The Wet oneerlijke handelspraktijken landbouw- en voedselvoorzieningsketen (Unfair Commercial Practices in the Agriculture and Food Supply Chain Act (the “UCP Act”) entered into force at the end of 2021. It is based on the European Directive of the same name (the “Directive”). The UCP Act has now been in force for over two years and the first UCP investigations by the Netherlands Authority for Consumers and Markets (“ACM”) and foreign authorities have taken place.
In this blog we briefly explain the UCP Act. We then address ACM’s recent investigations, as well as discussing the enforcement measures of foreign regulators based on the Directive. We conclude with the main lessons learnt from the enforcement measures.
The UCP Act in a nutshell
The UCP Act serves to protect suppliers in the food chain against the procurement power of their buyers. To this end, the UCP Act provides a list of buyer practices that are prohibited (the black list) and a list of buyer practices that are prohibited unless agreed beforehand in writing (the grey list). Examples of black list practices include unilaterally changing delivery conditions and cancelling an order at short notice. An example of a grey list practice is returning unsold agricultural and food products without paying for them.
The UCP Act applies only to trading relationships in which the supplier is significantly smaller than the buyer. In this regard, the UCP Act sets turnover thresholds that must be met in order to fall within its scope. A detailed explanation of the UCP Act, including an overview of the black list, the grey list and the turnover thresholds, is provided in this blog.
ACM survey: many buyers not yet familiar with UCP Act
In 2023, ACM commissioned I&O Research to investigate the knowledge of the UCP Act among larger buyers of food products. It also investigated the extent to which buyers in the food chain encounter unfair trading practices. The findings were published in the ‘Agriculture UCP Act in practice: food product buyers’ report in December 2023.
The main conclusions in the report are that many buyers are not yet entirely familiar with the practices that are no longer permitted under the UCP Act. Three in four buyers of those surveyed had never heard of the UCP Act before the survey was conducted. Also, more than half of those surveyed believed that it was still permitted to cancel an order of perishable goods and to threaten negative consequences less than 30 days beforehand. Most of the group (90%) were unfamiliar with the prohibition on unilaterally amending contracts or conditions. In the coming period, ACM intends to increase compliance with the UCP Act by means of both its survey and the relevant communications.
Termination of ACM investigation into breach of UCP Act by meat producer
The fact that the majority of the buyers in the food chain are familiar with the prohibition on unilateral amendments to contracts or conditions may have something to do with ACM’s investigation into a Dutch meat producer. ACM launched this investigation at the end of 2022, following complaints from the Dutch Pig Production Organisation (POV) on the grounds of the unilateral amendment of delivery conditions by the meat producer.
The meat producer is one of the largest in the Netherlands and has contracts with many pig farmers. Those contracts set out the conditions and price system under which the producer buys pigs from pig farmers. According to ACM, the provisions in these contracts were at odds with the UCP Act because they allowed the meat producer to unilaterally amend the delivery conditions.
As a result of ACM’s investigation, the meat producer promised ACM that it would in future amend the contracts with pig farmers only by mutual consent. Pig farmers would furthermore be given the option not to agree to a new contract, without the meat producer being able to immediately terminate the current agreement. Moreover, if pig farmers do not agree, they are not bound by the one-year notice period. The meat producer itself, however, is still bound by this notice period.
ACM accepted these commitments and declared them binding, thereby putting an end to the investigation into the meat producer. According to ACM, this will strengthen the bargaining position of pig farmers. The meat producer was assisted by Maverick Advocaten in the investigation and commitment process.
Unfair trading practices in the agri-food supply chain elsewhere in the EU
Other Member States are also increasingly enforcing unfair trading practices in the agri-food supply chain. On 26 October 2023, for instance, the Swedish competition authority fined Everfresh, a fruit and vegetable wholesaler, SEK 5 million (about €430,000). According to the Swedish competition authority, Everfresh had applied payment terms that were longer than those permitted under the Swedish implementation of the Directive (more than 30 days).
The Croatian competition authority has not been idle either. In 2021 already, mandarin buyer Jasenska was fined for several unfair practices. For instance, Jasenska’s general purchasing conditions did not contain provisions on payment terms, delivery locations and delivery deadlines. Jasenska furthermore did not make clear agreements on prices and price calculation methods with suppliers. This is required under Croatian law, however. Furthermore, the Croatian competition authority fined supermarket chain Plodine in October 2023. Plodine allegedly paid its fresh meat supplier too late (after the 30-day statutory deadline).
What is interesting about the Swedish and Croatian implementation of the Directive is that the Swedish and Croatian legislatures have significantly expanded the scope of the Directive and the prohibited conduct. For instance, Swedish and Croatian laws govern all agri-food trading relationships in which buyers have a turnover of more than €2 million, regardless of the size of the supplier. This differs from the Directive and Dutch law, which set specific turnover thresholds for both suppliers and buyers.
Furthermore, in December 2023, the Polish competition authority imposed a fine of over €20 million on Auchan Polska, a large supermarket chain. Like all other large retail chains, Auchan uses a centralised system for supplying goods to shops. It requested suppliers that wanted to use this system to pay for it. According to the Polish authority, this was not permitted, because it is not an additional service provided by the chain, but rather a core element of the business model of retail chains. It is therefore unacceptable to charge for transporting goods from the chain’s main warehouse to its shops. This amounts to financing one’s own operations at the expense of suppliers, according to the Polish authority.
Key practical lessons learnt from two years of UCP Act supervision
The enforcement measures and investigations referred to above show that enforcement under the Directive and the UCP Act is now underway. Moreover, now that the Directive has been implemented in all EU Member States and companies in the Netherlands are becoming more familiar with their rights and obligations under the UCP Act, the Act is likely to be increasingly the subject of discussion and ACM enforcement. It is therefore important that agri-food companies carefully review current and future contracts for potentially prohibited agreements in light of the UCP Act. In doing so, they can take into account the following lessons learnt from the enforcement measures discussed above:
- In principle, unilateral amendment of delivery conditions is prohibited. According to ACM, this is true also if the possibility of unilateral amendment has been agreed in writing. Agreeing that the buyer may change delivery conditions is permitted if it is agreed in writing under which specific circumstances the buyer may do so. These circumstances must be described very precisely and may not be too broad. Reference to a general force majeure provision is too broad, according to ACM.
- Buyers that wish to change delivery conditions but for which it is onerous to request approval from each individual supplier may use a supplier council. This supplier council can then agree or disagree to the change on behalf of the remaining suppliers. ACM stated this in the context of the aforesaid investigation into the meat producer. While there are competition law objections to a supplier council, ACM sees no reason to enforce it (at present), provided that the council is composed by the suppliers themselves and not by the buyer. Individual suppliers must of course agree to be represented by the supplier council. Also, the supplier council must be sufficiently representative.
- The turnover thresholds that apply in order to fall within the scope of the national implementations of the UCP Directive can vary greatly from one EU Member State to the next. It is therefore possible that a supplier cannot rely on the UCP Act in the Netherlands because the group turnover is too large or the buyer’s turnover is too small, but it can do so in another EU Member State. Suppliers and buyers that enter into agreements in multiple countries should keep a close eye on the differences in national implementations.
More information on what conduct is or is not permitted under the UCP Act and as from what turnover the UCP Act applies can be found in this and this blog. More information on dawn raids and inspections by ACM and the NVWA can be found at invalacm.nl and invalnvwa.nl.
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