by David Phelan , John Deignan March-02-2016 in Commercial & Business, Retail
On 1 February 2016 the Consumer Protection Act 2007 (Grocery Goods Undertakings) Regulations 2016 were signed into law by the Irish Minister for Jobs, Enterprise and Innovation. The regulations apply to retailers and wholesalers of food and drink operating in Ireland which have, or are part of a group which has, a worldwide turnover of in excess of €50 million. The regulations will enter into force on 30 April 2016.
Key features of the regulations
Grocery goods contracts – From 30 April 2016, new or renewed contracts between a retailer or wholesaler and a supplier must be put into writing. The regulations also provide that a retailer or wholesaler is prohibited from varying/terminating/renewing a grocery goods contract with a supplier unless this is expressly provided for in the contract, in which case a written notice period must also be set out in the contract. It is worth noting that “variation” includes variation in the frequency, timing or volume of the supply or delivery of grocery goods.
Goods and services from a third party –The regulations prohibit a retailer or wholesaler from compelling (directly or indirectly) a supplier to obtain goods or services from a third party from whom the retailer or wholesaler receives payment for this arrangement. This prohibition is however subject to limited exceptions, namely if the supplier’s source for the goods or services does not meet the reasonable quality standards of the retailer or wholesaler or if the supplier’s source charges more than the third party proposed by the retailer or wholesaler.
Non-performance due to factors beyond the reasonable control of a party to a contract – This deals with “force majeure” situations and provides that neither party to a grocery goods contract should have any liability or be deemed to be in breach of the contract as a result of delays/non-performance due to factors beyond the control of the parties. However, the regulations stipulate that in such circumstances the affected party should promptly notify the other party in writing of what the circumstances are and when those circumstances cease. If the circumstances continue, the regulations provide for termination of the contract.
Forecast of supply of grocery goods – If a supplier requests of a retailer or wholesaler a forecast of the goods required, the retailer or wholesaler will be obliged to provide this and in the first instance to consult with the supplier concerning the basis on which the forecast will be prepared.
Payment from a supplier – Retailers and wholesalers will be prohibited from seeking “hello money” from a supplier for stocking, displaying or listing grocery goods, unless the payment is based on an objective and reasonable estimate of the costs of stocking, displaying or listing these grocery goods. Further, if such payment is requested a supplier is entitled to request an estimate of the costs of stocking, displaying or listing the supplier’s grocery goods and the basis for that estimate. These provisions do not apply to promotions, which are dealt with separately under the regulations (see below).
Payment terms and conditions – A retailer or wholesaler will be obliged to pay the supplier within 30 days of the receipt of the goods/the supplier’s invoice (whichever is the later), unless the parties agree to a different timeframe in the grocery goods contract.
Promotions – The regulations prohibit a retailer or wholesaler from compelling (either directly or indirectly) a supplier to make any payment in respect of the promotion of the supplier’s grocery goods in the retailer’s or wholesaler’s premises (except where the parties make this a term of the contract).
Payment for marketing costs – A retailer or wholesaler must not seek payment from a supplier for marketing costs (except where this is a term of the contract and the payment is based on objective and reasonable estimates). Marketing costs include visits by a retailer or wholesaler or their staff or representatives directly involved in the purchase of grocery goods to a supplier and also includes artwork or packaging design.
Payment for shelf space – Under the regulations a retailer or wholesaler must not charge a supplier for better shelf positioning, retention or increased allocation of shelf space (except where this is an express term of the contract).
Payment for advertising or display of grocery goods, wastage and shrinkage – A retailer or wholesaler is prohibited from seeking payments under the regulations for these matters (except where this is an express term of the contract). Under the regulations, “wastage” refers to grocery goods that become unfit for sale after they delivery by a supplier to a retailer or wholesaler.
Enforcement of the regulations
- The Competition and Consumer Protection Commission will be charged with enforcing compliance with the regulations.
- The Competition and Consumer Protection Commission has substantial powers to enforce compliance with the regulations, including penalties of up to €100,000 or two years in prison.
Summary
Affected wholesalers and retailers will be required to assess whether these regulations apply to them, and if they do, take the necessary steps to ensure compliance with the regulations. In the case of suppliers, they will also need to be aware of the content of the regulations.
In addition to the penalties mentioned above, the regulations also make it a requirement for affected wholesalers and retailers to demonstrate their compliance with the regulations in an annual compliance report to the Competition and Consumer Protection Commission. Further, affected wholesalers and retailers will be required to appoint a liaison officer to deal directly with the Competition and Consumer Protection Commission
We are happy to discuss how the new legislation will affect your business.
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About the Authors
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David Phelan
David is Head of the Commercial & Business team at Hayes solicitors and advises a number of the firm’s major corporate clients. He advises on a wide range of corporate and commercial law issues. He has expertise in advising on general corporate and commercial matters, particularly in the manufacturing, retail, aviation, sports and motor sectors, and also frequently advises clients who operate in regulated areas.
John Deignan
John Deignan is an associate solicitor in the Commercial & Business team at Hayes solicitors. John predominantly specialises in commercial litigation and dispute resolution, and has acted for a wide variety of private companies, State bodies and financial institutions in contract law cases, enforcement and recovery actions, commercial landlord and tenant disputes and defamation actions.