Legalize / United Kingdom / Statutory-Instrument

The Fair Dealing Obligations (Milk) Regulations 2024

Type Statutory-Instrument

Publication 2024-04-16

State In force

Department King's Printer of Acts of Parliament

Source legislation.gov.uk

Reform history JSON API PDF

Made: 16th April 2024

Coming into force in accordance with regulation 1

In accordance with sections 29(10) and 50(6)(a) of the Agriculture Act 2020, a draft of this instrument has been laid before Parliament and approved by a resolution of each House.

PART 1 — General

Citation, commencement, extent and application

1

(1) These Regulations may be cited as the Fair Dealing Obligations (Milk) Regulations 2024.

(2) They come into force on the commencement date.

(3) They extend to England and Wales, Scotland and Northern Ireland.

(4) Subject to paragraphs (5) and (6), these Regulations apply in relation to milk purchase contracts.

(5) They do not apply in relation to any quantity of milk that the business purchaser[^f00002] takes possession of before the transition date under a milk purchase contract that was in force immediately before the commencement date.

(6) Part 4, excluding regulations 9 and 10, does not apply to a milk purchase contract—

(a) where the terms that relate to the price of milk supplied under it were agreed to on behalf of the producer by a representative organisation, of which the producer is a member; or

(b) where the business purchaser has an internal democratic structure and the contract relates to the purchase of milk from a producer member.

(7) In this regulation—

“the commencement date” is the day after the expiry of 12 weeks, beginning with the day on which these Regulations are made;

“the transition date” is the day after the expiry of 12 months, beginning with the commencement date.

Interpretation

2

In these Regulations—

“fixed-duration contract” has the meaning given in regulation 5(2);

“fixed price” has the meaning given in regulation 7(2);

“internal democratic structure”, in relation to a business purchaser, means an organisational structure— which is established in the business purchaser’s constitution; and within which is a decision-making body— the membership of which includes a majority of individuals who are democratically elected by the producer members of the business purchaser; and which has ultimate decision-making authority in relation to contracts for the purchase of milk;

“milk” means cow’s milk;

“milk constituent” means a substance contained in, or which can be extracted from, milk;

“milk purchase contract” means a contract made by a business purchaser for the purchase of milk from a producer;

“notice of intent” has the meaning given in regulation 23(2);

“producer” means a qualifying seller falling within section 29(3)(b)(i) of the Agriculture Act 2020;

“producer member” means a producer that has an ownership interest in the business purchaser in question;

“representative organisation” is— a producer organisation or an association of producer organisations recognised under Chapter 3 of Title 2 of Part 2 of Regulation (EU) No 1308/2013 of the European Parliament and of the Council of 17 December 2013[^f00003] establishing a common organisation of the markets in agricultural products; or a pre-commencement society, within the meaning of section 150 of the Co-operative and Community Benefit Societies Act 2014[^f00004], that does not carry out processing activities[^f00005];

“the parties” in relation to a milk purchase contract, means the business purchaser and the producer who are party to the contract;

“variable price” has the meaning given in regulation 8(2).

PART 2 — Requirement to use a milk purchase contract

Requirement to use a milk purchase contract and general provisions

3

(1) A business purchaser may not purchase milk from a producer unless the purchase is made under a milk purchase contract that complies with the requirements of these Regulations.

(2) A milk purchase contract must contain all the express terms relating to the purchase.

(3) A milk purchase contract must contain a term that requires the business purchaser to act in good faith in relation to the contract.

(4) A milk purchase contract may not contain any terms that are contrary to the provisions of these Regulations.

(5) A milk purchase contract containing terms agreed to by a representative organisation on behalf of the producer must contain the name of the representative organisation.

PART 3 — Format and duration of milk purchase contract

Format of a milk purchase contract

4

(1) A milk purchase contract must—

(a) be in writing; and

(b) be signed by all parties to the contract.

(2) An electronic signature is sufficient to satisfy the requirement in paragraph (1)(b).

(3) An “electronic signature” is so much of anything in electronic form as—

(a) is incorporated into or logically associated with any electronic communication or electronic data; and

(b) purports to be so incorporated or associated for the purposes of being used in establishing the authenticity of the communication or data, the integrity of the data, or both.

Duration of milk purchase contract

5

(1) A milk purchase contract must be—

(a) a fixed-duration contract; or

(b) an evergreen contract.

(2) A “fixed-duration contract” is a milk purchase contract that will terminate—

(a) on the expiry of a specific period; or

(b) on a specified date.

