The amendment to the Federal Act on Improvement of Local Supply and Competitive Conditions (Fair Competitive Conditions Act, abbreviated FWBG in German) entered into force on 1 January 2022, thereby transposing into Austrian law Directive (EU) 2019/633, the Directive on unfair trading practices in business-to-business relationships in the agricultural and food supply chain. The aim of the Directive is to alleviate the imbalances in bargaining power between suppliers and buyers of agricultural and food products and to protect the supplier as the weaker trading partner. Implementing the rules through the FWBG marks a consistent approach as a major aim of this Act has always been to protect small and medium-sized suppliers from large, powerful trading enterprises.
The following are defined as agricultural and food products:
- Products listed in Annex I to the TFEU (e.g. meat, dairy produce, but also cut flowers or animal feed)
- Food products processed using products listed in that Annex (e.g. fruit yoghurt).
Suppliers are any agricultural producers or a group of such producers (including producer organisations and associations of such organisations), natural and legal persons who sell agricultural and food products (e.g. farmers, processors, retailers/wholesalers).
Buyers are any natural or legal persons who buy agricultural and food products, including groups of such natural and legal persons and public authorities (processors, retailers, purchasing alliances, regional or local authorities). The rules do not apply to sales to consumers.
The imbalance between suppliers and buyers, which is the condition for the new rules to apply, is determined by their annual turnover.
The key amendments centre around two lists of prohibited trading practices:
- Annex I to the FWBG contains a blacklist of twelve practices that are prohibited and may also not be waived by the parties (e.g. short-term cancellation, unilateral modification of the contract by the buyer, demands for payments that are not connected with the sale).
- Annex II contains a grey list of practices that are forbidden unless expressly agreed upon beforehand (e.g. return of unsold products without payment, demands for payments related to advertising or marketing).
Contract clauses that include prohibited practices are strictly null and void. Existing supply agreements must be brought into line with the new legal situation by 1 May 2022.
The Austrian Federal Competition Authority (AFCA) has been entrusted with enforcement of the provisions on unfair trading practices, and has been given far-reaching powers of investigation in this context. The AFCA may file applications for a cease-and-desist order or (from 1 May 2022) for imposition of a fine of up to EUR 500,000 with the Cartel Court.
Claims for a cease-and-desist order may also be asserted by, among others, the Federal Cartel Prosecutor, the Federal Economic Chamber, the Chambers of Agriculture and the Presidential Conference of the Austrian Chambers of Agriculture, as well as by any company concerned.
An independent first point of contact will be set up at the Federal Ministry of Agriculture, Regions and Tourism and will be available to suppliers from 1 March 2022 for confidential advice and the settlement of disputes without formalities.
For further information about lodging a complaint with the AFCA, please refer to: https://www.bwb.gv.at/en/cartels_and_abuse_control/complaint
In light of the amendment to the Federal Act on Improvement of Local Supply and Competitive Conditions, the AFCA will also update its Guidance for fair conduct in business in the coming months.