New law for dairy producers defines contracts and unfair practices

Lithuania has introduced a new law designed to create fairer relationships within the dairy sector. President Gitanas Nausėda has signed the "Law on Prohibition of Unfair Trade Practices in the Dairy Sector," which aims to bolster the negotiating capabilities of milk sellers and ensure greater transparency and legal clarity in milk purchase and sale transactions.

The legislation establishes clear principles for milk pricing and sets requirements for milk purchase and sale agreements. It also defines prohibited unfair trade practices, establishes a supervisory mechanism, and outlines penalties for violations. "The adopted law is an important step toward creating fairer relationships in the dairy sector. Greater transparency and clearer rules will help strengthen farmers' positions, but the work does not end there – together with social partners, we will continue to seek solutions that ensure a fairer distribution of value throughout the food supply chain," stated Minister of Agriculture Kęstutis Mažeika.

Under the new law, parties can choose between indefinite or fixed-term contracts, each with distinct pricing requirements. For indefinite contracts, a uniform price must be applied for milk produced under the same system and delivered in the same manner. Premiums and surcharges cannot exceed 20% of the milk price, and price changes are limited to once a month. Prices for milk delivered directly to processors cannot be lower than milk collected directly from farm refrigerators.

Fixed-term contracts must specify a clear duration and a concrete price or a clear price recalculation formula. Premiums and surcharges are not limited in these contracts. The law upholds the principle of free negotiation, allowing parties to bargain over contract terms within the legal boundaries set to protect the weaker party.

The law also explicitly prohibits unfair practices by milk buyers, such as unilaterally terminating contracts, applying deductions not specified in regulations, imposing stricter quality requirements than stipulated, failing to detail premiums and surcharges in contracts, not including all applicable premiums and surcharges in payments, or not evaluating milk composition and quality in a state-controlled accredited laboratory. The new regulations will come into force on March 1, 2027, with all implementing legal acts to be adopted by the end of 2026.