A commercial alliance may violate the Food Supply Chain Law by using sensitive information without the consent of the affected parties

Aida Oviedo & Eduardo Crespo 

In Judgment of December 20, 2021 (appeal no. 5756/2020), the Supreme Court dismissed the appeal filed by DIA against the Judgment of the High Court dated April 15, 2020 and upheld the sanctions imposed by the Ministry of Agriculture and Fisheries, Food and Environment (hereinafter, "MAPAMA") in connection with its purchasing alliance with EROSKI. The judgment also clarified what is to be considered as "commercially sensitive information" and the prohibition of its exchange in the food procurement sector.

The judgment put an end to a long procedure, in which the last noteworthy milestone was the High Court Judgment dated April 15, 2020, which confirmed the sanctions imposed by MAPAMA in its resolution of March 13, 2017 (the "Resolution"). Said Resolution imposed penalties amounting to 6.8 million EUR on the company, Distribuidora Internacional de Alimentación, S.A. (DIA), for infringements of food procurement regulations, provided for in articles 23.1 paragraphs e), f) and g) of the Law on measures sought to improve the operation of the food supply chain ("LCA"). The infringements were classified as serious due to recidivism.

The Supreme Court Judgement of December 20, 2021, placed its main focus on the 44 infringements of Article 23.1.g) of the LCA, as these were the issues that led to annulment prospects and thus gave rise to the acceptance of the appeal request.

In the food procurement sector it is prohibited "to request or disclose commercially sensitive information related to other operators that was obtained during the negotiation process or execution of a food supply agreement, in breach of confidentiality requirements, as well as the use of such information for purposes not foreseen in said agreement", as per article 23.1 g)- According to the Resolution, within the framework of the collaboration agreement entered into in 2017 (and which was subsequently terminated in 2018) . Grupo DIA and Grupo EROSKI disclosed commercially sensitive information related to suppliers and manufacturers to a consulting firm and a law firm in order to assess and evaluate the agreement’s viability However, neither companies obtained prior consent of the companies whose information was being exchanged.

The Supreme Court maintained that the contractual conditions agreed upon by a distributor with manufacturers or suppliers fall within the meaning of "commercially sensitive information". Furthermore, it corroborates the High Court’s view, stating that such information cannot be disclosed to third parties without their consent, except to receive expert assistance during the negotiation or execution of a food supply agreement. Therefore, it is lawful to hire a consulting firm or a team of lawyers to assess the viability of a project; but during said process, sensitive information belonging to third parties cannot be disclosed without their prior consent, as the information disclosure process would be considered to have taken place beyond the scope of the food supply agreement. Even if the recipients sign a non-disclosure agreement that prevents them from revealing such information, as was the case, this does not affect or alter the Court’s decision.

The Supreme Court ruling of December 20, 2021, also confirmed the sanctions imposed on DIA for committing 34 infringements by demanding additional payments from its suppliers and manufactures, above the price foreseen in the agreement (article 23.1.f) and 10 infringements by modifying the contractual terms of the agreement with its suppliers (among others, delisting certain products) without both parties having agreed on such modifications (article 23.1.e]). "[...] pressure and blockade measures [...]" were also used when implementing said modifications.

Through this ruling, the Supreme Court offered a more precise definition of the term “commercially sensitive information”, specifically within the context of food procurement and the prohibition of disclosing such information to third parties without their consent. It also confirmed the High Court’s standpoint, according to which the same behaviour could simultaneously constitute an infringement of the LCA and of applicable Competition Law - even though, for the matter at hand, the complaint filed before the Spanish National Markets and Competition Commission (CNMC) was dismissed. Large distribution companies must pay attention to and abide by both regulations, particularly in cases of joint purchasing agreements or other collaboration mechanisms between competitors that involve disclosing information about their suppliers to third parties.

The Supreme Court ruling of December 20, 2021, could become an obstacle for future purchasing alliances. From a Competition Law perspective, such alliances are lawful if they meet several strict requirements but, in practice, they may become more difficult if suppliers refuse to give their consent for distributors to exchange information related to them, either amongst themselves or with third parties, for the purpose of analysing the viability of a joint purchasing agreement. 

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