A host of new legislation and guidance has come into force over the latter half of March 2020. The entire business and social environment has altered. The article below summarises the current key areas affecting the food sector:
Business Closures - Emergency Regulations on 21 March 2020 required the closure of certain retail, hospitality and leisure businesses. All businesses trading food consumed on their premises, such as restaurants, cafes, bars and pubs, had to stop and close any premises (or part of the premises) where food and drink are sold for consumption on site.
A business that sells food or drink to be consumed off the premises may continue doing so. This therefore allows takeaway and delivery services to remain open and operational. These mandatory closures do not apply to catering facilities in hospitals, care homes or schools, or where services are provided to the homeless or vulnerable persons. However, specified businesses including cinemas, theatres, nightclubs, museums, betting shops, leisure centres and gyms, have had to close. It is an offence to contravene these restrictions "without reasonable excuse". Enforcement is via trading standards and environmental health officers. Breaches will be subject to prohibitions notices, contravention of which is a criminal offence.
‘Essential’ Businesses - Guidance has been published that identifies which businesses and premises are currently considered non-essential and which are essential (generally, only food shops and supermarkets, but also; pharmacies, vets, hardware stores, petrol stations, banks, post offices, laundrettes, and premises hosting food banks or homeless services are designated essential).
Planning regulations to be amended - Planning regulations are to be temporarily relaxed to allow pubs and restaurants to operate as takeaways of hot food and drinks to serve people staying at home. Currently, planning permission is required for businesses to carry out a change of use to a hot food takeaway. The government has confirmed regulations will be relaxed to enable businesses to deliver this service without a planning application. This time limited permitted development right will last for 12 months. Businesses will be required to tell the local planning authority when the new use begins and ends. The government will introduce the measures as soon as possible through secondary legislation. Operators are reminded however that the sale of hot food and hot drink between 11:00pm and 05:00am will still require authorisation for late night refreshment under licensing law. Furthermore, the measures only relate to takeaways of hot food and non-alcoholic drinks. Premises licence holders should check their licence conditions and ensure that they are permitted to sell off sales of alcohol before offering takeaways or deliveries of alcohol.
Safety Guidance for all food businesses - The Food Standards Agency (FSA) has published guidance to assist food businesses in responding to the coronavirus outbreak. It is vitally important that all food businesses prioritise the health and safety of their employees, agents and customers. This guidance should be incorporated into those food businesses' policies and practice who continue to operate during the coronavirus outbreak as a priority. The new guidance has been developed with the Department for Environment, Food and Rural Affairs (Defra) and covers a range of areas including good hygiene practice, management of employee sickness, and social distancing for specific food business settings. A full review of this is provided in our earlier blog.
It is important that business continuity plans also incorporate safety as well as supply and commercial objectives, an overview of these issues is provided here.
Supply Chain Information – The Coronavirus Act 2020 was passed last week on 25th March. It gives the government wide ranging powers but looking specifically at the food sector, section 25-29 and schedule 15 of the Act gives the government the power to require a relevant entity within the industry to provide necessary information on whether the supply chain is being disrupted (or at risk of being disrupted), if that entity has previously refused to provide that information voluntarily, or has provided false information. In practice, certain food companies have been being asked for information relevant to this by trade bodies and government agencies for several days before the enactment of the Coronavirus Act so the government has full information of the food supply situation, can make informed judgements and respond effectively; but this Act now puts in place financial penalties for failure to comply of 1% of qualifying turnover. Additionally, and most importantly, it states that disclosures made by a relevant entity would not breach an obligation of confidence owed by that relevant entity to another party. Commercially, where confidentiality agreements are used they will often include a provision that permits the disclosure of confidential information if this is required by law, which might also explain the reference to this in the Coronavirus Act. Individuals, sole traders and some farmers are exempt but other entities along the whole range of the supply chain are covered.
