Poland: Unfair practices

Oct 5, 2018 | Insight

One year has passed in Poland since the Act on Counteracting the Unfair Use of Contractual Advantage in the Trade of Agricultural and Food Products entered into force. The act aimed to protect small Polish farmers and grocery suppliers from the abuse of power by large supermarkets and chain stores.

RECENT DEVELOPMENTS

The authority tasked with enforcing the act hasy issued only one decision thus far. In March 2018 it imposed commitments on Cykoria SA, a producer of food concentrates. In the final decision, Cykoria was ordered to amend its contracts with carrot suppliers by:

• providing advance information on the place and date of planned delivery;
• shortening the payment term to 45 days; and
• removing the obligation on suppliers to pay a fee to a trade organisation.

As the case was closed with a commitment decision, no fine was imposed on the party.

Two other formal proceedings were launched by the authority that also concerned distant payment dates in contractual relations with suppliers. The abovementioned cases are the result of exploratory investigations into the soft fruits market, during which inspections at 29 soft fruit purchasing centres were carried out to verify whether:

• fruit prices were being set in accordance with the law; and
• purchasing centres had unfairly used contractual advantage in relation to farmers.

Additional investigations have occurred with to the relationship between milk processers and their suppliers. The investigations revealed some practices which could be seen as conducive to an abuse of contractual advantage. For example, the authority called into question exclusivity clauses that forced suppliers to provide all of their milk to one specific dairy or provisions that allow purchasers to terminate contracts without a notice period were abusive.

PROPOSED CHANGES

One year after the act’s entry into force, the government adopted an amendment, which has yet to go through the Polish parliament. The proposed changes aim to protect a larger number of farmers. At present, the act is applicable only to agreements between parties where:

• the total mutual turnover between the purchaser and the supplier in previous year  exceeded 13,000 euro; or
• the turnover of the party that applied the questionable practices exceeded 25 million euro in the previous year.

Under the proposed amendment, the abovementioned turnover thresholds will be abolished. Changes have also been proposed to:

• ensure the anonymity of the complainant in cases regarding the unfair use of contractual advantage; and
• empower the authority to pronounce an immediately enforceable decision.

THOUGHTS

Although in the past year the authority issued only one decision regarding the unfair use of contractual advantage and launched only two other formal proceedings, it should be acknowledged that it has been actively enforcing the new law. Numerous actions that the authority has taken since the act’s entry into force show that it has given a lot of consideration to ensuring that the food supply chain functions properly.

Moreover, the result of the proposed changes will be an increased number of cases in which the authority will be empowered to intervene and issue a decision due to the abolishment of the current turnover thresholds.