The Fair Dealing Obligations (Milk) Regulations 2024

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations make provision in respect of commercial contracts for the purchase of milk between persons purchasing milk in the course of carrying on their business (business purchasers) and producers.

Regulation 3 requires a business purchaser to use a “milk purchase contract” that complies with these Regulations when purchasing milk from a producer, and makes general provision about the use of milk purchase contracts, including that the terms relating to the purchase of milk must all be included in the milk purchase contract.

Regulation 4 makes provision about the format of the milk purchase contract. Regulation 5 provides that the duration of the milk purchase contract must either be fixed or evergreen (as defined).

Regulation 6 sets out the permitted pricing models.

Regulation 7 makes provision in relation to fixed price milk purchase contracts, including that different periods within the duration of the contract may have different fixed prices. It further makes provision about the review of the fixed price in exceptional market conditions.

Regulation 8 makes provision in relation to variable price milk purchase contracts. It imposes a requirement that the milk purchase contract must set out the factors to which the business purchaser must have due regard when determining the price. It makes further provision, including that different sets of factors may relate to different periods within the duration of the contract, limits on the frequency at which the price can be determined and the ability of the producer to request an explanation as to how a price was arrived at by the business purchaser.

Regulation 9 provides that certain milk purchase contracts may not use a pricing model that purports to provide that the price to be paid for milk under the contract changes if the amount of milk provided by the producer exceeds a certain volume.

Regulation 10 makes provision about the method and frequency of payment.

Regulation 11 provides that where business-sensitive data (as defined) is used in relation to a variable price, the milk purchase contract must provide that the producer may refer the explanation given under regulation 8 to an independent person for verification.

Regulation 12 makes provision in relation to milk purchase contracts that specify the supply of a fixed volume of milk over a given period. The milk purchase contract may not specify a period of longer than 12 months over which the milk is to be supplied. It also must specify “acceptable supply volumes”, i.e. volumes of milk above and below the fixed volume which are subject to the same pricing structure and remedies that are available to the business purchaser when the amount of milk is below the lower acceptable supply volume.

Regulation 13 makes provision for the terms relating to the collection of milk by the business purchaser. Regulation 14 requires milk purchase contracts to contain force majeure clauses. Regulation 15 makes provision for the requirements in milk purchase contracts relating to the giving of notices under them. Regulation 16 makes provision for the variation of terms of a milk purchase contract.

Regulation 17 requires milk purchase contracts to contain a dispute resolution procedure.

Regulation 18 makes provision requiring a milk purchase contract to provide that a producer may terminate the milk purchase contract without penalty within the first 21 days of the contract being made.

Regulation 19 provides that milk purchase contracts with a duration of over 12 months must include a process by which the contract can be terminated. The business purchaser must give at least 12 months’ notice, unless the milk purchase contract is of less than 12 months duration. The producer may not be required to give more than 12 months’ notice to terminate. This regulation also provides that the milk purchase contract must set out certain specific circumstances in which notice to terminate immediately can be given.

Regulation 20 provides that a producer may refer a complaint relating to the compliance of the milk purchase contract with the requirements of these Regulations to the Secretary of State. It sets out the procedure and conditions the producer must comply with in order to refer a complaint to the Secretary of State. It sets out certain powers the Secretary of State has in relation to investigating a complaint and enforcing compliance with a request made by the Secretary of State under this regulation.

Regulation 21 gives the Secretary of State power to impose a civil penalty on a business purchaser found to have failed to comply with their obligations under these Regulations. It further empowers the Secretary of State to require that business purchaser to pay compensation to the producer concerned.

Regulation 22 requires the Secretary of State to publish guidance relating to the requirement to pay a civil penalty or compensation under regulation 21.

Regulation 23 requires the Secretary of State to give a business purchaser a notice (a “notice of intent”) where the Secretary of State proposes to require them to pay a civil penalty or compensation under regulation 21.

Regulation 24 enables the business purchaser who has received a notice of intent, and the producer concerned in the matter, to make representations regarding the imposition of a requirement to pay a civil penalty or compensation under regulation 21.

Regulation 25 requires the Secretary of State, after the business purchaser and producer have had an opportunity to make representations, to decide whether to impose a requirement to pay a civil penalty or compensation under regulation 21. The Secretary of State must give the business purchaser a notice informing them of the decision (a “notice of decision”), which must be copied to the producer.

Regulation 26 makes provision in relation to appeals against a decision of the Secretary of State to impose a requirement to pay a civil penalty or compensation under regulation 21.

Regulation 27 makes provision for the Secretary of State to review the regulatory provision made by these Regulations.

Regulation 28 makes related amendments to Regulation (EU) No 1308/2013.

A full impact assessment has not been produced for this instrument as no, or no significant, impact on the private, voluntary or public sectors is foreseen. A de minimis assessment has been prepared as this instrument is likely to entail some costs for businesses but the net impact is estimated to be below £5 million per year. It is available from the Department for Environment, Food and Rural Affairs, 2 Marsham Street, London, SW1P 4DF.