Grocery Goods Regulations - Targeting Large Grocery Goods Retailers
Thursday, 06 November 2014The Competition and Consumer Protection Act 2014 came into force on 31 October and provides the Minister for Communications, Energy and Natural Resources with the power to make regulations in relation to the commercial relationship between relevant grocery goods undertakings and other grocery goods undertakings in relation to the sale or supply of grocery goods.
When the new regulations are adopted it will be important that large grocery goods retailers and distributors consider their contractual arrangements going forward.
The Minister has yet to publish any regulations under the Act but it is understood that regulations are being drafted and will be brought into force as soon as practicable. The regulations will apply to contracts entered into or renewed in relation to the sale or supply of grocery goods from the date of enactment.
Definitions
The definition of ‘relevant grocery goods undertaking’ in the Act which means a‘grocery goods undertaking engaged in the production, supply, distribution, wholesale or retail of grocery goods in the State, that has, or is a member of a group of related undertakings that has, an annual worldwide turnover of more than €50 million.’
‘Grocery goods undertakings’ are engaged in the production, supply or distribution, wholesale or retail of grocery goods, whether or not the undertaking is engaged in the direct sale of those goods to the public.
‘Grocery goods’ has a broad definition and includes any food or drink, additive, ingredient or processing aid in the preparation or production of food or drink for human consumption and intoxicating liquors but does not include food or drink served or supplied for consumption on the premises of a grocery goods undertaking. Household cleaning products, toiletries, garden plants and bulbs also come within this definition.
What is the purpose of the new regulations?
The regulations will be enacted to ensure fairness between suppliers and retailers in the grocery goods sector and to regulate certain unfair practices. The regulations will primarily aim to limit the extent to which large retailers can engage in practices such as unilaterally varying contracts with suppliers, requiring “hello money” from suppliers for space on supermarket shelves and requiring suppliers to bear the cost of promotions or wastage or shrinkage.
The purpose of those regulations will be to control unfair practices, not to set prices. The regulations will provide a mechanism to redress the perceived inequalities in bargaining positions between smaller and larger undertakings in the supply chain.
When considering whether or not to enact regulations, the Minister will have regard to:
1. promotion of competitive trade between grocery goods undertakings in the interest of quality, value for money and access to choice;
2. importance of conducting trading relationships in good faith and in a fair, open and transparent manner;
3. importance of maintaining freedom of contract and the impact on the development and maintenance of a competitive retail sector in respect of grocery goods.
What will the regulations prescribe?
1. The Act extensively lists a number of specific areas that the regulations will likely govern such as the form of contract between the parties and conditions on its variation, termination and renewal and the manner in which certain terms and conditions are to be incorporated into contracts including payment, ordering, supply and promotion.
2. The Act also stipulates that no contract shall be entered into or renewed unless terms and conditions specified in regulations issued by the Minister form part of the contract in relation to (i) the conditions under which a relevant grocery goods undertaking may require a supplier or retailer to obtain any goods or services from a third party from whom the relevant grocery goods undertaking receives payment for this arrangement and (ii) the extent of the liability for delays or failures in performance of the contract resulting from circumstances beyond that parties reasonable control.
3. The Act also allows for regulations to require grocery goods undertakings to implement new compliance procedures including staff training in compliance with the regulations and the preparation of annual compliance reports with the regulations for submission to the Commission.
Investigation of breaches of regulations
The new Competition and Consumer Protection Commission has the power to inspect compliance and investigate non-compliance with any regulations issued under the Act. The Commission may then issue a contravention notice on a grocery goods undertaking directing it to remedy any contravention. This contravention notice may be appealed to the Circuit Court within 21 days who may confirm, vary or cancel the notice.
Enforcement
1. Breaching a requirement of a contravention notice is an offence and punishable by fines and imprisonment.
2. Any person who is aggrieved as a result of the failure of a grocery goods undertaking to comply with the Act may seek damages in the Circuit Court up to a sum of €75,000.
3. The Commission may publish the names of grocery goods undertakings in contravention of the regulations. It is hoped that this facility will promote compliance amongst grocery goods undertakings with the regulations to avoid negative publicity.
What does this mean for Grocery Goods Undertakings?
Once regulations are enacted by the Minister, it is likely that they will result in:
1. Reduced freedom to contract as certain contractual terms and conditions that affect competition in the market will be prescribed in the regulations;
2. Increased administrative burden of creating policies and procedures that demonstrate compliance with any regulations issued and creating an annual compliance report;
3. Increased staff training requirements on all new regulations issued;
4. Risk of legal actions in the Circuit Court in the event of non-compliance with the regulations;
5. Risk of reputational damage in the event of non-compliance with the regulations being made public.
If you have any queries about the proposed regulations, or wish to be provided with an update when the regulations are published, please contact Feargal Brennan or Laura Greene.
