The Irish Minister for Jobs, Enterprise and Innovation recently announced (July 2011) a further consultation on the introduction of a code of conduct for suppliers and retailers operating in the grocery goods sector. This consultation follows the publication of a report by Mr John Travers who had been asked by the Irish Government to consider whether a voluntary code of practice could be agreed between suppliers and retailers operating in the Irish grocery sector. The consultation relates to a statutory code of conduct.
The current consultation process runs until 1 September 2011. It is likely that an enabling provision for a statutory code will be included in revised competition and consumer legislation, a draft of which is due to be published this Autumn.
The 2011 draft code differs significantly from the draft published in Autumn 2009 in a number of areas, including:
- The designation of certain grocery goods undertakings by the Minister for Jobs, Enterprise and Innovation ("Minister").
- New obligations on designated grocery goods undertakings to incorporate the code in its terms of business, to demonstrate compliance with the code, including the appointment of a Compliance Officer and to satisfy training and reporting requirements.
A selective comparison of some of the key features of the two draft codes is illustrated in the following table.
Comparison between the 2009 and 2011 Draft Codes
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The 2009 Draft Code |
The 2011 Draft Code |
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"Grocery goods means any food or drink for human consumption that is intended to be sold as groceries, and includes:
Grocery goods do not include food or drink served or supplied on a grocery goods undertaking's premises in the course of providing catering, restaurant or take-away services or intoxicating liquor served or supplied for consumption on a grocery goods undertaking's premises or any similar hospitality services." |
Grocery Goods definition remains the same |
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Grocery Goods Undertaking (GGU) means an undertaking engaged for gain in the production supply or distribution of grocery goods, including those not involved in direct selling to the public. |
Definition of GGU remains the same. GGUs with an annual turnover of more than €50 million generated from the supply or retail of grocery goods in the Republic of Ireland will be "designated" by the Minister. Both retailers and suppliers can be Designated Grocery Goods Undertakings (DGGU). The Code will be binding on DGGUs. |
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All relevant terms and conditions to be recorded in writing. |
"Writing" now includes electronic format. Applies to an agreement between one DGGU and a GGU. Requirement to incorporate code in agreement between a DGGU and a GGU. |
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Unless the Business Agreement expressly provides so, the following are prohibited:
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The 2011 Draft Code restricts similar conduct, but the obligations imposed on GGUs may differ depending on whether they are DGGUs or retailer DGGUs:
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No obligation to participate in promotional activity that entails payment from a supplier where this entails retrospective variation of the terms of the Business Agreement. |
Obligation on retailer DGGUs |
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No change to supply chain procedures without reasonable notice or compensation for costs incurred by failure to notify. |
Obligation on all DGGUs |
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Retailer to take reasonable care when ordering promotional goods. Retailer to compensate supplier for any over-order of such goods bought at a promotional wholesale price where such goods are subsequently sold at a higher non-promotional price. |
Obligation on retailer DGGUs |
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Continuation, renewal and termination of Business Agreements can only be done subject to the specific terms of the Business Agreement. |
Obligation on all DGGUs |
New Features of 2011 Draft Code
In addition to the changes described above, the 2011 Draft Code introduces new features including:
- An obligation on all DGGUs to appoint a Code Compliance Officer
- Prior to the entry into force of the code, all DGGUS must provide adequate training of the code to relevant staff
- An obligation to train staff within one week of them becoming relevant staff
- An obligation on all DGGUs to prepare annual reports on compliance and maintain certain records
The 2011 Draft Code indicates that enforcement will fall to a designated body whose principal duties will include investigation of complaints and to name undertakings found to be in breach of the terms of the code.
Comment
The key difference between the 2009 and 2011 Draft Codes is the proposal that the code will be binding on Designated Grocery Goods Undertakings, i.e., those GGUs generating turnover of more than €50 million in Ireland and have been designated by Ministerial order. Both Retailers and Suppliers can be designated. The designation of some GGUs but not others potentially gives rise to difficulties in application and potential dispute between GGUs. As the proposal is to put a code on a statutory basis, it would be prudent for suppliers and retailers to consider the code's potential impact on their business so that the operations can prepare to adapt to a new regime.
This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.