(3) An “evergreen contract” is a milk purchase contract that will continue until one of the parties terminates it.

(4) The milk purchase contract must state whether it is a fixed-duration contract or an evergreen contract.

(5) A milk purchase contract must specify the date on which the obligation to supply milk commences, if this is different from the date on which it is signed.

PART 4 — Pricing and payment

Permitted pricing

6

A milk purchase contract must use—

(a) a fixed price;

(b) a variable price; or

Use of a fixed price

7

(1) Where a milk purchase contract uses a fixed price (whether or not in combination with a variable price), it must do so in accordance with this regulation.

(2) A “fixed price” is a price, set out in the milk purchase contract, that—

(a) is expressed per unit of milk or milk constituent; and

(b) will be paid by the business purchaser to the producer for milk supplied under the contract.

(3) The milk purchase contract may set out more than one fixed price within the duration of the contract.

(4) The milk purchase contract must specify—

(a) the period within the duration of the contract to which each price relates; and

(b) the date on which each period begins and ends.

(5) The milk purchase contract must set out a procedure by which the price may be reviewed where exceptional market conditions occur.

(6) The milk purchase contract must set out what constitutes exceptional market conditions for the purpose of the procedure referred to in paragraph (5).

(7) The procedure referred to in paragraph (5) must provide that, where requested by the producer, the business purchaser must, within 30 days beginning with the date on which the request was made, invite the producer to enter into a discussion with the purpose of—

(a) reviewing the price payable under the milk purchase contract at the time of the exceptional market condition occurring; and

(b) where both parties agree, changing that price.

Use of a variable price

8

(1) Where a milk purchase contract uses a variable price (whether or not in combination with a fixed price), it must do so in accordance with this regulation.

(2) A “variable price” is a price per unit of milk or milk constituent that is not fixed at the point that the milk purchase contract is made but is determined—

(a) in accordance with; or

(b) by the business purchaser with reference to,

factors set out in the milk purchase contract.

(3) Where the milk purchase contract makes provision in accordance with paragraph (2)(b), it must provide that the business purchaser must have due regard, as far as it is reasonably practicable to do so, to only the factors set out in the milk purchase contract when determining the price per unit of milk or milk constituent.

(4) The milk purchase contract may provide for the price per unit of milk or milk constituent to be determined by reference to more than one set of factors within the duration of the contract.

(5) Where the milk purchase contract accords with paragraph (4), it must specify—

(a) the period within the duration of the contract to which each set of factors relates; and

(b) the date on which each period begins and ends.

(6) The milk purchase contract must provide how often the price per unit of milk or milk constituent is to be determined, which is to be—

(a) not more frequently than monthly; and

(b) not less frequently than every three months.

(7) After the price per unit of milk or milk constituent is determined under the milk purchase contract, the producer may by written notice request that the business purchaser give them a written explanation as to—

(a) how the price was determined; and

(b) where the price per unit of milk or milk constituent is to be determined by the business purchaser, how the factors to which the business purchaser is to have due regard influenced the price.

(8) The notice described in paragraph (7) may be given once each time the price is determined.

(9) The business purchaser must give the explanation requested in the notice within 7 days beginning with the date on which the notice described in paragraph (7) was given.

Tiered pricing

9

(1) An exclusive milk purchase contract may not include any provision 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.

(1A) Paragraph (1) does not apply to an exclusive milk purchase contract made by a business purchaser which has an internal democratic structure when purchasing milk from a producer member.

(1B) Where an exclusive milk purchase contract referred to in paragraph (1A) provides 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, it must do so in accordance with paragraphs (1C) to (1E).

(1C) The milk purchase contract must set out the amount by which the price is to change as a numerical value per unit of milk or milk constituent.

(1D) The milk purchase contract must specify the volume of milk above which the change in price is to apply.

(1E) The milk purchase contract may set out different amounts by which the price is to change that apply to different volumes of milk produced.

(2) An “exclusive milk purchase contract” is a milk purchase contract that provides that the producer may not make a milk purchase contract with another business purchaser.

Method and frequency of payment

10

A milk purchase contract must set out—

(a) the first day on which;

(b) the method by which; and

the business purchaser will pay the producer for milk under the contract.

Referral of relevant variable price to independent third party

11

(1) A milk purchase contract that uses a relevant variable price must include a third-party verification procedure.

