The Agri-Food Regulator: Ready to submit your first annual compliance report?

Ireland’s Agri-Food Regulator is now fully operational and taking active steps to promote fairness and transparency in the agri-food supply chain. While exercising a broad remit, a key function of the new body is to ensure compliance with the rules on unfair trading practices (UTPs). Companies that buy agricultural and food products will soon face their first milestone in demonstrating compliance with the UTP rules when they submit their first Annual Compliance Report to the Agri-Food Regulator by 31 March 2025.

Background

An Rialálaí Agraibhia (the Agri-Food Regulator) is an independent statutory office established under the Agricultural and Food Supply Chain Act 2023 (the 2023 Act). It is the designated supervisory authority under the Agricultural and Food Supply Chain (Unfair Trading) Regulations 2023 (the UT Regulations) to monitor agri-food contracts and thereby protect farmers, producer organisations and other weaker suppliers of agricultural and food products against stronger buyers.

To protect suppliers, the UT Regulations prohibit 16 specific UTPs. In doing so it distinguishes between “black” and “grey” practices. Whereas black UTPs are prohibited, whatever the circumstances, grey practices are allowed if the supplier and the buyer agree on them beforehand in a clear and unambiguous manner. The rules on “black” or “grey” practices apply to all supply agreements whether these are agreed orally or are in writing. The protection against UTPs is afforded to suppliers of food and agricultural products where the supplier has an annual turnover less than that of the buyer, and where the buyer’s annual turnover is >€2m. An overview the UTP rules in Ireland is available here.

To assist the Agri-Food Regulator, Part 3 of the UT Regulations sets out certain compliance requirements. These include the submission of an Annual Compliance Report, designation of a liaison officer (i.e. a point of contact within each compliance reporting company), maintenance of specification records, and monitoring and evaluating policies relating to UTPs.

Content of the Annual Compliance Report

There is relatively little guidance on the form and content of the Annual Compliance Report. The Agri-Food Regulator has not provided a template for compliance reporting. The UT Regulations, however, state that the Annual Compliance Report should include the following details:

• A detailed and accurate account of the compliance reporting buyer’s ongoing implementation and compliance with UTP rules. This includes, where a breach has been identified, the steps taken to rectify it.
• A record of any cancelled orders of perishable products.
• A record of any returns to the supplier of unsold products.
• A record of any payment by the supplier to the buyer in respect of agricultural and food products, for:

1. unsold products returned to the supplier or disposal of those products, or both
2. stocking, display and listing, or of making such products available on the market
3. promotion
4. advertising
5. marketing
6. staff for fitting-out premises used for the sale of the supplier’s products

• Details of any costs borne by a supplier of any discounts on agricultural and food products that are sold by the buyer as part of a promotion.
• The names and addresses of all suppliers of agricultural and food products with whom the compliance reporting buyer has a supply agreement. This should include the dates of the supply agreements, a description of the agricultural and food products subject to the agreement (categorised as either perishable or non-perishable); and an indication of any supply agreement entered into, renewed, changed or terminated during the period covered by the annual compliance report.

The need for more guidance

The purpose of the UTP Directive is protect small agricultural producers against a powerful buyer who might use its bargaining power to impose an unfair or disproportionate share of commercial risk on the small producer. However, the way the UTP Directive has been transposed into Irish law means that it covers contracts with agri-food suppliers that are international companies (sometimes with annual turnover of many billions) if the buyer under the contract nevertheless has a greater turnover than the supplier. In these cases, it is at least questionable that any “economic imbalance” in bargaining power exists between the parties. Moreover, the UTP rules do not seem to anticipate regulating trading behaviour between large, sophisticated companies in the agri-food supply chain. This has caused some uncertainty around the application of the rules to certain types of contracts and further guidance from Agri-Food Regulator would be welcome in advance of the reporting deadline. These are just a few of the many high-level points needing clarification:

• Aggregated contracts – The contract value for the supply of large quantities of food and agricultural products will comprise of both the raw material and other related elements (e.g. logistics, delivery costs such as fuel, cost of packaging, financial aspects such insurance, credit arrangements, FX hedging etc.). How do the reporting obligations apply to supply contracts that aggregate each of these elements within one agreement?
• Shared risk – Large supply contracts are often built into a medium-term business commitment (e.g. 5 years) through which the parties decide to allocate the commercial risk across the lifetime of a framework agreement. Will the Agri-Food Regulator accept the parties’ understanding of economic risk under the contract and, where there is any ambiguity, their interpretation of how the UTP rules apply to their business arrangement?
• Complex contracts – The UTP rules provide strict time periods within which a buyer must make payment for agri-goods. Complex contracts often build in a provision for fluctuation in future commodity price - it is not clear the exact date on which the payment obligation is triggered and might not be clear for some time. It is unclear how the Agri-Regulator will assess these contract provisions. 
• Jurisdiction – The rules apply once either the buyer or supplier is established in EU. In principle, this would include companies established in Ireland and who enter contracts for the supply of food products from a non-EU country and to a non-EU country, where the sale has no impact on the EU internal market. How will these contracts be assessed?
• Cross-border enforcement: The new EU Commissioner for Agriculture and Food, Christophe Hansen, has recommended new rules on cross-border enforcement under the framework of the UTP Directive. Until this happens, it is unclear how national regulators will avoid duplication in reporting obligations, potentially to multiple national regulators.
• Broader regulatory context – The 2023 Act seems to envisage the Agri-Food Regulator having an active role in examining commercial or market imbalances in the supply chain - for example, cost margins or routes to market - beyond the specific trading practices that are addressed in the UT Regulations. Guidance would be welcome on how compliance with the UTP rules interacts with this wider regulatory context. There is also some ambiguity as to where UTP compliance sits alongside other, existing rules governing the supply chain (e.g. late payments directive).

Summary

Many companies with a compliance reporting obligation already trade with their suppliers on terms consistent with the UTP rules. The requirement to produce an Annual Compliance Report is still a significant administrative burden, made more difficult by the apparent contradiction between the aim of the UTP rules (to protect weak producers) and the application of those rules to trading relationships between large, sophisticated companies.

The office of the Agri-Food Regulator takes its responsibility very seriously and secured its first conviction for non-compliance with the UT Regulations in December 2024. Potential offences under the UT Regulations and the 2023 Act include a failure to submit an Annual Compliance Report and care should be taken in the preparation of the report not to expose the reporting company to further investigation.

For further information in relation to this topic, please contact Damien Ryan, Anna-Marie Curran or any member of the EU, Competition & Procurement Group.

Date published: 22 January 2025