Restrictive ECJ ruling on online distribution of organic products

Published on 14th Nov 2017

Compliance systems for traceability of organic products – ECJ extends application to online-distribution of organic products

Manufacturer and distributor have to maintain consumer’s confidence in organic products. Businesses of the organic sector are subject to specific compliance obligations on all levels of production, preparation and distribution. The European Court of Justice (ECJ) recently expressed its view to the future of online selling of organic products and found that online traders of organic products must maintain compliance mechanisms according to Regulation (EC) 834/2007 to be permitted to sell their products on the internet – or anywhere other than directly to customers in face-to-face transactions.

Online distribution is the major trend of retail for a long time now. More than 40 bn EUR in sales have been accrued via online channels in 2016. In particular, food online trading is a fast growing sector. Although only representing 1% of the total market of food trading in the year 2016, its growth rate was 25% in comparison to the preceding year. Almost any fifth internet user bought its food online. Click to click to get the food on the table.

The connected consumer has arrived in the organic products branch and is a hot pick of the online distributors. However, he does not come without a price: he has the same rights as the old analogue consumer. Digital online distributors have to live up to the same compliance standards as any other seller, according to  the ECJ.

The ECJs preliminary ruling in the case C-289/16 originates from a German competition watchdog’s lawsuit against an internet business offering organic spice mixes that it marketed under the description ‘Bio-Gewürze’ (organic spices). The internet business relied on the exemption from compliance obligations under Art. 28 (2) (EC) 834/2007 in connection with German national law as it was of the opinion that it ‘directly’ sells to the customer via the internet. German Supreme Civil Court referred the case to the ECJ to learn how the ECJ interprets the meaning of ‘directly’ – does that mean ‘face-to-face’ or just without an intermediary? Or in rather legal terms of the ECJ: the German Supreme Civil Court asked whether Article 28(2) of Regulation (EC) 834/2007 must be interpreted as meaning that, in order for products to be regarded as being sold ‘directly’, within the meaning of that provision, to the final consumer or user, it is necessary for the sale to occur in the presence of both the operator or his sales personnel and the final consumer, or whether it is sufficient that the sale take place without the intervention of a third party

In its preliminary ruling the ECJ rejected the application of an exemption for online distributors and stated that ‘directly’ in fact means products being sold face-to-face from the seller or his personnel to the final consumer or user in their respective presence. Only this situation would create the required confidence of the consumer that ‘organic’ in fact is ‘organic’.

The ECJ explained that the control system is intended to guarantee the traceability of each product at all stages of production, preparation and distribution, in order, in particular, to give consumers guarantees that organic products have been produced in compliance with the requirements set out in law – “organic” shall be “organic”. According to the ECJ, the application of the control system appears to be fully justified in cases of online or mail order retail trade, given that the storage of products, generally in very large quantities, and the delivery by intermediaries carry the risk that products could be relabelled, exchanged or contaminated, a risk that cannot be regarded as low overall. Moreover that and most importantly, the ECJ turned his head to the future and recognized the enormous potential of online trading and the efforts of classic stationary distributors to access the digital world to market and sell their products. The German Supreme Civil Court has now to decide its case within the parameters of the preliminary ruling.

Businesses, which have until today relied on the exemption, should immediately prepare themselves to comply with the standards under Regulation (EC) 834/2007. This might have an impact on QS/QM systems, supply chains, organisation of tasks within the business and the online marketing platform itself – the law requires to display that the distributor is in fact compliant.

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* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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