The law implementing EU Directive 633/2019 on unfair trading practices in B2B relationships in the agricultural and food supply chain in Italy

The law implementing EU Directive 633/2019 on unfair trading practices in business-to-business relationships in the agricultural and food supply chain in Italy

Shopping cart full of food in the supermarket aisle. High internal view. Horizontal composition

On 15 December 2021, Legislative Decree 198/2021, implementing EU Directive 633/2019 on unfair trading practices in business-to-business relationships in the agricultural and food supply chain, came into force.

The purpose of this article is to highlight certain features of the new law compared to the well-known precedent of Art. 62 of legislative decree 1/2012. The implementing national law followed some of the general lines of the Directive (such as the division into so-called “black-list” commercial practices, which are always prohibited, and so-called “grey-list” practices, which are prohibited only when there is no agreement between the buyer and the supplier; and the adoption of an effective and dissuasive sanctioning system) but has also innovated with respect to the Directive.

In this respect it is relevant the elimination, as opposed to the Directive’s provisions, of any kind of turnover threshold as a subjective requirement for access to the protection afforded by the law; the broadening of the scope of unfair practices and the introduction not only of unfair practices but also of positive general principles (such as those of transparency, fairness, proportionality and mutual consideration). A very important novelty introduced by Legislative Decree No. 198 with respect to the previous rules, as analyzed below, is the elimination of the reference to the “significant imbalance in the respective positions of commercial strength” which was the cornerstone of the regime provided for by the now repealed Article 62. Alongside the elimination of this requirement, the Central Inspectorate for the Protection of Quality and Fraud Repression (ICQRF) at the Ministry of Agricultural, Food and Forestry Policies has been given the power of sanctions in this area, instead of the Italian Competition Authority .

Eventually, the attached document provides a summary table that summarizes prohibited practices, whether those can be classified as black or grey-listed, and who is subject to the relevant prohibitions and the applicable administrative sanctions.
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On 15 December 2021, Legislative Decree 198/2021, implementing EU Directive 633/2019 on unfair trading practices in business-to-business relationships in the agricultural and food supply chain, came into force.

Ten years ago, Italy, with the Article 62 of Law Decree 1/2012, converted into Law 27/2012, was one of the first EU countries to adopt regulations on trade relations in the agri-food sector, with the aim of preventing abuses of contractual force and, in particular, buyer power committed by one party to the detriment of the other. The 2019 EU Directive, which Legislative Decree 198 implements, therefore comes seven years after than the initial Italian initiative, to provide a harmonized response at EU level to a need that has long been felt by the agricultural and food sector, namely that of bringing back to canons of balance and fairness trading relationships that experience has shown have often been marked by a confrontational negotiating approach, in which contractual performances are not agreed with a view to effective reciprocity, but imposed through unfair conducts, such as the use of threats of commercial retaliation against the party that does not accept certain requests.
A well-known classic example in the field of large-scale retail trade is the so-called “delisting threat” made by buyers against suppliers: this threat envisages the immediate discontinuation of purchases, with simultaneous delisting of the products handled by the distributor (hence “delisting”), as a means of forcing the supplier to agree to certain commercial concessions (e.g. additional discounts).

The effectiveness of the threat of delisting is evident when one considers that for almost all suppliers, the disappearance, even temporarily, from the shelves of a store can be a source of losses not only of substantial revenues, but also of market shares which are difficult to recover subsequently, except by further promotional investments in the same outlet from which they were delisted.

Again, experience had convinced the EU institutions that in the vast majority of cases the party in the commercial relationship who is the victim of the abuse of bargaining power is the supplier of the goods, subjected to such abuses by the buyer.
In this perspective, Directive 633/2019 has therefore been structured along three main regulatory choices:

  1. act as a regulation exclusively protecting suppliers of agri-food products against purchasers but designing a system that could be defined as a turnover-pair system, whereby protection is granted only to suppliers who do not exceed a certain turnover threshold, against purchasers who have themselves achieved a certain minimum turnover. The consequence of this is that no supplier under the Directive would be protected against any purchaser if it has an annual turnover of more than €350 million;
  2. divide unfair practices into the two macro-categories of “black-list” commercial practices, which are always prohibited, and “grey-list” commercial practices, which are only prohibited when there is no prior agreement between the buyer and the supplier. Both of these categories are identified by the Directive according to an exhaustive list of practices; and
  3. ensure an effective and dissuasive sanctioning apparatus, with simultaneous protection of the anonymity of the denounced supplier who does not want to reveal his identity to the denounced customer for fear of suffering retaliation from the denounced customer (the so-called “fear factor” recognized by the European institutions as the reason for the brake on complaints by those affected by unfair practices).

