoption by the Member States of national rules on the same unfair commercial practices.
The main objective of this new Directive is to combat the imbalances in the bargaining power between suppliers and buyers of agricultural and food products, which are often in the genesis of unfair commercial practices. These practices are examples, in the words of the Resolution, “to deviate clearly from good commercial conduct, to be contrary to good faith and fair dealing and to be imposed unilaterally by one trading partner to another; impose an unjustified and disproportionate transfer of economic risk from one trading partner to another; or impose a significant imbalance of rights and obligations on a trading partner”.
Recognizing that, “while business risk is inherent in all economic activities, agricultural production is particularly prone to uncertainty due to dependence on biological processes and exposure to weather conditions. This uncertainty is exacerbated by the fact that agricultural and food products are, to a greater or lesser extent, perishable and seasonal“, and therefore greater protection against unfair commercial practices is required, particularly in view of the commercial conduct of large operators towards less powerful operators’ negotiation.
The Directive is aimed primarily at protecting small and medium-sized enterprises and natural persons from the agricultural and food supply chain but also larger enterprises with an annual turnover not exceeding €350,000,000.00 including producer organizations.
On the other hand, it seeks the protection of suppliers in the European Union against unfair commercial practices practiced either by purchasers established in the same Member State as the supplier or in a Member State other than the supplier, which also covers unfair commercial practices considered by purchasers established outside of the European Union.
Delays in the payment of agricultural and food products are a relevant focus of the Directive against abusive commercial conduct, considering that “payments of perishable goods made more than 30 days after delivery, or more than 30 days after the end of one agreed delivery deadline for products delivered on a regular basis, or more than 30 days after the date of clearance of the amount to be paid, are not compatible with fair trade practices” and other agricultural and food products should not be paid for more than 60 days after delivery.
It does not place the Directive in question, nor could it do so, the freedom of negotiation between a supplier and a buyer of agricultural and food products, including price, favoring the formalization of written agreements between suppliers and purchasers that regulate in a way objective, clear and unambiguous, the concrete negotiated situations agreed upon, it being also understood that the use of written agreements in the agricultural and food supply chain will help to avoid some of the unfair commercial practices.
Such contracts will be essential to disregard the idea of disloyalty of certain commercial practices such as storage and logistics costs, returns, exhibition, promotion or publicity, payment deadlines, placing on the market of agricultural and food products, that the Directive, as a rule, describe as unfair commercial practices.
Each Member State shall designate the competent authorities in order to ensure the effective implementation of the Directive, transposing it within a time limit yet to be fixed, but certainly less than twenty-four months.
Nuno Pereira Lopes