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Germany adopts bill to ban unfair business practices

The objective of this regulation is to achieve greater equity throughout the food chain for farmers and small suppliers.

11/18/2020

Julia Klöckner, German Minister of Agriculture,promoting 'fair play' in business practice.

The German Federal Minister for Food and Agriculture, Julia Klöckner, takes legal action against unfair business relationships and strengthens the market position of smaller suppliers and agricultural companies. Today the Federal Cabinet approved the pertinent amendment to the law by the Federal Ministry of Agriculture.

Smaller producers are often exposed to unfair contractual conditions due to market imbalances. In contrast to diversity, on the one hand, they are contrasted with highly concentrated food retailing, on the other. The four largest retail chains have a market power of more than 85 percent. This has led to the establishment of practices that clearly put producers at a disadvantage, such as short-term cancellations, long payment terms for perishable products, or unilateral changes in delivery conditions. These unfair business practices are now prohibited.

Federal Minister Julia Klöckner: “With the law we create at eye level, we strengthen regional production and competition. Small suppliers often had no choice but to accept unfair business terms - they didn't want to be excluded from the list. This will now come to an end! Or to put it another way: David gains significantly in strength compared to Goliath. "

Peter Altmaier, Federal Minister for the Economy: “The draft for the implementation of the UTP guideline is a good compromise between agricultural producers, other food manufacturers and suppliers, on the one hand, and food retailers, on the other. Fair and trustworthy contractual relationships are essential for both parties. We have achieved this goal with this bill. "

Specifically, the following are prohibited:

1. the buyer to cancel the supplier's perishable food orders on short notice;

2. that the distributors unilaterally modify the delivery conditions, the quality standards, the payment conditions, the quotation, storage and marketing conditions;

3. that perishable food is paid for after 30 days and non-perishable food after 60 days after delivery;

4. that the buyer does not confirm in writing the supply agreements concluded despite the supplier's request;

5. that buyers illegally acquire and use suppliers' trade secrets;

6. that the buyer threatens to retaliate of a commercial nature if the supplier makes use of its contractual or legal rights;

7. that buyers demand compensation from the supplier for handling customer complaints through no fault of the supplier;

8. That buyers require the supplier to bear costs that are not specifically related to the products sold.

9. that unsold products are returned to the supplier without paying the purchase price;
10. that the buyer demands a payment from the supplier for the storage of the products.

11. that the supplier must bear the costs incurred by the buyer through no fault of the supplier after the delivery has been delivered to the buyer.
The directive also states that other business practices are only allowed if they are expressly and clearly agreed between the contracting parties in advance. For example,

• whether the supplier pays the cost of discounts in the context of sales promotions;
• whether the supplier pays quotation fees;
• when a vendor contributes to the retailer's advertising costs.

The enforcement authority will be the Federal Agency for Agriculture and Food (BLE), a subordinate authority of the Federal Ministry of Agriculture. The BLE will make decisions on violations in agreement with the Federal Cartel Office. The BLE will decide the amount of the fines under its own responsibility, taking into account the opinion of the Federal Cartel Office. There is a risk of fines of up to 500,000 euros in case of infringement. The Düsseldorf Higher Regional Court will judge complaints against the decisions of the executing authority.


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