(2) A “a third-party verification procedure” is a procedure which enables a producer to refer an explanation given in accordance with regulation 8(9) to an independent person—

(a) for the purpose of seeking their professional opinion as to the extent to which any references to business-sensitive data are accurate; and

(b) to confirm that, in the reasonable, professional opinion of the independent person, the explanation is supported by the business-sensitive data.

(3) The business purchaser must—

(a) cooperate with the independent person, to such extent as is reasonably requested by the person; and

(b) provide such information or specified documents as are reasonably requested by the person.

(4) Paragraph (3) does not apply if the independent person does not confirm to the business purchaser that they will not share business-sensitive data without the business purchaser’s consent.

(5) The milk purchase contract must—

(a) provide that the independent person engaged to verify business-sensitive data is to be agreed upon by the business purchaser and producer; and

(b) provide for the costs of the independent person to be apportioned between the parties.

(6) But the milk purchase contract must provide that the producer may not be apportioned a greater share of the costs of engaging the independent person than is apportioned to the business purchaser.

(7) In this regulation,

“business-sensitive data” is data— the source of which is the business purchaser; and that is of a confidential nature;

“relevant variable price” means a variable price which is determined with reference to business-sensitive data.

(8) Data is of a confidential nature if it is stated as being so in the milk purchase contract.

PART 5 — Volumes

Fixed volume contracts

12

(1) This regulation applies to a milk purchase contract that specifies a fixed volume of milk.

(2) A milk purchase contract specifies a fixed volume of milk if it provides that the producer is to supply a fixed, pre-determined volume of milk over a given period.

(3) The milk purchase contract must—

(a) set out the period, of no longer than 12 months, over which the volume of milk is to be supplied; and

(b) set out upper and lower acceptable supply volumes applicable to that period.

(4) “Acceptable supply volumes” are volumes of milk which fall above and below the fixed volume of milk specified in the contract but which nevertheless are subject to the same pricing terms as the fixed volume.

(5) The milk purchase contract must also include provision setting out the remedies available to the business purchaser where the producer provides a volume of milk that is below the lower acceptable supply volume for the applicable period.

(6) An exclusive milk purchase contract may not specify a fixed volume of milk.

(7) “Exclusive milk purchase contract” has the meaning given in regulation 9(2).

PART 6 — Miscellaneous

Collection of milk

13

(1) A milk purchase contract must provide that milk supplied under the contract will be collected from the producer by, or on behalf of, the business purchaser.

(2) The milk purchase contract must specify when, and how frequently, collections will occur.

Force majeure

14

(1) A milk purchase contract must contain a provision setting out the effect on the business purchaser and producer of a force majeure event occurring.

(2) A milk purchase contract must set out specifically the acts, events or circumstances that constitute a force majeure event.

Notices under a milk purchase contract

15

(1) A milk purchase contract must provide that any notice given under it must be—

(a) in writing;

(b) sent by electronic mail or a method of post that requires the recipient to sign on receipt; and

(2) The milk purchase contract must provide that where the notice complies with the provision required by paragraph (1), service is deemed to be effected at the time at which the notice would be delivered—

(a) where electronic mail is used, in the ordinary course of using the electronic mail service; or

(b) where the notice is given by post, in the ordinary course of post.

(3) The milk purchase contract must state that the address for service by post for the parties is their ordinary business address unless a party specifies an alternative address.

Variation of terms

16

(1) A milk purchase contract must provide that the milk purchase contract’s terms may be varied only on agreement in writing between the business purchaser and—

(a) the producer; or

(b) where the producer is represented by a representative organisation, the representative organisation.

(2) Paragraph (1) does not apply to a milk purchase contract made by a business purchaser which has an internal democratic structure when purchasing milk from a producer member.

PART 7 — Dispute resolution

Dispute resolution

17

(1) A milk purchase contract must set out a procedure according to which a producer may make a complaint to the business purchaser relating to the milk purchase contract.

(2) The procedure must provide—

(a) that the producer must make the complaint by giving a notice to the business purchaser;

(b) the contact details of a person to whom the producer may give the notice; and

(c) that, upon receiving the notice, the business purchaser must investigate, and take all reasonable steps to resolve, the complaint.

PART 8 — Termination

Cooling off period

18

(1) A milk purchase contract must provide that the producer may, at any time before the expiry of the cooling off period, terminate the contract without any penalty or liability.

(2) The milk purchase contract must provide that the termination under paragraph (1) is to have immediate effect.

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