Imbalances in bargaining power between suppliers and buyers are not uncommon in the agricultural and food supply chain. To protect small and medium-sized suppliers from grossly unfair practices, the European Parliament and Council enacted the UTP Directive in 2019. In Austria, the UTP Directive was recently implemented into national law by way of the Federal Act on Improvement of Competitive Conditions (Faire-Wettbewerbsbedingungen-Gesetz, "FWBG"), which entered into force on 1 January 2022. Existing supply agreements must be adapted to the new legislation by 1 May 2022.
The material scope of the FWBG is limited to agricultural and food products. Those are products listed in Annex I to the TFEU (e.g. meat, dairy produce, coffee, cut flowers, animal feed) as well as products for human consumption not listed in that Annex but made from products listed there. The personal scope focuses on the imbalance between suppliers and buyers, which is determined by their relative annual turnover. Basically, suppliers are protected by the FWBG if their turnover is lower than the buyer's turnover, provided that (i) the buyer has a turnover of more than EUR 2m, and (ii) the supplier's turnover does not exceed EUR 1bln. Note that in this respect, Austrian law is stricter than the UTP Directive, which does not extend to suppliers with group revenue above EUR 350m. A buyer is any natural or legal person or any public authority who buys agricultural and food products (e.g. retailers, purchasing alliances). A supplier means any agricultural producer or any natural or legal person who sells agricultural and food products (e.g. farmers, wholesalers). The rules do not apply to sales to consumers.
Prohibited trading practices
The FWBG contains two lists of prohibited trading practices. The "blacklist" in Annex I comprises unfair trading practices that are in any case prohibited, i.e. the prohibition may not be waived by the parties. The blacklist contains the following practices, in line with the UTP Directive:
- agreements according to which the term of payment for perishable agricultural and food products is more than 30 days, for other agricultural products more than 60 days;
- short-term cancellation of orders for perishable products (a cancellation period of less than 30 days prior to delivery is deemed to be at short notice in any case);
- unilateral modification of a supply contract by the buyer;
- demands for payments that are not connected with the sale of goods;
- agreements under which the supplier is liable for reductions in quality or for loss of the delivered products after the goods have been handed over to the buyer;
- refusal to enter into a written supply agreement;
- unlawful acquisition, use or disclosure of trade secrets;
- threatening to carry out acts of commercial retaliation; and
- agreements that require the supplier to contribute to the costs of handling customer complaints that do not relate to the supplier's sphere of activity.
In addition, and going beyond the UTP Directive, two further practices are blacklisted:
- a refusal by the buyer to deal or discriminating amongst suppliers, taking advantage of a dominant position vis-à-vis the supplier; and
- restricting suppliers from directly marketing their products.
The "grey listed" trading practices in Annex II are only permitted if they have been clearly and unambiguously agreed in advance in the supply agreement or in a follow-up agreement between the supplier and the buyer:
- return of unsold products without payment;
- demands for payments related to advertising or marketing;
- requiring the supplier to bear all or part of the cost of any discounts granted by the buyer during a promotion;
- requiring the supplier to pay for advertising or marketing; and
- charging the supplier for fitting out premises used for the sale of contract products.
If a contract contains a prohibited trading practice, these clauses are absolutely null and void. The validity of the remaining provisions of the contract shall not be affected.
From 1 March 2022, suppliers will be able to get confidential advice from an independent first point of contact ("Ombudsman"), set up at the Federal Ministry of Agriculture, Regions and Tourism. The first point of contact will also act as a conciliation board. The Austrian Federal Competition Authority ("FCA") will act as investigative authority, with the same far-reaching powers as under antitrust law. The Cartel Court is responsible for the prohibition of trading practices and for handing out fines. At the request of the FCA, the Cartel Court may impose a fine on a buyer up to a maximum of EUR 500,000.
In addition to the sanctions specifically set forth in the FWBG, a prohibited trading practice may also
- carry sanctions under the Act against Unfair Competition ("UWG"), such as damages, provided the buyer must have been able to recognise that his behaviour is illegitimate; and
- trigger prosecution under the Cartel Act ("KartG"), provided the buyer is dominant vis-à-vis the supplier within the meaning of the KartG. Pursuant to Section 5(1) KartG, dominant market players may not impose contractual conditions upon their counterparts that deviate from the conditions on a market characterised by effective competition. Assuming that in a competitive market environment companies do not infringe the FWBG, prohibited unfair trading practices may be deemed to amount to an antitrust offence.