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Overview

 

On 1 November 2021, the Act on Combating Unfair Trading Practices in the Agricultural and Food Supply Chain, entered into force, transposing into Estonian law Directive (EU) 2019/633 of the European Parliament and of the Council of 17 April 2019 on unfair trading practices in business-to-business relationships in the agricultural and food supply chain.

The purpose of the Act on Combating Unfair Trading Practices in the Agricultural and Food Supply Chain is to protect sellers of agricultural products and foodstuff from unfair trading practices of buyers. The Act establishes public legal remedies applicable to the protection of the seller in addition to private legal remedies in the event of the use of an unfair trading practice, and provides the bases and procedure for state and administrative supervision over compliance with the law.

 
Agricultural product and foodstuff:

The Act affects operators that buy or sell agricultural products and foodstuff to another operator. The list of products classified as agricultural products and foodstuffs within the meaning of the Act on Combating Unfair Trading Practices in the Agricultural and Food Supply Chain is set out in Annex I to the Treaty on the Functioning of the European Union.[1] Products not listed in that Annex but which are processed into foodstuffs using a product listed in Annex I to the same Treaty are also considered agricultural products and foodstuff. For example, in addition to conventional agricultural products and foodstuffs (milk, bread, white bread, cheese, etc.), agricultural products also include, for example, live animals, cut flowers, plants, bulbs, cereals, as well as animal feed.

Unfair trading practices:

The Act lists 16 unfair trading practices, nine of which are prohibited in all cases and always, and seven unfair trading practices are prohibited unless they have been clearly and unambiguously agreed upon in a form that can be reproduced in writing. 

In any case, the buyer is prohibited from: 
  1. paying for the agricultural product and foodstuff later than within 30 days as of the date provided in the draft;
  2. cancelling an order for an agricultural product or foodstuff with such short notice that it cannot reasonably be expected that the seller will find alternative means of commercialising or using that product;
  3. unilaterally changing the terms and conditions of a contract of sales that concern the frequency, method, place, time, or volume of the supply and delivery of the product, the quality standards, the terms of payment or the prices, or the provision of services directly related to the sale offered or provided by the buyer;
  4. requiring the seller to make a payment not related to the sale of the agricultural products and foodstuff of the seller;
  5. requiring the seller to make a payment for the waste or loss of agricultural products and foodstuff belonging to the buyer which has taken place on the premises of the buyer, but not through the fault of the seller;
  6. refusing to confirm in writing the terms and conditions of the contract of sale agreed between the buyer and the seller if the seller has requested written confirmation;
  7. illegally obtaining, using, or disclosing the trade secret of the seller;
  8. threatening the seller with so-called trading retaliation if the seller exercises their contractual or statutory rights;
  9. claiming from the seller compensation for the costs incurred in dealing with customer complaints about the products of the seller, unless the cause of the complaint is due to the fault of the seller.
The buyer is prohibited (in the absence of a written agreement to that effect): 
  1. returning the unsold agricultural products and foodstuff to the seller without paying for the unsold products or their disposal;
  2. requiring the seller to make a payment for making available, storing, displaying, or listing the agricultural products and foodstuff on the market;
  3. requiring the seller to make a payment for the costs of promotion of the agricultural products and foodstuff sold by the buyer;
  4. requiring the seller to make a payment for the costs of advertising the agricultural products and foodstuff sold by the buyer;
  5. requiring the seller to make a payment for the costs of marketing the agricultural products and foodstuff sold by the buyer;
  6. requiring the seller to make a payment for personnel costs for the fitting-out of the sales areas used to sell the goods;
  7. requiring the seller to use only the transportation packaging provided, unless required by the relevant legislation.

The Act sets out the conditions that must be met if the latter unfair trading practices are used.

FAQ

To whom does it apply?

Under this Act, unfair trading practices are transactions or acts carried out by only one party, the buyer, which deviate significantly from good commercial practice, are contrary to the principles of good faith and fair dealing, and are imposed unilaterally on the seller. This is because the buyer is usually in a stronger bargaining position. Although a similar situation or practice is not ruled out for sellers, who are also operators in the food supply chain and as important as buyers, this is an unlikely and extremely marginal situation that does not need further clarification in addition to existing legislation (Law of Obligations Act) and legal remedies (civil court).

To whom does it apply?

This Act applies to the buyer or seller of agricultural products and foodstuff established in the EU (i.e. a legal person) or resident in an EU Member State (i.e. a natural person). This means that at least one of the parties to the transaction – either the buyer or the seller – must be established in an EU Member State or their residence must be located in a Member State of the European Union.

Who is the buyer?

For the purposes of this Act, a buyer of agricultural products and foodstuff is a person who buys agricultural products and foodstuff, including a governmental authority or an agency administered by a governmental authority, a local government agency or an agency administered by an authority or an association thereof, or a public legal person or an association thereof.

Who is seller?

For the purposes of this Act, a seller is a person, including a producer or supplier organisation or an association thereof, who sells agricultural products and foodstuff. The term ‘person’ includes both natural and legal persons. Pursuant to the General Part of the Civil Code Act, persons are natural and legal persons. A natural person is a person, including a self-employed person, and a legal person is a subject of law founded pursuant to law, whether in private or public law, such as a commercial association, a company such as a public limited company, a private limited company.

Does it also apply to purchases for own use?

This Act does not apply if a legal person buys agricultural products and foodstuff for its own use, for example to offer to customers or its employees (for example, tea, coffee, and candy for consumption on the premises of a company or as a so-called business gift to partners). The end user of agricultural products or foodstuff who does not resell the agricultural products or foodstuff for the purpose of obtaining income is not a buyer of agricultural products or foodstuff pursuant to this Act.

When should existing agreements be brought into line with the Act on Combating Unfair Trading Practices in the Agricultural and Food Supply Chain?

The Act entered into force on 1 November 2021, and contracts of sale entered into before the entry into force of the Act on Combating Unfair Trading Practices in the Agricultural and Food Supply Chain must be brought into conformity with the Act by 21 September 2022 at the latest.

Submission of application

An application for the initiation of state or administrative supervision over an unfair trading practice may be submitted to the Estonian Competition Authority by:

  • a seller
  • a producer organisation or commercial association on behalf of its member;
  • a seller organisation
  • an association of the organisations specified in clause 2 or 3 of this subsection in the name of its member or in the name of a member of a member of the association of the organisations; 
  • another organisation that operates as a non-profit association and has a legitimate interest in representing a seller
  • The application must include the name of the applicant, the clearly worded content of the application, the date of submission of the application and the signature of the applicant, the preferred method of delivery of the administrative act or other document and the necessary contact details, and other information required by law.
  • Confidentiality
    The Estonian Competition Authority may, on the basis of a reasoned request of an applicant, declare the name and other information of the applicant not to be disclosed to another person. Other information is, for example, a trade secret within the meaning of the Restriction of Unfair Competition and Protection of Business Secrets Act.
 

Contact

 

Kaspar Lehesmets

lawyer
Supervisory Department of Competition Division

 Phone: 667 2444
[email protected]