Spain update: The general ban on sale at a loss in the food chain returns, but … for how long? CJEU judgment.

Whether or not the general prohibition introduced in the reform of the LCA is compatible with Community law is a complex question.

The Court of Justice of the European Union (CJEU) said in its Judgment in Case C-295/16 that a national provision establishing a general prohibition on selling at a loss, without taking into account the specific facts of the case – the effective disloyalty of practice – is contrary to Directive 2005/29/EC on relations between businesses and consumers and should be annulled, where that provision is intended to protect the consumer.

Following the judgment of the CJEU, the Retail Trade Regulation Law (LOCM) was amended and the general prohibition of sale at a loss was withdrawn, moving to a system in which only the sale at a loss that posed an additional problem – misleading the consumer about the price level, discrediting the image of the products or seriously harming a competitor -, is prohibited. Thus, the need to prove the concurrence of any of these additional circumstances meant in practice the irrelevance of the prohibition of this type of practice.

It turns out that the transposition of Directive 2019/633,which concerns relations between operators in the food chain, has served to enable the Spanish legislature to rescue the system of general prohibition previous in the recent Law 16/2021, of 14 December, amending Law 12/2013, of 2 August, measures to improve the functioning of the food chain (LCA). This is what Article 12b(2) of the reformed LCA states:

In order to protect the marketing capacity of primary producers, operators who carry out the final sale of food or foodstuffs to consumers may not apply or offer a retail price lower than the actual purchase price thereof.

Therefore, with the aim this time of protecting operators in the primary sector – and not consumers – a system of automatic prohibition of sale at a loss is reintroduced, which does not require proof that any of the additional circumstances to which we have referred concur.

This is precisely what was done in Belgium, following another 2013 CJEU ruling annulling the Belgian general prohibition system of selling at a loss as also contrary to Directive 2005/29/EC. Then, in order to circumvent the CJEU’s ruling, the Belgian legislator argued that the prohibition of sale at a loss was made – this is the text that was added in the rule – to “guarantee fair market practices between companies” and no longer to protect consumers (Code de Droit économique – Art. VI. 116. § 1st.).

In our view, whether or not the general prohibition introduced in the reform of the LCA is compatible with Community law is a complex question.

In favour of compatibility, it can be said that, since the general prohibition is not intended to protect consumers – as the text at the beginning of paragraph 2 expressly states – the incompatibility with Directive 2005/29/EC is saved.

However, others may say that it is not enough to include the tagline: “to protect the marketing capacity of primary producers” to circumvent the CJEU Judgment of 2016, especially if we take into account that the LCA itself, in its explanatory statement and in the articles, includes multiple references to consumers as recipients or rather beneficiaries of the rules on fair practices in the chain (just look at paragraphs a) and b) of article 3 on the purposes of the Law) and that, curiously, the regime of prohibition of sale at a loss provided for in the new version of the LCA only affects operators who make the sale to the final consumer, which according to the very definitions of Article 5 LCA, should not be considered as operators of the chain.

In any case, taking into account what has happened in recent years, what we are sure of is that the number of complaints for sale at a loss will multiply in the coming months so we will soon have the opportunity to know the position of the AICA, first, and of the courts later, on the compatibility of the new prohibition of sale at a loss with EU law, without it being possible to rule out a new question for a preliminary ruling so that the CJEU can rule again on this matter.

By Marimón Abogados, Spain, a Transatlantic Law International Affiliated Firm. 

Published at ABCD Legal, the Blog of Marimón Abogados in Food Retail & Food Service.

For further information or for any assistance please contact spain@transatlanticlaw.com

Disclaimer: Transatlantic Law International Limited is a UK registered limited liability company providing international business and legal solutions through its own resources and the expertise of over 105 affiliated independent law firms in over 95 countries worldwide. This article is for background information only and provided in the context of the applicable law when published and does not constitute legal advice and cannot be relied on as such for any matter. Legal advice may be provided subject to the retention of Transatlantic Law International Limited’s services and its governing terms and conditions of service. Transatlantic Law International Limited, based at 42 Brook Street, London W1K 5DB, United Kingdom, is registered with Companies House, Reg Nr. 361484, with its registered address at 83 Cambridge Street, London SW1V 4PS, United Kingdom.