New Decree regulates Supermarket Shelf Law

New Decree regulates Supermarket Shelf Law

By Mariano PeruzzottiPaula Caraffa Morando and Mateo Cozzi.

On December 14, 2020, the regulation of the Supermarket Shelf Law No. 27.545 (“LG”, for its acronym in Spanish) enacted by the National Congress in 2020, was published in the Official Gazette.

Decree No. 991/2020 (“Decree”) regulated aspects of the LG. The main purposes of the LG are to contribute to the transparency and competitiveness of prices of products and expand the supply of artisanal and/or regional products produced by micro, small and medium-sized enterprises (“MiPymes”, for its acronym in Spanish), among others.

Below we describe the main aspects of the new regime.

What is considered a “shelf”?

It is all physical space, furniture in which products with similar features are offered, including shelves ends. This does not include exclusive freezers, display islands and displays next to the checkout line.

The provisions of this regime also apply to virtual locations such as websites, mobile apps, e-commerce stores or similar platforms owned directly or indirectly by the compelled subjects, as described below.

What products are reached?

Food, beverages, personal hygiene products and household cleaning supplies.

To whom does the LG apply?

The compelled subjects (“CS”) are:

a) Total supermarkets or hypermarkets

b) Supermarkets

c) Superstores

d) Food products Self-services

e) Non-food products Self-services

f) Retail business chains

g) Wholesale supply organizations

h) Perishable goods packers

i) Shopping centers

Who are exempt?

The economic agents whose average turnover of the last three years lower than that of a “MyPyme”.

What are the rules for displaying the products on shelves?

  • In shelves and virtual locations CS are obliged to offer a minimum of 5 suppliers or economic groups for the same product per shelf.
  • No brand may have more than 30% of the shelf.
  • 25% of the shelf must be guaranteed to products made by MiPymes and an additional 5% to display products made by family, peasant or indigenous agriculture.
  • Products of lower prices must be at an equidistant height between the first and the last shelf. In virtual locations, it must be guaranteed that the lowest priced products are published in the first display of products of each category.
  • 50% of the products in the displays next to the checkout line must be produced by MiPymes.
  • The display of imported products cannot exceed the percentage determined by the Secretary of Domestic Trade, depending on the ability of the national industry to meet the demand of these products.
  • The products of brands licensed by the same commercial groups or controlled companies will be considered a single brand.
  • National products produced by MiPymes, family, peasant and indigenous agriculture sector, of the popular economy sectors and/or produced by cooperatives and/or mutual associations, must be highlighted in the shelves and virtual locations using an isologotype that reads “Buy MiPyme” and indicates the number of the LG.

Does the LG have any conditions in the relationship between suppliers and CS?

Yes. The following conditions are established, among others:

  • It is prohibited to rent preferential spaces on the shelves as it is considered ‘anticompetitive exclusion’.
  • The payment period for MiPymes may not exceed 60 days and suppliers cannot be required to contribute, advance or deliver products for free.
  • Suppliers cannot be required to make contributions or financial advances for any reason or apply economic withholdings or unilateral debits.
  • In the contractual negotiation, the delivery of products free of charge or below the cost of provision, or any other anticompetitive practice cannot be imposed as a condition.
  • Conditions or variations in the prices of third-party suppliers cannot intervene in the price negotiation.
  • It is prohibited to demand the costs of reverse distribution or replacement of products from suppliers.
  • The contractual obligations or their modifications that are agreed between the CS and their suppliers must be formalized in writing.
  • Costs for promotional sales of products, or for the generation of waste or losses must be established contractually and through fair and objective criteria.
  • Preferential payment terms and conditions cannot be granted for exclusive or unequal purposes between the different suppliers.
  • Suppliers will not be responsible for the loss of products once received.

The LG also has specific rules aimed at promoting regional products.

What happens if it is not possible to comply with what the LG established due to lack of competition?

In cases where for a certain category of products it is temporarily not possible to meet the minimum limits established in the law, the CS must inform the Secretary of Domestic Trade of the well-founded reasons for said non-compliance and the expected period of time to comply with it.

The lack of suppliers allows the partial non-compliance of the LG until a new supplier is presented to meet the demand of the commercialization chains.

What are the sanctions imposed by the LG?

The fines provided in the Fair Trade Regulation are applicable, without prejudice to other sanctions that may correspond according to the procedure of the Antitrust Law or the Consumer Protection Law. In particular, the sanctions catalog includes fines that could reach up to ARS$ 552,900,000 (approximately USD 5,820,000 at the current exchange rate) according to the last update.

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