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Concerns relating to the impact of unfair trading practices (UTPs), broadly defined as practices that grossly deviate from good commercial conduct, are contrary to good faith and fair dealing and are unilaterally imposed by one trading partner on another, have been a recurring feature of public and political debates between agricultural producers/suppliers and buyers of agricultural produce in the EU and Ireland for at least the last decade.
At the EU Commission level, prior to 2016, it was felt that while the growing integration of the European agri-food sector in global markets was creating important trading opportunities, it was also bringing about greater exposure to market imperfections, price volatility, and increased opportunities for agricultural supplier incomes to be negatively affected by UTPs. This left suppliers with little or no effective regulatory recourse or protections, placing them at a significant disadvantage in the marketplace.
In this context, it was generally understood that the power imbalance in the supplier/buyer dynamic heavily favored the buyer to a disproportionate degree. Suppliers, often smaller and more vulnerable, were left struggling to negotiate fair terms or seek redress in cases of exploitation, further exacerbating income inequalities within the agricultural supply chain.
In an effort to identify and review the most common UTPs and to establish what protections for farmers and suppliers could be introduced to bring about a balanced commercial relationship, the European Commission created an expert group called the Agriculture Markets Task Force. This decision followed a European Council meeting in September 2015, where the pressing need to address these issues was highlighted. At the same meeting, Ireland’s Phil Hogan, then European Commissioner for Agriculture and Rural Development, introduced a solidarity package worth €500 million to assist EU agricultural markets experiencing volatility due to the Russian embargo against food imports from the EU and slowing demand from China.
The high-level advisory group created during this meeting was tasked with examining the functioning of the supply chain and the position of farmers within it. In time, this group was officially designated as the Agriculture Markets Task Force. The remit of the Task Force was to provide the European Commission with advice and expertise regarding the functioning of agricultural markets and farmers’ position in the supply chain. It was also charged with making recommendations and proposing policy initiatives to address the imbalances and unfair practices affecting agricultural producers.
One of the Union-wide frameworks to address unfair trading practices to emerge from this process was the 2019/633 EU Unfair Trading Practices (UTP) Directive. This directive specifically highlights how the protections provided should primarily benefit agricultural producers and natural or legal persons that supply agricultural and food products, including producer organizations. It also sets out minimum harmonized rules for the agricultural and food supply chain applicable across all EU Member States, including Ireland.
Importantly, the Directive categorizes UTPs into two groups: black and grey practices. Black practices include late payments, unilateral changes to supply agreements, and refusal to provide written confirmation of supply agreements. These are considered outright unacceptable and are prohibited under the Directive. Grey practices, on the other hand, include actions such as returning unsold perishable products or requiring suppliers to pay for marketing costs unless explicitly agreed upon. These practices are allowed only under specific conditions and with prior agreement.
It should be noted, however, that Ireland had already begun addressing UTPs domestically before the Directive’s adoption. In 2018, the Irish Parliament’s Joint Committee on Agriculture, Food and the Marine produced a political contribution on the EU legislative proposal COM (2018)173 – Proposed Directive on Unfair Trading Practices in Business-to-Business Relationships in the Food Supply Chain. This led to the Irish Government approving the General Scheme and subsequently publishing the Agricultural and Food Supply Chain Bill 2022. This legislative process was informed by a public consultation held in 2021 on the functions to be assigned to a new office, later named the National Food Ombudsman/Regulator.
The culmination of these efforts was the Agricultural and Food Supply Chain Act 2023, which established a new independent statutory authority, An Rialálaí Agraibhia (The Agri-Food Regulator or the “Regulator”). The objective of this new office, in line with the 2019 EU Directive, is to promote fairness and transparency in the agricultural and food supply chain in Ireland.
The key functions assigned to the Regulator under the 2023 Act include:
- Fairness and Transparency in the Agri-Food Supply Chain: The Regulator is tasked with considering the specific needs and circumstances of the agricultural and food sector, with particular emphasis on farming, fishing, and small food businesses.
- Information and Engagement: The Regulator will publish analyses of price and market data relating to the agri-food supply chain, aiming to enhance market transparency.
- Compliance with Unfair Trading Law: The Regulator is responsible for promoting understanding of and compliance with laws addressing UTPs within the agri-food sector.
- Enforcement of Unfair Trading Law: The Regulator serves as the designated Enforcement Authority under Directive (EU) 2019/633 and is responsible for enforcing compliance with UTP regulations.
Additional provisions of the Act empower the Regulator to issue guidelines, review codes of practice, and allow the Minister for Agriculture to consult the Regulator on legislative proposals related to fairness and transparency in the agri-food supply chain.
Despite its recent establishment, the Agri-Food Regulator has already initiated significant activities. It has confirmed that it has begun legal proceedings against a buyer business for an alleged breach of unfair trading practices. Additionally, it has conducted several on-site compliance inspections to ensure that businesses’ policies, procedures, systems, and internal controls meet the requirements of the 2023 Act and associated regulations. The Regulator has also indicated that these inspections will continue, with a focus on targeted, risk-based approaches. To date, no legal challenges have been made against the Regulator’s enforcement activities.
While the creation of the Agri-Food Regulator has been broadly welcomed as a positive step, there has been criticism of the legislation underpinning its operations. These criticisms primarily focus on the perceived limitations of its remit and powers. For example, the Regulator does not currently have the authority to conduct random inspections on suppliers and buyers to ensure ongoing compliance with UTP regulations. Additionally, there have been concerns about the ability of certain businesses, such as meat processors, to block access to pricing data on the grounds of commercial sensitivity. This lack of transparency could hinder efforts to detect and address price manipulation within the supply chain.
Another point of contention is the relatively slow pace at which these changes have been implemented. Stakeholders argue that the establishment of the Regulator and the introduction of robust UTP regulations should have occurred much earlier, given the longstanding challenges faced by agricultural producers. Critics also emphasize the need for continued vigilance and enforcement to ensure that the Regulator fulfills its mandate effectively and that it avoids becoming a “paper tiger” with limited practical impact.
Overall, the consensus is that the 2023 Act and the establishment of the Agri-Food Regulator represent important milestones in addressing unfair trading practices in Ireland. However, the true measure of its success will lie in its ability to protect the interests of suppliers and producers, foster transparency, and promote fairness throughout the agri-food supply chain. As the Regulator continues to develop its operations, its actions will be closely monitored by stakeholders who hope it will bring about meaningful change in an area that has long been fraught with imbalance and inequity.