On 8 June 2016, the Romanian Chamber of Deputies passed new legislation (“New Law”) amending Law no. 321/2009 on the trading of food products (“Law 321”). The New Law introduces more restrictive obligations for traders of food products in relation to their suppliers and aims at lowering the end consumer sale price for food products.
Main novelties brought by the New Law consist of:
New legal concepts
- The New Law introduces the food product acquisition price which represents the purchase price negotiated between the trader and the supplier. The food product acquisition price is further used by the New Law to regulate sale at loss and consumer sale price.
- A clearer breakdown of the elements of the production cost is provided in the New Law. Such cost includes, among others, the purchase price of the substances and materials which were used to obtain the product, as well as the expenses incurred by the processing of the raw materials in order to obtain the finished goods.
More restrictive obligations incumbent upon traders in relation to suppliers
- The trader may not charge the supplier with any taxes and/or fees for services, such as logistic services relating to the purchased products which would, as a result, need to be ensured by the suppliers themselves (charging the suppliers with fees for services was allowed under previous Law 321 to the extent such fees were directly connected to the sale operation).
- In those cases where the trader may refuse the receipt of the goods provided by the supplier, the New Law provides that, as a rule, such refusal must be expressed upon the time of delivery of the goods, otherwise the goods shall be deemed as accepted by the trader.
- The payment term agreed between the trader and the supplier for the delivered goods cannot exceed thirty (30) calendar days, with the exception of fresh food products where a maximum seven (7) calendar day payment term must be observed.
Traders to acquire a minimum of 51% of the volume of goods at shelf from the “short supply chain”
- With respect to specific categories of food products, namely meat products, eggs, vegetables, fruits, honey, dairy and bakery products, the traders have to acquire a minimum of 51% of the volume of goods available at shelf, from the “short supply chain”.
- Under the New Law, the short supply chain consists of a supply chain with limited number of business operators, which are involved in business at local level and engaged in relations at geographical and social levels. Further legislation will be passed by the Romanian Government to detail on the implementation of the New Law as regards provisions regulating the activities of the short supply chain.
- The 51% minimum threshold does not apply to traders with an annual net turnover or total assets value below EUR 2 million in RON equivalent.
- Under the New Law, repeated failure to comply with certain provisions (e.g. prohibition of the trader to charge the supplier with any taxes and/or fees for services) may lead to the suspension of the trader’s operating authorization, for a period of up to six months.
The provisions of the New Law may be viewed as controversial as regards the obligation of the traders to ensure, with regard to specific categories of food products, the purchase of a minimum of 51% of the traded goods from local producers. Such provisions seem to facilitate business for local producers in a manner which may be deemed detrimental to the freedom of trade and may also raise concerns from a competition law perspective.
Also, the New Law may have a significant impact on the manner in which food retailers conduct business in Romania, mainly in terms of ensuring appropriate stock management and sustainability of the cash flow required based on the New Law.
The New Law may be challenged before the Romanian Constitutional Court prior to its entry into force.
Also, in view of its entry into force the New Law needs to undergo promulgation by the President of Romania, who may alternatively decide to require the Parliament to re-examine such law. If promulgated, the New Law would be published in the Official Gazette of Romania and subsequently enter into force within the general term of three (3) calendar days from publication.
With specific regard to trader obligation to acquire a minimum of 51% of the volume of goods at shelf from local producers, such obligation (where applicable) will enter into force 6 months after publication of the New Law in the Official Gazette of Romania.