Why were the Grocery Regulations introduced?
The Consumer Protection Act 2007 (Grocery Goods Undertakings) Regulations 2016 (the "Grocery Regulations") are made under the Competition and Consumer Protection Act 2014 and were signed into law on 27 January 2016 but do not take effect until 30 April 2016. The Grocery Regulations were introduced following concern about certain practices in the grocery goods sector and in particular, the fairness of contractual relationships between large wholesalers and retailers, and their suppliers.
A summary of some of the most important elements of the Grocery Regulations are:
- All terms and conditions of “grocery goods contracts” to which a relevant wholesaler or retailer are party must now be expressed in clear understandable language and recorded in writing.
- A copy of the contract must be signed and retained by the supplier and the relevant wholesaler or retailer.
- In certain circumstances, the variation, termination or renewal of contracts can no longer be unilaterally carried out by relevant wholesalers or suppliers.
- Relevant wholesalers and retailers are obliged, unless the contract provides otherwise, to make payments to suppliers within the later of 30 days of receipt of an invoice or the delivery of the goods.
- Restrictions are imposed in certain circumstances in relation to certain practices including:
- the seeking of payments/benefits as a condition of stocking, displaying or listing goods; and
- the seeking or compulsion of payments/benefits for promotions, marketing costs, shelf positioning/allocation, advertising or display of goods, wastage and shrinkage.
What do the Grocery Regulations apply to?
The Grocery Regulations apply to contracts (referred to in the Grocery Regulations as “grocery goods contracts”) between suppliers and certain retailers and wholesalers for the sale or supply of grocery goods. The Grocery Regulations prescribe “grocery goods” to include food or drink that is intended to be sold for human consumption and includes certain additives, ingredients, processing aids and intoxicating liquors but does not apply to food or drink served or supplied on the premises of a retailer or wholesaler or as a part of providing catering, restaurant or take-away services or any similar hospitality services or intoxicating liquor served or supplied for consumption on the premises of a retailer or wholesaler.
The focus is on food and drink only as the most concern was expressed during the consultation period in relation to these products. Household cleaning products, toiletries, garden plants and garden bulbs are not included in the Grocery Regulations but could at some point in the future under further regulations be within scope. This is because the framework provided by the Competition and Consumer Protection Act 2014 covers these types of products and this is something to be aware of moving into the future.
Who do the Grocery Regulations apply to?
The Grocery Regulations apply to wholesalers and retailers engaged in the wholesale or retail of grocery goods in the state (described as “relevant grocery goods undertakings” in the Grocery Regulations) that have, or are part of a group of related undertakings that has, an annual worldwide turnover exceeding €50 million. The guidelines to the Grocery Regulations published in March 2016 make it clear that in calculating the turnover figure turnover generated by a retailer or wholesaler for products other than relevant food or drink will not be counted. It is fair to say that quite a number of businesses that operate in Ireland could fall within the scope of the Grocery Regulations.
When do the Grocery Regulations apply?
A relevant grocery goods undertaking must, as soon as practicable but no later than 3 months after the commencement of the Grocery Regulations, (which practically means on or by Friday 29 July 2016) designate and train members of staff to be responsible for compliance and to be responsible for raising awareness in the organisation about the Grocery Regulations. They must also appoint a liaison officer to liaise with the Competition and Consumer Protection Commission (the CCPC) and notify the CCPC of the name and contact details of that person as soon as practicable after 30 April 2016. Retailers and wholesalers to whom the Grocery Regulations apply must submit a compliance report by 31 March each year to the CCPC.
The Grocery Regulations also impose obligations on retailers and wholesalers to whom the Grocery Regulations apply, to keep and maintain certain documents and records. Whilst the legal obligation is in the main only on retailers and wholesalers to keep and maintain certain documents and records, suppliers to relevant retailers and wholesalers should be prudent and also maintain the type of records set out in the Grocery Regulations. Relevant retailers and wholesalers will be subject to inspections by the CCPC, who is responsible for monitoring compliance with the Grocery Regulations and will also be tasked with carrying out investigations arising from complaints.
Making a complaint
The legislation does not specify who can make a complaint, however, it is most likely that complaints will be made by competitors, suppliers or interest groups. Importantly, any person who is aggrieved in consequence of the failure by a retailer/wholesaler to comply with the Grocery Regulations has a right of action for relief in the Circuit Court and can sue for up to €75,000. A complaint can be made to the CCPC whose website is www.ccpc.ie
What are the Enforcement Sanctions?
What will happen if the CCPC believes that there has been a breach or contravention of the Grocery Regulations? There are two options open to the CCPC if it believes that there is a breach.
First, it can issue a contravention notice which can direct the relevant retailer/wholesaler to remedy the contravention within a specified time. The notice may include directions as to how the contravention should be remedied. The CCPC can then either confirm compliance or prosecute the retailer/wholesaler for non-compliance with the notice.
The second option available to the CCPC is to bypass the contravention notice stage altogether and proceed directly to prosecute the relevant retailer/wholesaler for breaches of various provisions of the Grocery Regulations.
Are there penalties?
If retailers and wholesalers are found to be in breach of a contravention notice or in breach of the Grocery Regulations they could face prosecution. There is provision for the prosecution of directors, managers, secretaries or other officers of a relevant retailer/wholesaler in their personal capacity and the imprisonment provision relates to those individuals. If found guilty, the retailer/wholesaler may be liable to fines and penalties ranging from €4,000 and/or imprisonment for 6 months for a first summary conviction, to fines of €100,000 and/or imprisonment for 24 months for conviction on indictment.
What you need to do
In the context of “grocery goods”, whether you are a retailer, a wholesaler or a supplier, below is a summary of some practical steps to take to ensure that your business is compliant and/or that your sales and marketing teams have the necessary knowledge to negotiate confidently and do business on your behalf:
- Familiarise yourself and your staff with the Grocery Regulations;
- Ascertain whether the Grocery Regulations apply to you and consider taking legal advice to assist you with this;
- Assuming that the Grocery Regulations are relevant to you, carry out a review of the current arrangements you have in place with suppliers (in the case of retailers and wholesalers) and with retailers and wholesalers (in the case of suppliers);
- Analyse whether your arrangements with other parties are in writing or not and carry out a gap analysis to see if your contractual arrangements are compliant with the Grocery Regulations. You may want to consider taking legal advice to assist you with this;
- Consider engaging with other parties you do business with to agree a method for regularising affairs;
- Establish procedures, policies and training in your organisation to create awareness of the requirements of the Grocery Regulations generally, from a compliance perspective and also to assist in the negotiation process for contracts. It is anticipated that the party with the better bargaining power may likely be the party that sets terms and drafts/revises contracts; and
- Finally, for relevant retailers and wholesalers only, below are some key dates to note:
- As soon as practicable but not later than three months after the commencement of the Grocery Regulations (in practical terms on or by Friday 29 July 2016) train appropriate members of staff to be responsible for compliance with the Grocery Regulations and for raising awareness and circulating information about the Grocery Regulations throughout the organisation;
- Nominate a suitably qualified member of staff to act as a liaison officer to liaise with the CCPC; and
- No later than 31 March 2017 submit a compliance report to cover the period 30 April 2016 to 31 December 2016 to the CCPC.