Law 16/2021 of December 14 was published on December 15, which modifies Law 12/2013, of August 2, on measures to improve the functioning of the food chain (“Law 16/2021”). This new reform intends to respond to the continuous claims of farmers in the agricultural and food sector, taking advantage of the framework of the transposition of the Spanish legal system of Directive (EU) 2019/633 of the European Parliament and of the Council, of April 17, 2019, related to unfair business practices in relationships between companies in the agricultural and food supply chain (“Directive 2019/633”).
The following are the principal reforms introduced by Law 16/2021:
Scope of application:
- Directive 2013/633is a minimum directive regarding contracting and abusive trade practices in food contracts, and the Spanish legislator has chosen to expand the scope of application of Law 12/2013 to all contractual relationships in the food chain, discarding the previous restriction on certain types of operators based on certain characteristics such as their turnover or situations of economic dependence. Thus, the regulation now exclusively requires the contract to have a price above the threshold established by reference to Law 7/2012, of October 29, currently at €1,000, amending tax and budgetary regulations and adapting financial regulations that scale up prevention efforts and the fight against fraud.
- The extent of the territorial scope of the regulation is equally relevant, as it will not only be applied between operators established in Spain, but also in those cases in which one operator is established in Spain and another in a Member State whose legislation is not applicable.
- Finally, the prohibitions and sanctioning provisions of the regulation shall apply in any case, regardless of the legislation applicable to the contract.
- Law 16/2021 modifies some existing definitions, of which it is worth highlighting the concept of “food supply chain,” which now includes hotel and catering and accommodation services companies with a turnover of more than €10 million and €50 million, respectively. Consequently, these operators are no longer exempt from complying with Law 12/2013. The new definitions of the 2019/633 Directive, such as supplier, perishable agricultural and food products, buyer and public authority, are incorporated, and additional definitions of trade secrets, associated entities and effective production cost are also added.
Rules regarding contracts:
- New obligations are introduced in relation to the obligation to formalize food contracts in writing, such as the obligation to be signed (electronic signature being accepted), and this obligation is extended in some cases to contracts between a member and the cooperative. Cooperatives will have six months to adapt. As regards the minimum content of the contract, new aspects are introduced and others are regulated in more detail, such as the prohibition of purchases below production cost and the obligation to observe payment terms of 30 days for fresh and perishable products and 60 days for the rest. The obligation to retain contracts and related documentation is extended to four years.
- With respect to annual trade negotiations, Law 16/2021 requires that they be closed and signed by the participating companies within reasonable timeframes, not exceeding three months from their commencement.
- With the purpose of making commercial relationships more transparent, a Ministry of Agriculture, Fisheries and Food digital register will be created in which food contracts concluded with primary producers and their groups, as well as their amendments, will have to be registered.
Unfair business practices:
- In line with the provisions of Directive 2019/633, the catalog of unfair business practices is increased through a new Article 14 bis, maintaining the classification of blacklisted practices (prohibited in any case) and greylisted practices (practices prohibited unless the parties have previously agreed clearly and unambiguously in the food purchase and supply contract). However, the Spanish legislator decides to go one step further by allowing the possibility of applying such behaviors in both directions, that is, they will be considered unfair if they are carried out by either the buyer or the seller.
- It also includes the prohibition of offering prices for a price lower than the purchase price, except for perishable products close to the expiration date and informing the consumer of this.
Complaints and Sanctioning Provisions:
- Law 16/2021 incorporates provisions relating to the protection and information of the plaintiff. With regard to sanctioning provisions, the catalog of infringements includes the conducts derived from the blacklisted and greylisted practices contained in Directive 2019/633, and certain infringing conducts are aggravated from minor to serious infringements, such as the demand for additional payments, the disclosure of trade secrets (previously sensitive information), those related to the resistance, obstruction, avoidance or refusal of the actions of the Administration, or the cancellation of orders of perishable products within 10 days prior to delivery, among others. As for sanctions, a minimum of €250 is regulated for minor infringements, it is established that the amount of the sanctions cannot be less than the economic benefit obtained by the offender and the publication on a quarterly basis of the sanctions imposed for serious and very serious infringements on the website of the competent enforcement authority, which in the case of the General State Administration, becomes the new Food Information and Control Agency.
Law 16/2021 entered into force on December 16, 2021, although it provides for a transitional adaptation period for food contracts in force, including their renewals and novations, until May 1, 2022. Likewise, the obligation to register food contracts will come into force as soon as the Register is fully operational (currently scheduled for January 1, 2023).