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Food & Drink update – May 2016

Limes Print publication

19/05/2016

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

Price comparisons

In a ruling involving Victoria Plum, the Advertising Standards Authority has ruled that the period for which the higher price applied and the percentage of items sold at that higher price were relevant in establishing whether a previous price comparison was valid. Victoria Plum is an online bathroom retailer but the case has implications for any retailer, including those operating in the Food and Drink sector.

The issue in this particular case was the accuracy of a “was” price that concerned two products that were sometimes sold separately and sometimes together and the retailer had failed to demonstrate that the “was” price was the usual selling price for the products when purchased individually.

Online advertising to children

The Committee on Advertising Practice is reportedly preparing to launch a public consultation on the advertising of foods high in fat, salt or sugar (HFSS) to children. The proposal is to make online advertising subject to the same restrictions as television advertising. This seems like a natural step for the regulator to take given that increasingly children are watching “television-like” programmes online.

Employment of illegal workers

A director of a cooked foods wholesaler, now in liquidation, has been disqualified from acting as a director for seven years. He was found to have employed illegal workers on two separate occasions. Separately, the director of a Manchester-based fast food outlet, also now in liquidation, has been banned from acting as a director after he was found to have breached his statutory obligations under the Immigration, Asylum and Nationality Act 2006, resulting in the employment of three illegal workers.  The two cases are a reminder of the importance of carrying out checks, and record-keeping when engaging new staff to avoid contravening the UK immigration rules and that the costs of contravention can be severe (a subject upon which we have written previously).

Brexit

The credit ratings agency Moody’s has warned that retailers, restaurants and food companies could be among the most at risk should the UK vote to leave the EU. The agency states that the biggest extra cost for retailers and suppliers in the sector would be on their ability to recruit staff on lower wages from other EU countries. It added, however, that the introduction of a £9 per hour “living wage” in 2020 could have even greater costs implications than this. Moody’s also warned that a vote to leave could cause significant EU tariffs a food and drink products as well as potential supply chain disputes.

Cartels

The European Commission has fined the Spanish canned and fresh vegetable company Riberebro just over €5 million for participating in an illegal and price-fixing and customer allocation cartel.  The cartel concerned mushrooms sold in tins and jars for private labels in the European Economic Area.  The overall aim of the cartelists was to stabilise market shares and halt a decline in prices.

Commercial contracts

The recent High Court decision in Alan Ramsay Sales & Marketing Ltd v Typhoo Tea Ltd [1] is a useful reminder that the “without prejudice privilege” doctrine can apply where there is not (yet) a live dispute between the parties and that if communications are covered by without prejudice privilege, this can have a major impact on arguments as to whether a contract has been terminated.

The case concerned the application of the “without prejudice privilege” doctrine in the context of the termination of a commercial agency agreement. The agency services in question concerned the defendant’s cash and carry, wholesale and food service convenience offering. At issue in the case was which of the parties had wrongfully terminated a contract and that issue hinged on whether emails labelled “without prejudice” could be relied upon in court. The judge considered the test for the application of “without prejudice privilege”, namely (1) whether there is an extant dispute between the parties, such that the parties contemplated or might reasonably have contemplated litigation if they did not agree the issues being discussed; and (2) that the communications constitute a genuine attempt to settle.  In this case, the judge found the conditions were met with the consequence that the emails could not be relied on. If in doubt as to whether or not the doctrine may apply, take advice.

Food labelling

The High Court has given judgment in favour of Newby Foods Ltd [2] that its new process for removing meat from flesh-bearing bones meant that the meat in question could be classified as fresh meat and not mechanically processed meat. The ruling may pave the way for other desinewed meat (DSM) products to be labelled as total meat content on meat products.

Reporting

Companies in the Food and Drink sector are still considering the steps they need to take to comply with their obligations under the Modern Slavery Act 2015, section 54 of which requires them to make a statement reporting on the steps they have taken to eradicate forced labour and human trafficking throughout their supply chain. A reminder of how close to home this issue can be came in March this year with the announcement that agricultural workers in Cambridgeshire were being subjected to forced labour and being paid less than £20 per week. This type of activity would be within the scope of a review under section 54.

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[1] [2016] EWHC 486 (Comm)
[2] R (on the application of Newby Foods Ltd) v Food Standards Agency [2016] EWHC 408 (Admin)

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