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Food & Drink update – February 2016

Limes Print publication

17/02/2016


Richard Naish of the Walker Morris Food & Drink Group presents a round-up of some recent legal developments in the sector.

Sentencing Guidelines

The Sentencing Council’s Guidelines for “Health and safety offences, corporate manslaughter and food safety and hygiene offences” came into effect on 1 February 2016 and will apply to any case heard on or after that date, regardless of when the offence occurred.

The Guidelines are virtually certain to mean higher fines for companies in the sector that are found guilty of food safety offences and, in the case of larger companies, the fines could be very high indeed. The Guidelines also increase the likelihood of custodial sentences for individuals (and for longer terms).

The Guidelines apply to a wide range of food safety offences, including putting unsafe food on the market, inadequate traceability, food recalls and withdrawals, failure to adopt systems based on Hazard Analysis Critical Control Point (HACCP) principles and misleading consumers through labelling, advertising and preparation of food.

The list of mitigating features does not now include evidence that the business or individual has effective food safety and hygiene procedures in place. If a business has failed to establish a due diligence defence, evidence of its systems and procedures will no longer be considered a mitigating feature.

The Guidelines can be accessed here.

Payment delays

The Groceries Code Adjudicator (the GCA) has found Tesco in breach of the Groceries Supply Code. The GCA found Tesco to be in breach of the Code provision relating to delay in payments but not in respect of the provision concerning the better positioning of goods. As the breaches took place before the GCA was empowered to impose a fine, no financial penalty was imposed on Tesco. The GCA has made a number of recommendations to reduce the likelihood of a repetition of Tesco’s non-compliance. We review the GCA’s findings and recommendations in this briefing.

Promotions and pricing

The Chartered Trading Standards Institute is currently consulting on a new Pricing Practices Guide, which, when implemented, may require Food and Drink retailers to review their pricing and promotion strategies. The CMA responded to the consultation shortly before Christmas, welcoming the approach taken in the draft Guide, which is to avoid prescriptive guidance and to encourage businesses to take a “holistic” rather than a “formalistic” approach to pricing. In other words, the draft Guide is seeking to encourage genuine thought about promotions and pricing and to discourage a “box-ticking” culture.

The draft Pricing Practices Guide can be accessed here.

Trade marks

Nestlé’s application to register the shape of its Kit Kat bar as a trade mark has been refused by the High Court [1]. This was expected following a ruling of the Court of Justice of the European Union last year. Arnold J found that the shape of the bar, when stripped of its wrapping and logo was not “distinctive”, a prerequisite to a successful UK trade mark registration.

General Data Protection Regulation

The final text of the EU General Data Protection Regulation was agreed shortly before Christmas. The Regulation will be published in the Official Journal shortly and will come into effect two years and twenty days from the date of publication, i.e. early 2018.

The Regulation will overhaul several aspects of the existing data protection regime and we will be writing about this separately.  One thing to note is that the financial costs of non-compliance will be potentially much more serious than currently. Regulators will be able to impose fines of up to 4 per cent of an undertaking’s total worldwide annual turnover in the previous year. This brings the regulatory costs of non-compliance more into line with the UK’s anti-bribery and competition law regimes. Food and Drink businesses should begin reviewing data protection policies and procedures well in advance of the 2018 implementation date.

Advertising

The Advertising Standards Authority (ASA) has ruled that an advert for Nestlé’s Nesquik hot chocolate which claimed that it gave children a “great start to the day” violated the CAP Code due to the product’s high sugar content.

The complaint was brought by the Children’s Food Campaign, who argued that the “great start” claim encouraged poor nutritional habits in children. The ASA agreed and said the advert should not have been run.

Sugar tax and child obesity

The World Health Organisation has called for the introduction of a sugar tax and a ban on advertisements for unhealthy products from children’s TV, schools and sports facilities. At the same time, the Government is reportedly reconsidering imposing taxes on sugary drinks as part of its childhood obesity strategy due to be announced in February.

The Health Secretary, in an interview on Sunday 7 February, said that the Government would either introduce a sugar tax or something “equally robust” as part of the strategy. It very much appears that the Government, which even a couple of months ago opposed the idea of a sugar tax, has had a change of heart.

Minimum unit pricing for alcohol

The Court of Justice of the European Union (CJEU) has ruled that the Scottish Government’s proposals to implement unit pricing for alcohol contravene EU rules on free trade [2]. The CJEU held that the policy could be justified on health grounds only if the unit pricing scheme was more proportionate and effective than using general taxation to increase the price of alcohol. The challenge to the policy was brought by the Scotch Whisky Association.

Contractual penalties

The Supreme Court has revisited the test for establishing whether a clause in a contract providing for payment of a sum of money upon the defaulting party’s breach of contract is a “penalty”. Penalty clauses are unlawful under English law and cannot be enforced. A penalty need not be the payment of a sum of money upon a breach; it could be, for example, a disproportionately severe service credit for poor performance by a supplier of IT services; or non-refundable deposits. We reviewed the Supreme Court decision in an earlier briefing.

Battle of the forms

You might have the best terms and conditions in the business but they will be of no avail if you do not successfully ensure that they apply to your contract. The High Court recently re-examined the question of whether a buyer or seller’s terms and conditions apply when a contract is formed. We examined the decision, and how to ensure your Ts and Cs apply, here.

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[1] [2016] EWHC 50 (Ch)
[2] Case 333/14

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