Mr. Thomas Burke:

Retail Ireland is the representative body for the entire retail sector in Ireland and its membership includes major supermarket groups, symbol groups and independent retailers. Retail is Ireland's largest industry and largest employer, with a presence in every city, town and village, right across the country. The sector employs more than 285,000 people and contributes more than €7 billion, which is 23% of total tax take, each year.

Retail Ireland and its members have some concerns regarding the effect certain aspects of the current draft EU directive on UTPs may have on the grocery trade and on consumers in Ireland in the longer term. We believe that certain aspects within the directive may have the potential for market distortion should some or all of them be introduced. Retailers in Ireland have been working closely and effectively with the Competition and Consumer Protection Commission and their suppliers, to embed the grocery goods regulations introduced in 2016. This has been a complex, administratively burdensome and costly process. It is widely accepted, however, that this process is thus far functioning well and the commitment from all parties has been fulsome.

Given how recently this process was completed, a further layer of legislation in the form of an EU directive governing this area, at this time, is unhelpful and potentially confusing for all parties to the regulations. We must also consider the potential for the scope of this directive to grow over time and supersede domestic regulations, which now exist in over 20 member states as Mr. McCormack has already said. National legislation is the most appropriate place to deal with the sensitivities and intricacies of the Irish retail grocery market and it should remain the primary route for addressing any concerns around how it functions.

Retailers consider farmers as key partners in the food supply chain and support measures that can directly address the problems farmers face. At an EU level, a critical mass of retailers are already applying principles of good practice in business to business relationships under the supply chain initiative.

On behalf of Retail Ireland I shall now turn to specific observations on the draft directive. Prohibited practices should be clearly defined to provide legal certainty: The directive provides for strict enforcement and sanctions, and it is key that it provides legal certainty to operators so as to avoid the risk of unjustified interpretation by member states, making reputable operators potentially vulnerable to disproportionate sanctions.

The scope of the directive should not be extended beyond small farmers and processors. The directive is based on the agricultural treaty provisions and should focus on the benefits accruing to farmers. By extending the scope to all food products and SME processors, the Commission is already stretching its powers under Article 43 of the Treaty on the Functioning of the European Union. Any attempt to extend the scope of the directive would run against the Commission's impact assessment. Regulating trading practices between large processors, including global brands, and retailers would affect parts of the supply chain fundamentally outside the scope of Article 43. More important, it will skew the relationship towards these large processors, with no guarantee that the benefits will accrue to farmers.

Flexibility and subsidiarity must be preserved while not undermining the Single Market. All EU countries, including Ireland, have legislative frameworks in place and most have specific enforcement provisions. The overwhelming majority of supply contracts are national and subject to national law. We ask that provisions within the directive are kept to a strict minimum common denominator and allow for a degree of flexibility so as to allow schemes that have proven to work well to continue. These have arisen out of a national context and relate to national structures. Member states should be allowed to extend the powers of an existing authority and not have to set up a dedicated one for the purposes of the directive.

The list of prohibited and restricted practices must be kept to a minimum and focus on contractual relationships between farmers and their first buyers. Freedom of contract and of negotiation is important in ensuring that retailers are able to deliver the best products to consumers at a reasonable price. This freedom must be preserved, and legislation must allow trading partners to engage in agreements that deliver a benefit to both parties. The list of prohibited practices must therefore be strictly limited to clearly defined practices, such as unilateral ex-post modifications of contracts, where the conditions were not previously agreed upon by the parties.

As per the remit of the directive, the focus should be on contractual relationships between small farmers and their first buyer. Lawmakers should resist adding a series of unnecessary and intrusive provisions which will undermine usual and perfectly legitimate commercial dealings and will simply create additional costs and benefit neither farmers nor consumers. In this regard, we are concerned at the proposed amendments emanating from the European Parliament, which include limitations on environmental or animal welfare standards and prohibitions on retail and wholesale buying groups that would have a significant impact upon thousands of independent retailers throughout the country that provide significant employment.

On complaint mechanisms, the directive establishes a right to complain for small suppliers in respect of large buyers. Article 48 of the EU Charter of Fundamental Rights requires that enforcement powers include a right of defence, including access to facts relating to a complaint, and appeal. These need to be fully reflected in the directive; currently, they are not.

Mediation and other alternative dispute resolution mechanisms should be promoted as an efficient means of solving disputes. Public enforcement can be costly and adversarial, with a risk of termination of any business relationship between the parties. Dialogue and mediation have proven to offer quick and efficient means of solving disputes in ways that allow business to continue. Public enforcement should only be sought as a last resort in the context of limited Government resources. Provisions on the role of mediation should be introduced.

As most contracts are negotiated annually, we ask that the directive foresees a reasonable transposition period of two years and continues to allow for its provisions to apply to new contracts negotiated after transposition. Retailers manage contracts with thousands of suppliers to provide consumers with a wide choice of products that meet their expectations and serve their needs. Renegotiating contracts halfway through their execution can simply not be put in practice.

On behalf of all Retail Ireland member companies, I thank the committee for affording us this opportunity to submit our views.