The Norwegian Act on Good Trading Practices has been adopted – Here is What You Need to Know

On 19 March 2020, the Norwegian Parliament finally adopted the Act on Good Trading Practices. The adoption puts an end to the long lasting discussion within the grocery sector on the need of an act providing guidance and obligations for what constitutes “good trading practice”.

The interesting question going forward is whether the act will be able to improve and make a difference for players within the grocery sector. The act aims to address challenges identified within the sector. The overall objective of the act is that the contractual relationships between the suppliers and the grocery chains will be more clear and predictable than in today’s contractual practices.

 The most important provisions of the act are:

  • The main principles (§ 3):

This provision introduces some main guiding principles requiring all parties to act in accordance with good trading practices. The standard for good trading practices is linked to the principles fairness, predictability and loyalty. This general provision, and the main principles, will provide guidance for the interpretation of the specific obligations set out in the act, but will also, by itself, set out rights and obligations.

  • The information requirement (§ 4):

The act imposes a an obligation to provide the counterparty with information which they have reason to believe is of importance to the other party; during both negotiations and the execution of the contract. The provision seeks to strike a balance between suppliers and grocery chains need for information and will provide equal access to important and relevant information in contractual negotiations. Examples of information which the parties will now have an obligation to share, includes the background for calculation of rebates and other matters of importance for the sharing of risk between the parties.

  • The protection of investments (§ 5)

An issue  that has been discussed for long between parties in the grocery sector, is the situation where one of the contractual parties undertakes specific investments relying on a contract being concluded. If a contract is not concluded, the party that undertakes the investment may suffer a loss. The general non-statuary  legal principle of loyalty in contracts provide already some protection; prohibiting such actions in bad faith. However, the new specific regulation will strengthen this legal principle. The provision states that if one party has, in good faith, made investments, the counterparty must not act in a manner that is contrary to the legitimate expectations that have arisen. As a consequence,  where one of the parties has remained passive whilst the other party has made visible investments relaying on that the contract will be concluded, there will an assumption a binding contract has been concluded. Further, a party that remains passive can become liable for the loss of the investments made by the counterparty if a contract is not concluded.

  • The requirement of written contracts and clarity (§ 6)

Another of the challenges that have been emphasized in the grocery sector has been related to ambiguity in contracts. A specific provision stating that contracts shall be entered into in writing and clearly describe the right and obligations of the parties, in order to remedy this issue. These requirements relates only to the form of the contract; not on its content. Accordingly, all important elements of the contract will have to be in writing.  Moreover, the provision also states that a party cannot unilaterally modify the contract. Examples of matters that now have to be concluded in writing are marketing services which are to be provided as part of execution of the contract and procedures for adjustment of prices.

  • The protection against imitations (§ 9)

The grocery chains’ private label products have also been an issue of debate. The suppliers fear the grocery chains demand for access to recipes may lead to private label copies  of the suppliers’ products. This provision prohibits the use of imitating characteristics, products, promotions etc. in such way and under such circumstances that it must be considered an unreasonable exploitation of another’s effort or result and it entails a risk of confusion. The provision is not only related to the grocery chains’ private labels, but also any other exploitation of sensitive information to market another product in general. The provision strengthens the protection of business secrets and is a supplement to the Marketing Act, in particular section 30 on the “copying of another party’s products“.

  • Other provisions

The act also contains provisions on, inter alia, responsibility for wastage and return of products (§ 7), requirements regarding delisting and termination of contract (§ 8)  and threats in negotiations (§ 10).

 

Enforcement – A new Supervisory Authority: Dagligvaretilsynet (“the Grocery Supervisory Authority”)

The new Norwegian act and its enforcement have been inspired by the “UK Groceries Code Adjudicator” responsible for enforcing the “Groceries Supply Code of Practice” in the UK, which, according to reports, has proved to be successful. The success in the UK stems in particular from the active role of the UK Groceries Code Adjudicator in guiding and influencing the market players. Hopefully the Norwegian Grocery Supervisory Authority (Dagligvaretilsynet) will be able to assume a similar function and role in Norway.

The new Grocery Supervisory Authority’s primary tools are guidance, mediation and informative work, inspired by the UK model. However, the Authority has also been provided with powers to request information, to adopt decisions, and to fine parties for non-compliance.

The Grocery Supervisory Authority is planned to be up and running as from 1 January 2021.