German parliament adopts law to implement UTP Directive

Germany

On 6 May, the German parliament formally approved the transposition law for the UTP-Directive. Scheduled for approval by the Federal Council at end of May, the law will introduce a higher level of protection for suppliers of certain agricultural goods and blacklist additional unfair trading practices.

A few days earlier, the coalition reached an agreement about the draft Agricultural Organisations and Supply Chain Act. Initially, the competent minister supported strict adherence to the minimum standard established by the Directive against unfair trading practices in the food supply chain (UTP Directive). Political opponents, however, called for widening the scope of application since the UTP Directive only protects suppliers who do not exceed an annual turnover of EUR 350 million. Other points for discussion included the black and grey lists of unfair trading practices and the question whether to include a catch-all clause. The Food Supply Chain Act represents a compromise and goes beyond the minimum protection, but only in some instances.

Minimum level of protection in the UTP Directive

The UTP Directive introduces a minimum standard. Suppliers whose annual turnover does not exceed EUR 350 million enjoy protection against black-listed unfair trading practices including:

  • late payments;
  • short cancellation of orders for perishable goods;
  • unilateral changes of a supply agreement regarding frequency, method, place, timing or volume, quality standards, terms of payment or the price;
  • certain unjustified payments or compensation, such as payments not related to the sales of agricultural and food products, payment for the deterioration or loss of agricultural and food products and compensation for the cost of examining customer complaints without negligence or fault of the supplier;
  • refusal to confirm in writing the terms of a supply agreement;
  • disclosure of trade secrets; and
  • retaliation measures.

Furthermore, the UTP-Directive identifies a list of grey-listed practices, which are prohibited unless they have been previously agreed upon in clear and unambiguous terms. These practices include:

  • the return of unsold goods without payment;
  • charging payment for stocking, displaying, listing and making a product available on the market;
  • charging payment for the advertisement or marketing of a product; or
  • charging the supplier for staff-fitting premises used for the sale of the supplier's products.

Transposition in Germany

In certain provisions, the Food Supply Chain Act will go beyond the minimum standard, such as introducing two different thresholds concerning the scope of application. Suppliers who sell dairy, meet, fruit, vegetable and horticultural products (including potatoes) fall under the scope of application if their annual turnover does not exceed EUR 4 billion in the respective sales segment and if the annual turnover of that supplier does not exceed 20% of the buyer's annual turnover. For now, this applies until the 1 May 2025. However, a prolongation is possible beyond that date. For other suppliers, the threshold of EUR 350 million remains.

The Food Supply Chain Act will not include a catch-all clause as proposed during the legislative procedure. However, some unfair trading practices moved from the grey to the black list. Returning unsold goods without payment as well as payments for the stocking of goods and pay-to-stay fees will be prohibited. Listing fees will only be allowed for product launches. Unfair trading practices can be sanctioned with fines of up to EUR 750,000.

In addition, the coalition agreed to establish an ombudsman's office for alternative dispute resolution. It will also monitor the development of prices and production costs. The German legislator will evaluate the law after two years and can amend the list of unfair trading practices during that process.

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