On 11 August 2009 the Department of Enterprise Trade and Employment (“DETE”) published a draft outline of the Code of Practice for Grocery Goods Undertakings (the “Draft Code”). The Tánaiste has announced a public consultation in relation to the introduction of the Draft Code.  The Draft Code is intended to regulate certain anti-competitive dealings it is alleged are occuring between suppliers and retailers of grocery goods.  Currently, their competitive conduct is regulated under competition law. This briefing broadly identifies the types of conduct which are currently prohibited under Irish competition law rules and also outlines some of the key proposals contained in the proposed Draft Code.

  

  

The Competition Act 2002, as amended by the Competition (Amendment) Act 2006 (the "2002 Act") prohibits certain anti-competitive practices in the grocery goods sector. The prohibition applies to “grocery goods undertakings”, defined as undertakings that are engaged for gain in the production, supply or distribution of grocery goods. 

  

The following practices are prohibited under the 2002 Act where the conduct has an anti-competitive object or effect on trade in any grocery goods in the State:     

    

Competition law is policed by the Competition Authority and the penalties for breaches of competition law can be severe, including fines of up to €4 million or 10% of turnover.  A company’s officers could have personal liability, depending on the nature of the infringement.  The Competition Authority also has the power under the 2002 Act to conduct ‘dawn raids’ on premises, vehicles and even the homes of company officers and seize books, documents and records.  Also, the 2002 Act provides that any person who is “aggrieved” as a result of prohibited conduct has the right to seek damages or injunctive relief from a party to the conduct.  Proceedings may also be instituted against any officer who authorised or consented to the prohibited conduct. 

  

The Draft Code: 

  

Several aspects of the Draft Code are similar to the obligations already in place under competition law rules.  However, the Draft Code also contains a number of novel proposals, which include:

  

Grocery Ombudsman: The DETE consultation paper acknowledges that there have been no prosecutions of retailers under the 2002 Act since its 2006 amendment and that suppliers are loath to make complaints to the Competition Authority.  The Draft Code contemplates the appointment by the Minister of Enterprise Trade and Employment of a Grocery Ombudsman as an alternative forum for dealing with complaints and for resolving disputes between retailers, suppliers and consumers. The Draft Code makes provision for the investigation by the Grocery Ombudsman of complaints in relation to illegal breaches of the Draft Code and the gathering of information (for example, by receiving confidential complaints received from retailers, suppliers, primary producers and consumer organisations or interest groups) in order to identify whether the Draft Code has been breached.

    

Compensation: Where one party requests significant changes to previously agreed supply chain procedures, that party must provide reasonable written notice to the other party.  In the absence of such notice, it is proposed that such undertakings shall pay compensation to the other party to the agreement for any costs incurred due to the failure to provide such notice. The Draft Code also provides that, in certain circumstances, compensation must be paid by retailers to suppliers for providing erroneous purchasing forecasts unless the retailer can demonstrate that the forecasts have been prepared in good faith in consultation with the supplier or the written agreement  provides that full compensation is not appropriate.

 

Shrinkage and wastage payments: Under the Draft Code, it is contemplated that a retailer shall not be permitted to require a supplier to pay for wastage or shrinkage unless provided for in the agreement between the parties.

 

Consultation and submissions
 
The DETE is seeking submissions in relation to all aspects of the Draft Code, including the issue of compliance costs, whether the introduction of the Draft Code should be on a voluntary or statutory basis and whether the Draft Code is needed at all.  The closing date for submissions is 30 September 2009.

    

Beauchamps can provide guidance to parties needing assistance with their obligations under competition law generally or who wish to participate in the consultation process.  Please contact: Niall O'Brien at n.o'brien@beauchamps.ie