International Trade - The Department for International Trade (DIT) published guidance for UK businesses trading internationally with the support the DIT can offer, and appropriate contact details. For example, where supply chains have been affected, it is stated the DIT can help find alternative suppliers (advisory and professional services firms who can assist with this task are asked to contact the DIT). The DIT can also help to ensure smooth clearance of products through customs, and advise on intellectual property and other issues with business continuity. In addition to the financial support available to UK exporters under the government’s general business support measures, the UK Export Finance (UKEF), the UK government’s export credit agency, may be able to guarantee bank loans through its Export Working Capital Scheme, companies may be able to recover costs through the UKEF's export insurance scheme and there may be some assistance available to overseas buyers via the Direct Lending Facility scheme.
Competition law relaxed – Legislation will be laid shortly to amend elements of the Competition Act 1998, which prevents certain types of anti-competitive behaviour. It can be relaxed in exceptional circumstances. This is intended to allow supermarkets to work together and a new approach to essential business cooperation. It will allow retailers to share data with each other on stock levels, cooperate to keep shops open, or share distribution depots and delivery vans. It would also allow retailers to pool staff with one another to help meet demand. It is stressed that this will be temporary and only with the specific purpose in mind to help retailers work together to feed the nation.
The Competition and Markets Authority (CMA) has made a statement in support of this offering the following reassurance: “the CMA has no intention of taking competition law enforcement action against cooperation between businesses or rationing of products to the extent that this is necessary to protect consumers – for example, by ensuring security of supplies.” The statement continues however they will not tolerate unscrupulous businesses exploiting the crisis as a ‘cover’ for non-essential collusion. This includes exchanging information on longer-term pricing or business strategies, where this is not necessary to meet the needs of the current situation. Businesses must still be aware that any assurance given by the CMA cannot protect against competition litigation by private parties.
Anti-Competitive Practices against consumers targeted – In an open letter dated 20 March to the food and drink and pharma sector the Competition and Markets Authority (CMA) referenced reports that a minority of companies in these sectors were seeking to capitalise on the current situation by charging unjustifiably high prices for essential goods or making misleading claims around their efficacy. It stated ‘We are determined to ensure that consumers are treated fairly through these difficult times. We are therefore keen to work with you to ensure that the approach firms take is clear, fair and supportive of trust among the wider public. We understand that some price rises may result from constraints further up the supply chain. For example, if an individual firm raises its prices as a result of passing on increased prices from wholesalers or suppliers, then this may be unavoidable. However, where this is happening, we would like to hear from you about any information relating to such price increases by wholesalers or suppliers, so that we can investigate these issues further up the supply chain.’ Companies were asked to report any such information to firstname.lastname@example.org.
Additionally, the CMA has launched a COVID 19 taskforce against sharp practices such as charging excessive prices or making misleading claims about their products. The taskforce will:
- Scrutinise market developments to identify harmful sales and pricing practices as they emerge.
- Warn firms suspected of exploiting these exceptional circumstances – and people’s vulnerability – through unjustifiable prices or misleading claims.
- Take enforcement action if there is evidence that firms may have breached competition or consumer protection law and they fail to respond to warnings.
- Equip the CMA to advise the Government on emergency legislation if there are negative impacts for people which cannot be addressed through existing powers.
- Enable the CMA to advise the Government on how to ensure competition law does not stand in the way of legitimate measures that protect public health and support the supply of essential goods and services. It will also advise on further policy and legislative measures to ensure markets function as well as possible in the coming months.
Andrea Coscelli, the CMA’s Chief Executive, added that the CMA urges retailers to behave responsibly in these exceptional circumstances but if they do not, the CMA taskforce is monitoring market developments to enable intervention as quickly as possible. “We have a range of options at our disposal, from warnings to enforcement action to seeking emergency powers. We hope that such action will not be necessary, but we will do whatever is required to stop a small minority of businesses that may seek to exploit the present situation.”
This is clearly a fast moving environment for the food sector, which is currently under significant stress and having unprecedented demands being placed on it. For advice on any aspect of the above or for further and more up to date information please do not hesitate to contact Craig Hodgson on Craig.Hodgson@mills-reeve.com or Jessica Burt on Jessica.Burt@mills-reeve.com.