Legislative Decree No. 198, on the other hand, in transposing the aforementioned guidelines of the Directive, took a partially innovative approach, also inspired by the need to merge the principles and precepts of Article 62 with those of the Directive, as well as to overcome certain deficiencies and rigidities of the Directive itself. In particular, Legislative Decree 198:

  1. has eliminated any turnover threshold as a subjective requirement for access to protection. At the same time, it has taken a structure which, while remaining inspired by the primary protection of suppliers towards purchasers, has nevertheless maintained, in line with Article 62, a reciprocal character, which therefore also sees suppliers as entities subject to compliance with the discipline, with regard to certain unfair practices and the general principles which must inspire the commercial relationship;
  2. has extended the list of unfair practices by adding to the black-list and grey-list of the Directive, to which Article 4 is dedicated, a third list of unfair practices not expressly classified as black or grey-list, enumerated in Article 5. On the one hand, the latter largely reproduce those of Article 62 and the open wording of the offences covered by Article 62, while on the other hand adding new ones, including some which specifically place behavioral obligations exclusively on suppliers (the practices referred to in Article 5(1)(m-p));
  3. introduces in positive terms in Article 3 the general principles of transparency, fairness, proportionality and mutual consideration of services which commercial relations must be inspired by at all stages (pre- and post-contractual), as well as the general criteria which, again in positive terms, enable a contract to be regarded as complying with good commercial practice (Article 6). Among these principles, of particular relevance in view of the future application of the law is the one requiring the assumption of entrepreneurial risks by all parties in the chain. This provision of positive principles is, in my view, of particular importance because it offers a normative parameter in the light of which to assess the actual suitability of the agreements between the parties to render lawful the “grey-list” practices set out in Article 4(4), which would otherwise be prohibited, or in any case those listed in Article 5, which may be deemed to be legitimate in the presence of an agreement. In other words, I consider that in order for an agreement to be considered as permitting grey-list practices, it will not be sufficient to prove that an agreement has taken place, but it will also be necessary – if objections are raised in this respect – that the agreement complies with the general principles of Article 3 as well as those of Article 6.

An absolutely important innovation introduced by Legislative Decree No. 198 compared to the previous rules, which deserves to be mentioned here, is the elimination of the reference to the “significant imbalance in the respective positions of commercial strength” which, under the regime of Article 62, had been introduced by a second level of legislation, Ministerial Decree No. 199/2012 implementing Article 62, as a subjective element determining the unfairness of the conduct of one party towards the other. Partly because of this qualification, in my view improper, in almost ten years of force, Article 62 has seen the conclusion of very few and all in all irrelevant investigations by the Antitrust Authority (AGCM), competent under the previous discipline. The elimination of this requirement today, together with the attribution of sanctioning competence to the Central Inspectorate for Quality Protection and Fraud Repression (ICQRF) at the Ministry of Agricultural, Food and Forestry Policies in place of the AGCM, should, at least in what seems to be the intentions of the legislator, lead to an application focused on the objectivity of the practice, rather than on the subjectivity of those who put it in place, in accordance with the principle that a practice is either unfair or it is not, regardless of the negotiating position of those who put it in place. If only because the very fact that a party has been able to engage in an unfair practice is itself an indication of the imbalance in the bargaining power of one party vis-à-vis the other.

The attached document provides a synoptic table summarizing which practices are prohibited, whether they can be classified as black or grey-listed, who is subject to the relevant prohibitions and the applicable administrative sanctions. It must be stressed that in the attached synoptic table an attempt has been made to include in the category of black or grey-list also those practices, referred to in Article 5, which are not provided for by the Directive and which derive from Article 62 and/or have been introduced ex novo with respect to the Directive itself. In fact, I believe that in the case of these too, one can interpretatively conclude whether they impose an absolute prohibition (black-list) or whether they may be permitted by virtue of an agreement between the parties (grey-list), if only by virtue of the specific literal wording adopted by the legislature. In any case, the entire law will, as is normal, be subject to a necessary continuous work of refinement and clarification of interpretation, as its application in the field is tested, and therefore the interpretative views expressed here may also be subject to endorsement or refutation over time.