The Department of Jobs, Enterprise and Innovation is running a public consultation on draft regulations including new rules for commercial arrangements between certain grocery businesses that are active in Ireland. The Department is accepting written submissions until Friday 27 February 2015.
The draft regulations are to be issued pursuant to a Ministerial power under the Competition and Consumer Protection Act 2014 (“Act”). The draft regulations only apply to “large” businesses in the food and drink sector. However, the public consultation seeks comments on the approach to future regulation of other segments of the grocery sector which can be regulated under the Act (household cleaning products, toiletry products and garden plants / bulbs).
Matheson advised the Department of Jobs, Enterprise and Innovation on the introduction of grocery regulations under the Act.
Need to Know
- The draft regulations define “large” grocery businesses in a way that covers every manufacturer, distributor and retailer of a food or drink product that is active in Ireland and is part of a group with a worldwide turnover of at least €50 million. The Act defines these parties as “relevant grocery goods undertakings”. This scope of regulation is wide, in particular by comparison to the equivalent UK regime which applies only to ten named retailers. For example, the draft regulations would apply to a small food supplier that is active in Ireland and is owned by a large non-grocery business. The extent to which the draft regulations apply to groceries business in Ireland which carry out their buying / selling functions abroad is an interesting issue that is not specifically mentioned in the consultation documents.
- The draft regulations impose a large number of new obligations, such as to: (i) adhere to a prescribed ‘form of contract’, (ii) include certain terms in written supply contracts, (ii) follow certain procedures for contract changes, (iii) appoint a compliance officer, (iv) deliver staff training, (v) submit an annual compliance report to the Competition and Consumer Protection Commission (“CCPC”), and (vi) maintain certain business records for inspection by the CCPC. The new obligations are intended to come into effect on a particular date and to apply to all contracts that are “entered into or renewed” following that date.
- The draft regulations impose more extensive obligations on “relevant grocery goods undertakings” that are retailers, including rules on the circumstances in which suppliers can be required to make payments towards shrinkage, marketing and promotional costs. These retailer-specific obligations apply regardless of the size of the supplier. A related and interesting scoping issue that is mentioned in the consultation document is whether specific regulations should also apply to large suppliers when they supply smaller retailers.
- The Department intends to publish guidelines to accompany any grocery regulations that are issued by the Minister, and the consultation paper seeks suggestions as to what might be included in such guidelines.
- Any grocery regulations that are issued will be supported by strong enforcement powers. Under the Act, the CCPC has power to investigate compliance, to issue compliance notices, and to ‘name and shame’ those in breach of the regulations. Certain of the draft regulations are specified to be ‘penal’. This means that a breach of these particular regulations can be prosecuted without a compliance notice having been issued. A breach of a compliance order or a ‘penal’ regulation carries serious, criminal sanctions, including court-imposed fines of up to €100,000 and 24 months’ imprisonment.
- The Act provides a legal basis for civil damages actions for breach of a grocery regulation.
Key Questions For Your Business
- Assess whether your business is either a “relevant grocery goods undertakings” that could by covered by the Grocery Regulations, or a person that could be otherwise affected by them.
- Consider responding to the upcoming public consultation process and, in particular, consider whether your business could respond to the Department’s request for an estimate for the likely costs / administrative burdens arising from the draft regulations.
- Prepare for the likely compliance requirements (compliance officer, training, reporting etc).
- Identify whether your commercial arrangements in Ireland may need to be adjusted in future.