Amendment to protect suppliers of big retail chains approved

2. 12. 2022
Amendment to protect suppliers of big retail chains approved

On 16 November 2022, the president signed an amendment to the Significant Market Power Act. The amendment is likely to come into effect on 1 January 2023.

The law regulating relations in the agricultural and food sector between suppliers and buyers aims to protect smaller suppliers from large concerns and chains.

The current law defines significant market power as “the position of a buyer, due to which the buyer may enforce an advantage on suppliers in connection with the purchase of food, or the receipt or provision of services related to the purchase or sale of food without justifiable cause.” In relation to buyers exceeding the threshold of CZK 5,000,000,000 and controlled entities with a turnover below that threshold it shall be assumed that they have significant market power unless proven otherwise. However, the current general concept of significant market power (SMP) results in considerable interpretative difficulties and thus contradicts the principle of legal certainty and predictability.

The amendment defines the concept of significant market power more precisely – such power is held by a buyer with an annual turnover exceeding EUR 2,000,000 in relation to a supplier with a turnover under this threshold or a buyer with a turnover in the Czech Republic of more than CZK 5,000,000,000. The same applies to a member of a purchasing alliance (a group of buyers collaborating on food purchases relating to their business). A buyer that is a controlled entity has significant market power even with a turnover under the threshold of CZK 5,000,000,000 if this threshold is reached by the sum of the turnover of this controlled entity and the controlling entity.

The amendment will thus significantly expand the range of buyers who are bound by this regulation and must therefore, for example, enter into a written contract with a supplier with a clearly defined purchase price, payable within a due date which must not exceed 30 days.

In order to increase legal certainty, the concept of abuse of significant market power disappears and is replaced with a list of unfair commercial practices, including tied sales (conditional on further sales or services), unilateral amendments to terms and conditions, non-compliance with the written form of the contract or generally unequal treatment of commercial partners (for example, favouring a group supplier).

The Office for the Protection of Competition, which provides supervision, will now be required to publish individual proceedings and their results in its annual report. The amendment also requires it to publish final decisions on its website.

The purpose of the amendment is to implement Directive (EU) 2019/633 of the European Parliament and of the Council of 17 April 2019 on unfair trading practices in business-to-business relationships in the agricultural and food supply chain. As this was not done by the set deadline, the European Commission initiated proceedings regarding an infringement of the Treaty on European Union. The amendment is therefore aimed at preventing a sanction being imposed on the Czech Republic.

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