Court Ruling confirms 1 million euro sanction for origin labelling of durum wheat on Italian pasta
On February 13, 2023 Tar del Lazio, the first degree administrative court, confirmed the 1 million euro sanction to LIDL for pasta origin labelling, which had been imposed by the Italian Competition authority (AGCM) on December 20, 2019.
The Italian Competition Authority (AGCM) determined the existence of an unfair commercial practice under Articles 21 and 22 of the Consumer Code concerning Lidl Italia’s packages of dry pasta under the brand names "Italiamo," "Fusilli Pasta di Gragnano IGP" and "Combino". In short, the pasta was produced in Italy, with Italian durum wheat semolina, but the durum wheat (the only ingredient of the semolina) was not entirely Italian. The unfair commercial practice, according to the AGCM, consisted of misleading the consumer by failing to sufficiently point out that these products were made with wheat that did not come entirely from Italy. The origin of the wheat was written on the pack, but it was on the side panel, or on the back of pack, and therefore was not highlighted with the same graphical evidence as the other features recalling the Italian-ness of the product on the front of pack.
The ruling is interesting as it addresses several relevant topics, including: the relationship between the unfair commercial practices and food labelling rules, the notion of “primary ingredient”, the reference “average consumer”, and the summary of the recent (January 2023) ruling regarding Interministerial Decree of July 26, 2017, which is the decree that sets the origin labelling requirements for durum wheat and durum wheat semolina on dry pasta packaging in Italy.
1. The misleading practice
With regard to the "Italiamo" branded pasta packs, the front of pack prominently displayed the evocative brand name "Italiamo," the image of the Italian flag, the words "Passione Italiana," (Italian passion), as well as the indication "IGP" (PGI) in the case of Pasta di Gragnano IGP.
Instead, the indication on the origin of the wheat (EU and non-EU) was displayed only on the side, or on the back of the pack, in small letters, in a position not immediately visible.
Similarly, "Combino"-branded pasta packs were characterized by strong reminders of Italianness, consisting of images of typical Italian landscapes, a cockade or heart bearing the colors of the Italian flag, accompanied by the words "Produced in Italy," and the indication "Italian specialty".
Also in this case, the indication on the origin of the wheat had a marginal placement: it was displayed in small letters on the back of the pack, which, by the way, was not visible on Lidl’s website.
2. The relationship between the consumer code (unfair commercial practices) and food labelling rules - Reg. (EU) 1169/2011-
The court recalled precedents which recalled the ECJ, in its judgment of September 13, 2018, in C-54/17 and C-55/17, where the European Court affirmed there is the prevalence of the sectoral discipline (in this case - food labelling rules) over the general legislation (in Italy, of the Consumer Code) only if an irremediable "contrast" can be identified. The notion of "contrast" denotes a relationship that goes beyond mere dissimilarity or mere difference. There must be a divergence that cannot be overcome by an inclusive formula that allows for the coexistence of both realities, without the need to distort them. So, according to the Court, the contrast exists only when strictly EU derived provisions, governing specific aspects of unfair commercial practices, impose obligations that are "incompatible" with those established by Directive 2005/29, on traders, without any room for maneuver, giving rise to an irreconcilable divergence that does not admit the coexistence of both sets of rules. Since in this case no conflict can be discerned, the relationship between the two disciplines is not one of specialty, and they can therefore be applied in parallel.
TAR also recalled another precedent, ion which it had reiterated that, "the regulations on labeling and food supplements and the regulations on consumer protection are complementary to each other and not alternatives, so that there is the competence of the AGCM to assess the unfairness of a commercial practice, even in light of the general criteria and specific requirements set forth in the "claims" regulation (Tar Lazio, June 3, 2019; see also Tar Lazio, April 9, 2019, no. 4630, 4 April 2013, No. 6596 and July 3, 2012, No. 6027).
The ruling also reaffirmed that compliance with sectorial regulations does not exhaust the obligations of diligence incumbent on the professional, "who must, in any case, put in place those additional behaviors that derive in any case from the application of the more general duty of completeness of information provided for by the Consumer Code, in the same way as the principle of good faith that inspires all the regulations to protect the consumer" (Tar Lazio, Sec. I, Sept. 24, 2020, no. 9762), even regardless of and, in any case, in addition to the information obligations provided for by the sector regulations.
3. The relationship between Italian consumers and origin labelling
According to the data assessed by AGCM during the investigations, the knowledge of the origin of the raw material of food products is, for Italian consumers, a particularly relevant element of the consumption choice: the most considered variable of choice (62 percent versus 53 percent of the EU average) by Italian consumers when choosing food products; the singularly most relevant aspect when choosing the product, surpassing even the product's price, according to other surveys. According to a recent demographic survey conducted by Ismea, 78% of consumers surveyed feel reassured by the "100 % Italian" origin of the product, which is perceived by more than 90 percent of them as an assurance of product quality and goodness and compliance with food safety standards.
