Unfair use of contractual advantage
The Act of 17 November 2021 on counteracting the use of contractual advantage in trade in agricultural and food products defined 16 unfair practices of retail chains, including, among others, a ban on introducing or forcing discounts from suppliers of agri-food products.
According to a report by the Office of Competition and Consumer Protection (UOKiK), in recent years some entrepreneurs have been exploiting their contractual advantage and demanding that suppliers reduce the prices of agricultural and food products after they have been sold, and also collecting additional discounts from some suppliers, not previously provided for in the contract.
Entrepreneurs concluded agreements with suppliers of agri-food products regarding commercial terms (including discount conditions) for a given year with a delay - in such situations, the arrangements were retroactively valid, therefore in the period from the beginning of the year to the date of signing the agreement, suppliers may not have had knowledge of the financial conditions of specific deliveries and did not know whether this cooperation would be profitable for them.
This led to the occurrence of retroactive discounts (so-called retro-rebates), which resulted in retailers' customers suffering unjustified losses or being forced to pay unfavorable compensation. This resulted in a retroactive reduction of the product sales price already paid.
The second unfair practice consisted in charging additional discounts from certain suppliers that were not provided for in the contract, thus the contractors of retail chains did not know when they would be asked to grant this discount or what its amount would be, and they were also not sure when the chain would demand a reduction in their remuneration.
As stated in the UOKiK press release, contractual arrangements between the network and the supplier, including the aforementioned discounts, should be made at the time of concluding the initial contract or when extending it. Only extraordinary or objective circumstances constitute an exception.
As Tomasz Chróstny, President of the Office of Competition and Consumer Protection, pointed out, trade relations must be based on honesty and responsibility, especially in the economically important agri-food sector.
Liability for unfair practices
The competent authority in matters of practices involving the unfair use of contractual advantage is the Office of Competition and Consumer Protection.
The President of the Office of Competition and Consumer Protection may consider a given practice to constitute unfair use of contractual advantage and issue an appropriate decision if he finds a violation of Article 5 of the Act (contractual advantage) on counteracting unfair use of contractual advantage in trade in agricultural and food products.
The President of the Office of Competition and Consumer Protection (UOKiK) may impose a fine on a buyer or supplier, by way of a decision, of no more than 3% of the turnover achieved in the financial year preceding the year in which the fine is imposed. However, such a decision is not final and may be appealed to the court.
Recently, the Office of Competition and Consumer Protection (UOKiK) fined Kaufland Polska Markety for practices involving unfair use of contractual advantage. The fine for these practices amounted to PLN 124 million. The aforementioned company was also charged an additional PLN 13.2 million for falsely labeling vegetables, which misled customers about the products' country of origin.
The Kaufland chain responded to the allegations and emphasized that the basis for its operation is legality.
This alert is for informational purposes only and does not constitute legal advice.
