Are you aware of the implications of the new Spanish Food Supply Chain Act?

Follow @lady_godina

The  Spanish Ministry for Agriculture showed its commitment to ending up with abusive trading practices when the ‘measures for a better functioning food supply chain Act’ was published in August 2013.

In the words of the current Minister, Isabel García Tejerina, the objective of this regulation is providing legal certainty and transparency to business operations and balancing the supply chain in favor of the small producers who are its weaker part.  

The scope of this law has deep implications for growers and trade operators and has created much of a stir in the spanish agrifood industry. We are at a legal framework of great importance for an strategic sector of the Spanish economy and it directly or indirectly affects foreing companies that are purchasing Spanish fresh food.

The highlights of this regulation

The law shall apply if one of the parties is a SME or a primary grower. Trying to avoid a number of practices resulting from the asymmetry observed among the food market operators, several issues have been regulated.such as unilateral changes and unanticipated commercial payments, the provision of commercially sensitive information or the brand management. 

  

It should be noticed that the Act expressly excludes from its scope the activities like food transportation and product deliveries made to agricultural cooperatives.

 

The main dissuasive measures implemented are fines from 3000 Euros - for minor infringements- to 1.000.000 Euros, -in the case of very serious infringements-. At the same time, this Act calls for a written formalisation of those commercial dealings above the 2500 euros treshold. 

The truth is that many of the practices gathered in this law are already regulated by other legislation (including the Unfair Competition Act)  but t is still early to assess whether this accumulation of legal remedies will be effective and beneficial to the market or will otherwise complicate the legal analysis to the point of generating uncertainties. However, the Ministry for Agriculture has created the ‘Agencia de Información y Control Alimentarios’ (AICA. In English: Agency for Information and Food Control) which is an autonomous body that monitors the enforcement of the Food Supply Act. 

Practical implications. Concern in the food industry 

When one year has passed since the entry into force of the law,  from this moment the AICA is beginning to examine irregularities and impose sanctions. 

This is a major concern within the food sector, where it is day-to-day practice that providers deliver a product and not until the the end of the campaign the final price is fixed. Other situations, like when providers are obliged to finance their distributors´ promotions or commercial support, will be also under the spotlight.

However, some companies see this new situation as an opportunity to enhance their Corporate Social Responsibility policy and give added value to providers and clients. Therefore, if your company is already doing -or planning to do- business with Spanish food growers, it is highly advisable to check out the ‘measures to improve the functioning of the food supply chain Act’ following this link, or seek for legal guidance.