4. The widespread use of Italian origin labelling in Italy
AGCM recalled that the importance attributed by Italian consumers to the origin of products and food raw materials finds precise evidence in the spread of food products that display a reminder of Italian-ness on the label (Italian flags and claims "made in Italy," "produced in Italy," "only Italian ingredients," "100 percent Italian," as well as EU quality marks). About one fourth of food references sold in Italian supermarkets feature such reminders, with a preponderance of the use of Italian flags (about 14 percent of products, corresponding to about 10,000 references).
5. Origin labelling requirements
AGCM’s sanction, confirmed by the ruling, states that beyond mere compliance of the rules on labeling, having chosen to emphasize the Italianity of the product, the labelling required the professional to counterbalance this emphasis with a more obvious and contextual indication of the origin of durum wheat on the label.
Regulation (EU) 1169/2011, which aims to ensure a high level of consumer protection with regard to food information, stipulates in Article 7 that the indication of the country of origin or the place of origin of a product must be provided in a way that does not mislead the consumer.
Regulation No. 2018/775 was not applicable at the time. However, an examination of the provisions of Regulation 1169/2011, according to the Court, confirms that the Authority correctly assessed the importance of the information provided on the product packaging and the necessary contextuality of origin claims: they must be placed in the same visual context.
6. the notion of "primary ingredient"
The notion of primary ingredient, as per Article 2, paragraph 2, letter q), Regulation (EU) n. 1169/2011, leverages both the quantitative criterion ("primary" is the ingredient that represents more than 50% of the food) and the qualitative criterion (the ingredient generally associated with the name of the food in the perception of consumers). In the case at hand, as proven by the recalled market surveys, the ingredient generally associated with the naming of pasta, in the perception of consumers, is durum wheat, which is the fundamental component of the pasta product. The origin of semolina, which is obtained by the mere mechanical processing of a single raw material, durum wheat, without altering its characteristics, is not relevant in this case. According to the court, therefore, one cannot validly argue that the manufacturer was not required to label the origin of the durum wheat, due to the fact that both the semolina and the food product (pasta) were both produced in Italy. Following the Court’s and the AGCM’s interpretations, according to EU Regulation 1169/2011, there was an obligation, in any case, to provide the correct and visible information on the place of origin of the product and the raw material used (durum wheat).
7. The Italian decree requiring origin labelling of the durum wheat and the durum wheat semolina in pasta
Interministerial Decree of July 26, 2017, (in force at the time and then, gradually extended, finally until December 31, 2022), concerning the "Indication of origin, on the label, of durum wheat for durum wheat semolina pasta", according to which the "indications on the origin referred to in Articles 2 and 3 [Country of cultivation of wheat and Country of milling] shall be affixed on the label in a conspicuous place and in the same field of vision so as to be easily visible, clearly legible and indelible" (Article 4, paragraph 2). The objections regarding the validity of the Italian decree have already been examined and disregarded by the Court, in the judgment of Sec. V, No. 1291 of Jan. 25, 2023. In that ruling, the Tar clarified, with considerations that must be shared here, that "the European Commission's failure to adopt the executive acts pursuant to Article 26(8) of Regulation no. 1169/2011, does not preclude the Member State from dictating, in the meantime, a national regulation accompanied - as in this case - by the cedeability clause (see art. 7, par. 2, of the contested decree), of labeling the origin of the raw material for durum wheat semolina pasta, in order to ensure greater safety and transparency towards consumers. Moreover, the decree in question expressly provides that the new requirements do not apply with respect to products lawfully manufactured or marketed in another EU member state or a third country (Art. 6), so that the alleged interference of the new requirements with the freedom of movement of goods under the EU Treaty must be considered groundless.
It should finally be noted that the notification of the decree to the Commission European was carried out by the Italian government on September 8, 2017, that is, well in advance of the date fixed for the entry into force of the decree itself (February 2018), without any negative comment being made on the merits." The ruling also addressed the complaint pertaining to the prohibition of "reverse discrimination," noting that "Article 6 of the decree contains the so-called. mutual recognition clause pursuant to which 'the provisions of this decree shall not apply to products lawfully manufactured or marketed in another EU member state or in a third country,' with the obvious consequence that, as far as foreign (EU and non-EU) market shares are concerned, the Italian producer is subject to the same labeling regulations as companies from other member states, being able to market pasta produced in Italy abroad without having to apply the regulations of the challenged decree."
8. The average consumer is the Italian consumer
The notion of "average consumer," refers "to a normally informed and reasonably circumspect subject, taking into account the characteristics of the market in which such a type makes its choices” (Consiglio di Stato, October 14, 2019, no. 6984). In the case at hand, the assessments carried out by the Competition Authority concern the purchasing choices of consumers in the Italian market, so that the perception of Italian consumers was correctly taken into account in order to verify the potential impact of the message on the conduct of potential buyers of the product.
In a consistent sense, moreover, the same EU Regulation No. 1169/2011 provides in Article 1 that it lays down rules to ensure a high level of consumer protection with regard to food information, "taking into account differences in consumer perceptions and information needs."
9. Conclusions. - Legal advice on country of origin food labelling
Italy is very peculiar with regards to origin labelling of food. There are several national laws in place: some general, and others product-specific, that either require or prohibit origin labelling, depending on the case. One must know EU and national legislation, as well as national interpretations, in order to be able to assess the compliance of food labelling that is meant for the Italian market.
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